The success factors for employee ownership implementation

Smit, Shaun Gareth (2015-04)

Thesis (MBA)--Stellenbosch University, 2015.


ENGLISH ABSTRACT: Today’s business world is characterised by technological advance, globalisation, and concentrated ownership of productive assets. The result is a dysfunctional economy with income being concentrated with capital owners, and related economic insecurity for a majority of the population. Employee ownership offers a more balanced economy with more distributed capital ownership. This is particularly relevant in South Africa, which faces numerous socio-economic challenges. The South African government has specifically identified employee ownership as a means to facilitate broad-based economic empowerment of previously disadvantaged persons. Employee ownership not only offers benefit at societal level, it also offers a vehicle to provide benefit at personal and organisational levels. Given the benefits of employee ownership, the objectives of this research are to identify the success factors of employee ownership implementation, and assess whether such success factors have been addressed in implementation of employee ownership in South Africa. The research methodology involved performance of a literature review of success factors of employee ownership implementation and a qualitative study involving a discussion framework and semi-structured interviews regarding implementation of employee ownership in South Africa. Interviewees included management of South African companies that have implemented employee ownership, trade union representatives involved with employee ownership, employee ownership scheme fiduciaries, socio-economic development specialists, and employee ownership advisors. The literature review provided the international context to employee ownership and related success factors, and the interviews provided a South African analysis thereof. The research findings identified success factors which relate to education and training of employees; ensuring the initiative is perceived as being fair; delivering meaningful financial benefit to employee participants; establishing an ownership-oriented culture in the business; instilling a commitment to pursuing key business disciplines; implementing sound employee ownership governance; engaging with unions; and employing specialist advisors. The identified success factors were used to develop a success factor framework, which was used in guiding discussions with interviewees, and which was compared to Employee Share Ownership Scheme requirements as set out in the Codes of Good Practice on Broad-based Black Economic Empowerment. The findings included that implementation in South Africa has predominantly been compliance driven, in an attempt to address transformation – specifically ownership by historically disadvantaged South Africans. Management has typically not been focussed on changing business culture or operations, and no success factors in this regard have been addressed. Employee ownership in South Africa has, in general, been considered a failure as few schemes have delivered meaningful financial benefit to participants. The recommendations for businesses implementing employee ownership are regarding awareness of primary objectives, understanding the potential benefits of employee ownership, understanding related success factors, and managing employee expectations. The recommendations for government organisations that wish to promote employee ownership implementation as well as obtain maximum benefit for employees, businesses, and society as a whole are regarding understanding the potential benefits of employee ownership, understanding related success factors, considering past employee ownership successes and/or failures, and consideration of appropriateness of policies and legislation. Further employee ownership research includes study of best practice structuring; challenges faced by businesses; the employee perspective; South African policies and legislation and assessment against recognised success factors; and study of international tax treatment in order to drive South African implementation.

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