Academic journal article International Journal of Employment Studies

Employee Share Ownership Schemes in Australia: A Survey of Key Issues and Themes

Academic journal article International Journal of Employment Studies

Employee Share Ownership Schemes in Australia: A Survey of Key Issues and Themes

Article excerpt

Employee share ownership (ESO) schemes have recently been the subject of public policy interest in Australia. Employees owning shares in the company for which they work potentially has a number of ramifications, not least of which is the prospect that these schemes might circumvent the problem of employees as 'outsiders' in corporate governance. This article surveys key issues and themes surrounding ESO schemes in Australia. It explores the varied policy rationales for these schemes, noting both broad bipartisan support and a generally limited conception of their fundamental purpose. The article also outlines the current state of empirical research on their incidence and effects. It is suggested that available information on ESO schemes is patchy and there is no clear picture of Australian practices. In light of an overview of the present regulation of ESO schemes, the article concludes by highlighting further research questions.

INTRODUCTION

Employee share ownership (ESO) schemes have recently been the subject of public policy interest in Australia. The central point of reference for debate about these schemes has been the work of the inquiry into ESO ('Shared Endeavours'). Chaired by Dr Brendan Nelson, this Committee examined the extent to which ESO schemes had been established in Australian enterprises and their effects on workplace relations, productivity, and the economy as a whole. (1) In September 2000 the Committee produced two reports (a Majority Report and a Dissenting Report from the Australian Labor Party committee members). The Shared Endeavours Majority Report made a number of detailed recommendations, particularly regarding the present regime for ESO tax concessions, the bulk of which were not supported by the Federal Government. (2) Instead, the major government response has been the establishment in 2003 of one of the two agencies recommended in the Shared Endeavours Majority Report; a promotional 'Employee Share Ownership Development Unit' (ESODU) based in the Department of Employment and Workplace Relations. (3) The second recommended agency was to have had a more traditional regulatory role, with oversight responsibilities for a unified ESO regulatory regime, established by a single piece of legislation. While the need for this second agency and unified legislation was not accepted by the government, in February 2004 the Minister for Employment and Workplace Relations, Kevin Andrews, announced a target of doubling the ESO schemes in workplaces from 5.5% of employees to 11% by 2009. (4)

This article presents a survey of key issues and themes surrounding ESO schemes in Australia. It is comprised of five major parts. The first part considers how ESO schemes differ from other mechanisms of employee participation in corporate governance. It also examines some of the important but often under-appreciated assumptions involved in the idea of employees becoming 'insiders' in corporate decision-making through owning shares in the company for which they work. The second part traces the contours of the public policy debate on ESO schemes in Australia. While there is a considerable breadth of arguments for and against ESO schemes, it is suggested that the present debate is underpinned both by broad bipartisan support for these schemes and a limited conception of their fundamental purpose. The third part surveys existing data on ESO practices, incidence and characteristics. It is suggested that available information on ESO schemes is patchy and that consequently there is no clear picture of the nature and incidence of Australian ESO practices. The fourth part presents an overview of the present regulation of ESO schemes and also outlines the work of the Federal Government's promotional ESO Development Unit. The article concludes by highlighting further research questions regarding the role of law and regulation and the prospects of ESO schemes in small proprietary companies.

EMPLOYEE SHARE OWNERSHIP SCHEMES--A UNIQUE FORM OF EMPLOYEE PARTICIPATION IN CORPORATE GOVERNANCE? …

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