Shareholders and Ownership Culture

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Wed, Mar 30, 2011
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Earlier this week we took a look at the role that Shareholders have in the ESOP Corporate Governance process. A Closer Look at Business Education: Employee Ownership explores how the presence of an ESOP and the resulting employee ownership can structurally improve the culture. The emphasis on long-term company performance will increase as the influence of outside stakeholders decreases and employees and management more actively participate in the corporate governance process. This translates into more employee engagement and entrepreneurship:

On the uniqueness of employee-owned companies: There are at least two issues here; structure and culture. Structurally employee owned companies have fewer external constituencies, e.g. investors, shareholders engaged in the governance structure. Hence there is more of a long term focus on company performance and employee and management voice in governance. This difference in structure of course translates directly into culture where behavior is much more focused in broad based engagement of employees in driving innovation and customer interface. These employees are encouraged to behave entrepreneurially since they have a real sense of ownership and control of their futures, rather than waiting for someone else to innovate or make a decision. My sense is that corporate culture is part of the DNA of a company and is best embedded from the beginning. Corporate cultures are very difficult to change once bureaucratic structures become entrenched.

In addition to impacting the culture by implementing or increasing the stake in employee ownership, Shareholders can help sustain an ownership culture by ensuring that remaining employee owned is a legal purpose of the company and that the ESOP and ownership culture are Long-Term Strategic Objectives of the company. Shareholders should make sure that Board members have ESOP experience and that all Board members are supportive of the ESOP and employee ownership and receive training as needed. The Shareholders should consider support of the ESOP and building an ownership culture when evaluating the Board.

Topics: ESOP Corporate Governance, ESOP, Communications and Culture, employee stock ownership plan

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

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