Employee Share Plans Maximum Business Value Craig West

Employee Share PlansEmployee Share PlansMaximum Business ValueMaximum Business Value

Craig West

did you know?

Of the estimated $8 trillion of corporate equity in the United States, employees own about $213 billion through ESOPs

and similar stock plans

$213 B $213 B in US ESOP’sin US ESOP’s

ESOP companies that combine employee ownership with a

participative management style grow 8-11 % per year faster than they

otherwise would have.

8–11% 8–11% Faster growthFaster growth

In the United States, more than 11,500 companies have an ESOP covering

almost 9 million employees.

11,50011,500 companies & companies & 99 million employeesmillion employees

Competitive Edge

“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”- Mary Kay Ash

Performance examples!Year

1Year

2Year 3 Year

4Year

5

Net Profit (average improvement)

55% 51% 35% 40% 43%

Staff Turnover (as a percentage of total employees)

13% 10% 6% 6% 4%

Absenteeism (average days per employee)

5 3 3 2 2

Rewarding key people who are already collaborating to drive the

business !

What are you telling your What are you telling your staff by the way you pay staff by the way you pay

them ?them ?

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 Key people as business owners ?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 profitSharing 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

Participating Employees

Peak Performance

Trust Shares in Company

extra profits

Peak Performance Trust – Stage One

Shareholders

Key Employees

Existing Company

Co-Trustee

Peak Performance

Trust

Peak Performance Trust – Stage Two

Shareholders

Key Employees

Existing Company

Co Trustee

Peak Performance

Trust

buys equity

profit share% $

unit holders

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 WestCraig WestSuccession PlusSuccession Plus

telephone: telephone: 1300 665 4731300 665 473

cwest@successionplus.com.aucwest@successionplus.com.au

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