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#Written by David Tam, 1997. #
#davidkftam@netscape.net Copyright 1999#
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David Tam
Tuesday, March 18, 1997.
Business Press Review
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"Employee share ownership can pay big dividends". The Globe and Mail.
Friday, March 14, 1997. C7. ------------------
This article is related to human resources issues because it explores the
practice of having an employee share ownership plan (ESOP). This plan
encourages employees to purchase shares of the company, becoming part owners
and having more say over the company's future. The theory behind this practice
is that it provides major motivation for employees to work harder and smarter,
to become more involved in the company, and contribute to the success and
growth of the company.
There are many other advantages to implementing an ESOP. As mentioned in
the article, rather than paying out money in a profit-sharing plan, profits can
be converted to equity held by the employees, allowing the funds to be
reinvested in the business. Also mentioned is that ESOP makes employees more
aware of the company's bottom line. It removes the hostile relations between
management and labour as well.
A problem mentioned in class was that, in the high technology industry, it
is very hard to keep highly knowledgable employees, such as computer
programmers and engineers. One effective method is to give these employees a
"piece of the action". By giving shares, the employees is given a higher stake
in the company. As mentioned in the article, "An employee will be more
productive and less inclined to leave if he [or she] has a stake in the
business". ESOP may also be used as effective compensation rather than paying
premium salaries to important employees.
This theory has proven to work successfully for many companies that
implement it. According to the consulting firm, ESOP Builders, Inc., companies
listed on the TSE who have implemented ESOP show higher growth rates, profit
margins, employee productivity, return on equity, and lower debt/equity ratios
than non-ESOP companies.
In summary, ESOP may be seen as a great human resources solution.
People's mentality change when they are given a stake in a business. I believe
it brings out the best in every one. It brings out the best in every employee
in a company making that company highly successful.
(
geocities.com/siliconvalley/campus/9640/2ndYear) (
geocities.com/siliconvalley/campus/9640) (
geocities.com/siliconvalley/campus) (
geocities.com/siliconvalley)