Employee Share Plans Maximum Business Value Craig West

Employee Share Plans
Maximum Business Value
Craig West
did you know?
$213 B in US ESOP’s
Of the estimated $8 trillion of corporate
equity in the United States, employees
own about $213 billion through ESOPs
and similar stock plans
8–11% Faster growth
ESOP companies that combine
employee ownership with a
participative management style grow
8-11 % per year faster than they
otherwise would have.
11,500 companies & 9
million employees
In the United States, more than 11,500
companies have an ESOP covering
almost 9 million employees.
“People are definitely a
company’s greatest asset.
It doesn’t make any
difference whether the
product
is cars or cosmetics. A
company is only as good
as the
people it keeps”
Competitive
Edge
- Mary Kay Ash
Performance examples!
Year
1
Year
2
Net Profit
(average improvement)
55%
51%
35%
40%
43%
Staff Turnover
(as a percentage of total
employees)
13%
10%
6%
6%
4%
5
3
3
2
2
Absenteeism
(average days per employee)
Year 3 Year Year
4
5
What are you telling your
staff by the way you pay
them ?
Rewarding key people who are
already collaborating to drive the
business !
Base Remuneration
• Salary & Wages
• Other benefits
Short Term (annual bonus)
•
•
•
•
•
•
•
Cash bonus
Commission
Cars
Fringe benefits
Entertainment
Income Continuance Policy
Other benefits
Long Term (loyalty) bonus
•
•
•
•
•
Retained Bonus
Equity Savings Plan
Equity
Shadow Share Plan
Replicator Plan
Key people as
business owners ?
“Employee ownership is world changing.
It is the way ahead…in the global
economy. It reflects that human capital
is becoming more important than
physical assets… The global economy
will succeed when employees feel a
stake in the business”
Gordon Brown MP
– Chancellor of the Exchequer
Sharing the profit
“The truth is that profit sharing doesn’t
create employee involvement - it
requires it.”
Ricardo Semler
Ladder to Equity
1. Employee – earning income
(salary/wage/hourly rates etc. ) – this is where most
employees sit ( and stay ).
2. Income model – the first step on the ladder then
is to boost that income and this is quite common –
we often see companies paying bonuses,
commissions on sales, incentives etc. to increase an
employee’s income.
3. Profit share – most equity plans begin with this
simple step and in fact many end at this step –
simply providing a share of profits to employees is a
great additional incentive as they are directly
rewarded as a result of the financial performance of
the company in the same way that a business owner
typically would be.
4. Equity
– whilst there are many equity plans available our
Peak Performance Trust provides a formal structured
mechanism to incorporate stages three, four and five
into any business succession plan - this allows
employees to transition into an equity ownership
position within the business they work for.
5. Control – often this step is never utilised though
on occasion has substantial benefits in terms of
succession not only of business management but
also ownership. Ultimately control means that
employees can be transitioned through the earlier
four stages and end up in a position of control – this
may be that they take over general management or
CEO of the company, it may be that they end up with
a seat on the board at some future date however
this step is not to be rushed
Extra Profit
Share 20%
Target Profit
Current Profit
Your company
Peak Performance
Trust
Shareholders
Company
extra profits
Peak
Performance
Trust
Participating
Employees
Shares in Company
Peak Performance Trust – Stage One
Co-Trustee
Shareholders
Existing
Company
Peak
Performance
Trust
Key Employees
Peak Performance Trust – Stage Two
buys equity
Co Trustee
Shareholders
Existing
Company
profit share
%$
Peak
Performance
Trust
unit holders
Key Employees
Identify key employees and KPI’s
Financial Modelling
Employee Education
Introduce the PPT
Integrate the PPT
Ongoing- Communication and Management
Case Studies
LJ Hooker Commercial
Central Coast
Winner of the 2010 ESOP of the year
award using a Peak Performance Trust.
Award based on substantial reduction in sick
days and improved staff retention, as well as
a noted increase in performance and
participation.
Ty Blanche - LJ Hooker:
“We have created a more
understanding team of people,
and added value to the
individual’s performance
congruently.”
“both financial services and property
management referrals from
employees participating in this
scheme increased at a higher level
than before. I put this down to their
seeing value in contributing to the
company’s bottom line because they
will share in the profit.”
Questions & Discussion
Craig West
Succession Plus
telephone:
1300 665 473
[email protected]
Visit www.successionplus.com.au
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