The Beyster Institute: Building Entrepreneurial Companies Through Employee OwnershipPowered by the Rady School of Management at UC San Diego

Looking to take your organization to the next level? Employee ownership lifts more than just company spirits. It boosts the bottom line, reduces turnover and increases competitiveness.

Employee ownership can transform a company, improving performance and accelerating growth. It can create a sustained competitive advantage, driving business success that builds wealth for founders, investors and employee-shareholders alike.

Still, it’s not for everyone, and it’s not easy. If you’re not careful, you can do it wrong, issuing equity and getting little in return. But when you get it right, it’s great. A spirit of entrepreneurship takes root throughout the organization. Employee-owners take business goals to heart. They don’t just see problems, they envision solutions. They find customers and cost savings. They show the kind of commitment and passion that we usually associate only with owners. Management can spend less time overseeing and more time planning growth initiatives.

Creating the Employee Ownership Program that’s Right for You

There are many ways to give employees a financial stake in the fortunes of their company, and each company must identify the right approach in light of their unique conditions and circumstances. Beyster Institute consultants offer expert guidance in navigating this process. Our publications The Entrepreneur’s Guide to Equity Compensation and Transitioning Ownership in the Private Company provide excellent introductions to employee ownership.

Many types of vehicles can put equity interests into employee hands, ranging from stock options to ESOPs to purchase plans to phantom stock. Each vehicle has its own unique mix of features. Tax treatment, accounting rules and motivational impact are just some of the differentiating factors. Important issues to consider are the owner or founder’s personal financial concerns, valuation of the company’s stock, federal and state securities laws, liquidity for employee shareholders and the policies and procedures of stock plan administration. When analyzed together, several employee ownership alternatives should emerge as best suited to a company’s particular needs.

Beyster Institute consultants help companies determine a thoughtful rationale for the design of an equity-sharing program and identify the tools and resources required to implement the plan.

Building a Culture of Ownership: The Key to a Successful Employee Ownership Program

The history of employee ownership is littered with the experiences of well-meaning, but poorly informed business owners who consulted a lawyer, put in a stock plan and were disappointed to see very little change in terms of employee behavior and business results. However, there are many more examples of companies that were transformed in the most positive ways — business results among them — after installing a stock plan.

Expert research and the Beyster Institute’s 20 years of experience in this field both point to the same conclusions. Success with a strategy of employee ownership springs from three critical factors: an ownership program must provide a level of ownership with significant potential results for its employees; it must build a company culture in which employee-owners feel, think and behave like owners; and employee-owners must be well-informed of the company’s operations and their role in the company’s success. We can help you make the most of your employee ownership plan by consulting on the design and installation of effective education and communication programs.

International Equity Compensation

The success of employee ownership in the United States has fueled growing interest in the use of broad-based employee ownership plans around the world. Global equity plans are increasingly being established by public and private firms of all sizes that have international operations. Dozens of countries have established laws and regulations governing the operation of employee stock plans. Many of these laws specifically address the use of employee ownership within the context of the privatization of state-owned enterprises, but often they affect the general operation of employee stock plans, including plans established by multinational companies.

Employee Financial Participation: An International Survey reviews the legislative and regulatory changes in both established and emerging economies, and provides examples of the impact of these strategies on individual firm performance.