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Employee Share Plans Employee Share Plans Maximum Business Value Maximum Business Value Craig West

Employee Share Plans Maximum Business Value Craig West

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Page 1: Employee Share Plans Maximum Business Value Craig West

Employee Share PlansEmployee Share PlansMaximum Business ValueMaximum Business Value

Craig West

Page 2: Employee Share Plans Maximum Business Value Craig West
Page 3: Employee Share Plans Maximum Business Value Craig West

did you know?

Page 4: Employee Share Plans Maximum Business Value Craig West

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

Page 5: Employee Share Plans Maximum Business Value Craig West

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

Page 6: Employee Share Plans Maximum Business Value Craig West

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

Page 7: Employee Share Plans Maximum Business Value Craig West

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

Page 8: Employee Share Plans Maximum Business Value Craig West

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

Page 9: Employee Share Plans Maximum Business Value Craig West

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 ?

Page 10: Employee Share Plans Maximum Business Value Craig West

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

Page 11: Employee Share Plans Maximum Business Value Craig West

Key people as Key people as business owners ?business owners ?

Page 12: Employee Share Plans Maximum Business Value Craig West

“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

Page 13: Employee Share Plans Maximum Business Value Craig West

Sharing the profitSharing the profit“The truth is that profit sharing doesn’t create employee involvement - it requires it.”

Ricardo Semler

Page 14: Employee Share Plans Maximum Business Value Craig West

Ladder to Equity

Page 15: Employee Share Plans Maximum Business Value Craig West

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.

Page 16: Employee Share Plans Maximum Business Value Craig West

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.

Page 17: Employee Share Plans Maximum Business Value Craig West

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.

Page 18: Employee Share Plans Maximum Business Value Craig West

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

Page 19: Employee Share Plans Maximum Business Value Craig West

Extra Profit Share 20%

Target Profit

Current Profit

Your company Peak Performance

Trust

Page 20: Employee Share Plans Maximum Business Value Craig West

Shareholders

Company

Participating Employees

Peak Performance

Trust Shares in Company

extra profits

Page 21: Employee Share Plans Maximum Business Value Craig West

Peak Performance Trust – Stage One

Shareholders

Key Employees

Existing Company

Co-Trustee

Peak Performance

Trust

Page 22: Employee Share Plans Maximum Business Value Craig West

Peak Performance Trust – Stage Two

Shareholders

Key Employees

Existing Company

Co Trustee

Peak Performance

Trust

buys equity

profit share% $

unit holders

Page 23: Employee Share Plans Maximum Business Value Craig West
Page 24: Employee Share Plans Maximum Business Value Craig West

Case Studies

Page 25: Employee Share Plans Maximum Business Value Craig West

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.

Page 26: Employee Share Plans Maximum Business Value Craig West

Ty Blanche - LJ Hooker:

“We have created a more understanding team of people,

and added value to the individual’s performance

congruently.” 

Page 27: Employee Share Plans Maximum Business Value Craig West

“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.”

Page 28: Employee Share Plans Maximum Business Value Craig West

Questions & Discussion

Page 29: Employee Share Plans Maximum Business Value Craig West

Craig WestCraig WestSuccession PlusSuccession Plus

telephone: telephone: 1300 665 4731300 665 473

[email protected]@successionplus.com.au

Visit www.successionplus.com.auFollow us on: