SHARE OWNERSHIP - MODEL PLANS
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share ownership, what is it? Employee
share ownership is when employees hold
a stake in the capital of the company
that employs them. It starts with one
employee holding one share and can extend
up to 100% held by all employees.
In the simplest form, an employee can
use part of his or her savings to buy
shares in his or her company. Or a person
creates a company to which he or she contributes
capital and becomes an employee. Beyond
such individual steps, it can become a
"plan" that systematically arranges
employee participation in the company's
A small number of model employee share
ownership plans exist around the world
(but with many variations depending on
the specific legislation of each country).
These plans are more or less adapted to
startups (or micro-enterprises) or to
SMEs or large companies.
There are about 25 million companies in
Europe with 150 million employees. These
include 23 million micro-enterprises with
0–9 employees, 1.5 million small companies
with 10–49 employees, 250,000 medium-sized
companies with 50–249 employees, and 50,000
large companies with 250 or more employees
(of which 2,500 are publicly traded).
Micro-enterprises, SMEs, and large companies
each employ more or less one-third of
the total workforce, both at a European
level and within each country.
corporate ownership in general, employee
share ownership plans can be divided into
two main categories: individual direct
and collective indirect.
direct employee share ownership is the
most traditional and familiar form. To
achieve this, the employee uses part of
his or her savings or financial resources
to buy shares in the company, thus assuming
a personal risk. This is possible under
various types of plans. This category
of employee share ownership plans is virtually
the only one of its kind in continental
indirect employee ownership is very little
practised in Europe, except in the UK.
explains why employee share ownership
in Europe is almost non-existent in SMEs,
and why it is almost unknown outside large
companies. Indeed, SMEs generally avoid
increasing their shareholder numbers,
whether or not they are employees. They
are only forced into it when they become
larger. On the other hand, one particular
phase may trigger the desire for new shareholders:
Business transmission. That is why this
is the best time to introduce employee
ownership in SMEs. Collective indirect
ownership is the most suitable form for
transferring a company to employees. Plans
within this category (ESOP, EOT) have
been designed for this purpose. They allow
employees to acquire ownership of their
company, often 100%, without having to
use up their savings or personal finances,
therefore without personal risk.
Collective indirect employee ownership
plans (ESOPs, EOTs) facilitate the transfer
of companies to employees, which individual
direct schemes can only achieve with great
difficulty and expense, as employee savings
are usually not up to the task.
1 - Employee share
The employee share purchase plan is the
most common employee share plan in large
companies worldwide. Employee participation
is usually encouraged by a discount of 20
to 30% on the market price, with the shares
being unavailable for sale for 2 to 5 years.
In France, this unavailability is usually
organised through a dedicated investment
fund, a Fonds Commun de Placement d'Entreprise
In Europe, one in every two large companies
periodically and routinely organises share
purchase plans for all employees. On average,
the employee uptake rate is nearly 40% in
France, with nearly one employee in two
in large companies.
2 - Stock options
The stock option allows you to defer the
purchase of shares over time, at a price
fixed in advance. The option becomes a share
when the purchase is actually exercised.
This variant of the simple stock purchase
plan serves a wide range of purposes.
Europe, we are familiar with stock option
plans for managers and executives, which
are common in most large companies, but
also in many smaller ones.
several European countries have adopted
measures to encourage the use of stock options
in startups. The most impressive example
is the United Kingdom, with the Enterprise
Management Incentive scheme launched
in 2000 to facilitate the recruitment and
retention of "talents" in SMEs.
After 20 years of this scheme, it has been
found that almost 70% of the shareholders
of SMEs are none other than the employees
of these SMEs, holding up to 20, 30% and
more. However, this only concerns a fringe
of about 10% of SME employees, mostly managers
some European countries, employee share
plans are not share purchase plans
but option purchase plans. Similarly,
one of the two most popular employee share
plans in the UK for large companies (the
SAYE plan) is for employees to save for
3, 5 or 7 years before being able to exercise
their stock options at the end of the period.
3 - Free share awards
stock options, the distribution of free
shares to employees is widely used in large
European companies, in various forms.
subject to performance conditions, they
form an element of compensation for executives
and managers, sometimes replacing stock
distribution of free shares is one of the
three modalities of the SIP plan, the most
popular employee share plan in large companies
in the UK. Similarly, in France, the number
of free share allocations for all has increased
in large companies.
distribution of free shares to all employees
tends to become widespread in Europe during
4 - Workers' cooperative
workers' cooperatives are the first form
of employee share ownership, since it dates
back to the first half of the 19th century.
It is still one of the few benchmarks.
By imitating shareholders of an ordinary
capitalist enterprise, it is the employees
here who invest part of their savings. They
hold at least 51% of the shares, often alongside
other investors. Frequently, the "one
man, one vote" principle of governance
is preferred to the "one share, one
In Europe, the bulk of employee ownership
in SMEs is concentrated in workers' cooperatives.
These companies have some 750,000 employees,
including 500,000 employee owners. However,
the workers' cooperative sector is only
significant in Italy, Spain (with the Mondragon
Group in particular) and France. In each
of the other European countries, workers'
cooperatives number only a few dozen units
Throughout Europe, there is a decline in
the number of large workers' cooperatives.
