Employees want their shares

A RECENT survey has revealed 94 per cent of companies that adopt employee share schemes are experiencing benefits in productivity, employee interest, motivation, profitability and wage restraint.

The findings of KPMG’s survey of 800 Australian organisations indicated an increasing number of businesses (79 per cent of those surveyed) had implemented or were planning to implement share schemes.

Liquid Engineering chairman Paul Andrews, who employs about 30 staff, agrees the schemes have had a positive impact on staff members.

“It has made a huge difference. They are more interested in their jobs and in what management are doing,”

he said. “They are working smarter and some are working harder. I wish we’d done it years ago.”

Mr Andrew’s case is contrary to the survey’s findings for companies with fewer than 100 employees, however, with only a third of these having adopted the schemes.

“I have 30 staff, of which one third hold shares,” he said.

“The idea for the scheme came out of an administration process and the subsequent capital raising process. A lot of our staff asked to buy in.

“What better people to make a contribution than your staff.”

The resources sector also has found that the share schemes provide benefits.

A spokesman for one of the State’s largest producers said the company had used the scheme to help align employees with the business’ objectives.

He said employees had developed a strong interest in maintaining the share price, with the scheme an integral part of their total reward approach.

Also benefiting companies are share schemes targeted at executives, as opposed to the entire employee base.

PricewaterhouseCoopers' Craig Melville said the schemes typically were incentive based, with options granted to executives with an exercise price in excess of the market value of the shares at the time of the grant. The schemes were successful because executives strive to raise the share price above the exercise price so they acquire their shares at a discount to the prevailing share price.

KPMG’s Craig Yaxley said the survey’s results on performance hurdle schemes were generally not used for all employee plans, with schemes setting performance targets more likely to improve productivity and profitability than schemes without targets.

“It is very encouraging to see the use of performance hurdles for executive option plans, which should reinforce the behaviour required to achieve company objectives and create shareholder value,” he said.

Another benefit of using share schemes occurred in tough economic climates, with staff re-warded without the company having to draw cash from its funds.

“Share schemes can assist with compensation, motivate performance and help to retain employees, without immediately adding expense to the bottom line,” Mr Yaxley said.

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