employee buy-out, employee retention, Employee Stock Ownership Plans, employee trust, employee-employer partnership model, Engro Chemicals, ESOP, Exxon Chemicals, Fauzia Kerai Khan, Harvard University, Productivity, Rutgers
“No one ever washes a rental car,” is a popular adage that perfectly sums up the responsibility and concern that is inherent in ownership. This is why an increasing number of companies, globally as well as in Pakistan, are offering Employee Stock Ownership Plans (ESOPs). These are formal contracts offered by employers whereby employees ‘own’ the organisation and ensure that a stipulated percentage of the company’s profits flow to its ‘owners’ in the form of bonuses.
This employee-employer partnership model is based on the principle that it is in the interest of the staff to work with dedication in order to achieve individual, team and organisational goals, if they are the direct beneficiaries of increasing revenues. On the other hand, the company benefits from having a close relationship and dialogue with its employees, who are also its shareholders, and are therefore involved in day-to-day business operations.
Studies have linked ESOPs with improved company performance. According to research conducted at Harvard University and Rutgers late last year, ESOPs increase levels of employee trust, productivity and employee retention. They are also believed to improve employees’ attitude towards their work. No wonder then, organisations that provide employee incentives such as ESOPs consistently outperform those organisations that do not.
ESOPs have the potential to increase employee productivity and company revenues. However, for this potential to be realised, in addition to merely having a financial stake in the company, employees need to be kept in the loop regarding important business decisions and given the opportunity to exercise their influence.
An ESOP success story in Pakistan is that of Exxon Chemicals; its employees bought a 75% equity share and launched Engro Chemicals, which to date, remains the most successful employee buy-out in Pakistan’s corporate history.
– Fauzia Kerai Khan
The writer is Chief Consultant, i&b Consulting, Training, e-learning. firstname.lastname@example.org
First published in the Careers Section of The DAWN National Weekend Advertiser on January 11, 2015.