On the other hand, the attraction of the
workers' cooperative when creating a company
cannot be denied – on the contrary – for
its simplicity and flexibility, as well
as belief in its efficacy.
5 - ESOP plan
ESOP or Employee Stock Ownership Plan,
quite simply "the" employee
stock ownership plan, conceived in the
United States almost a century ago, is
in a way the father of all plans. It takes
many forms, with the acronym "ESOP"
being used indiscriminately all over the
world, leading to a lot of confusion.
The focus here is on the leveraged
ESOP. This aims to organise the transfer
of businesses to employees, at 15, 30%
or more, often gradually, and generally
at 100%. The funding does not come from
the employees themselves, but from elsewhere.
To make this possible, a second legal
entity is created alongside the company
to hold the shares or ownership on behalf
of the employees. This dual structure
makes it possible to buy the company on
behalf of the employees via external financing,
without the employees bearing the financial
Legally, the set-up is therefore a little
more complex than that of individual direct
ownership. In fact, it is much simpler
since it makes possible what would otherwise
be impossible, the transfer of the company
The legal entity holding the property
is a not-for-profit organisation, generally
a trust in Anglo-Saxon countries, or in
continental Europe a private foundation,
which allows it to benefit from preferential
Even if the trust is the owner of the
shares, the rights to governance and to
share in the results can be individualised.
Thus, employees can be involved in the
governance of the company, often even
with the "one share, one vote"
rule practised in many cooperatives.
The ESOP was introduced into US law in
1974. By accident, this legislation gave
it the form of a pension plan, which is
probably a major reason for its success.
No other form of employee ownership in
the world has been as successful, as well
known, as observed, and as analysed.
to create an ESOP plan
- Employee Ownership Trust
Employee Ownership Trust scheme was
introduced in the UK by legislation in 2014.
Inspired by the ESOP plan and with the same
objective of facilitating the transfer of
businesses to employees, it is however much
With the ESOP, the EOT scheme shares the
dual construction, allowing employees to
buy the company through external financing
without bearing the risk.
However, it does not include the pension
arrangement or the process of individualising
the ownership of the company's shares, which
are features of the ESOP.
Nevertheless, as in the ESOP model, even
if the trust is the owner of the shares,
the rights to governance and to share in
the results can be individualised.
Thus, as with the ESOP plan, employees can
be involved in the governance of the company,
often even with the "one share, one
vote" rule practised in many cooperatives.
Since its introduction in 2014, the number
of EOTs has continued to grow. Today in
Great Britain, one in twenty business transfers
is made to employees, about one per day,
with an average size of 80 employees.
The Employee Ownership Trust arrangement
is also spreading in the United States as
an alternative to the ESOP, as well as in
the rest of the world.
7 - Sociedades Laborales
Spanish plan that originated in the economic
depression under General Franco's regime.
The first case followed the bankruptcy of
the Valencia bus company. The company was
taken over by its more than 3,000 employees
in the mid-1960s. From then on, cases involving
corporate rescues multiplied, with a sophisticated
model of structure and shareholder rights
such as those usually seen only in large
After the death of General Franco, Spain
bounced back. Requests for company rescues
diminished. The promoters of the sociedades
laborales therefore proposed a conversion
to business creation. It was a great success,
and came with original public financial
support, the "activation" of unemployment
benefits: unemployed people who set up their
own sociedad laboral received the
equivalent of two years of benefits, enabling
them to capitalise their company. In a few
years, there were more than 20,000 companies
in 2006, with 130,000 jobs, with an average
of 6–7 employees. Paradoxically, this model
designed for large companies found success
The crisis hit in 2008. The cumbersome nature
of the model meant that it was not possible
to meet the recapitalisation needs of sociedades
laborales facing difficulty. In addition,
the unemployment benefit activation scheme
was extended to other forms of business
creation, and the sociedades laborales
suddenly lost their special appeal. In just
a few years, the number of sociedades
laborales has fallen by 60%, the number
of jobs has been halved and the number of
sociedades laborales creations is
now thirty times lower than previously.
8 and 9 - FCPE de reprise
and SCOP d'amorçage
French attempts to organise the transfer
of businesses to employees on the basis
of individual direct share ownership. The
FCPE de reprise was introduced in
France by legislation in 2006, while the
SCOP d'amorçage evolved from the
Hamon Law in 2014.
At the end of 2021, there have been three
cases of FCPE de reprise in France
in fifteen years, and one case of a SCOP
d'amorçage in seven years. The numbers
speak for themselves.
information and contact
EFES - EUROPEAN
FEDERATION OF EMPLOYEE SHARE OWNERSHIP
FEAS - FEDERATION EUROPEENNE DE L'ACTIONNARIAT SALARIE
Avenue Voltaire 135, B-1030 Brussels
Tel: +32 (0)2 242 64 30 - Fax: +32 (0)2 808 30 33
Web site: www.efesonline.org
EFES' objective is to act as the umbrella organization
of employee owners, companies and all persons, trade
unions, experts, researchers, institutions looking
to promote employee share ownership and participation