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EMPLOYEE-OWNED BUSINESSES: PROS AND CONS - Essay Example

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Paying a part of employees' salary with the stock of the company is traditionally considered beneficial for both companies and staff (Broadly Granted Stock Options Improve Corporate Performance, 2002); however there are certain points to be taken into consideration…
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EMPLOYEE-OWNED BUSINESSES: PROS AND CONS
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Employee-owned businesses: pros and cons 2007 Outline: A) Why might employee-owned businesses perform better B) Why might traditionally owned businesses perform better
C) Conclusion.
Why might employee-owned businesses perform better
Paying a part of employees' salary with the stock of the company is traditionally considered beneficial for both companies and staff (Broadly Granted Stock Options Improve Corporate Performance, 2002); however there are certain points to be taken into consideration. There are a lot of successful companies whose stock are held exclusively by its employees and managers. So, what are the advantages and disadvantages of this phenomenon
First of all, it is important to mention that the pros of the practice of the staff's holding the company's shares only works in case the shareholders indeed feel that they are company's owners, and treasure the stock they possess. In this case, the level of motivation and responsibility of the workers is generally increased, since they are interested in their company's better performance. Moreover, the personnel tend to be more accurate with the company's property and equipment.
There is a possibility to actualise inner loans within the company, e.g. paying salary or part of it with the company's stock. In this case, the company saves salary funds, and at the same time attracts funds. Very often the staff members have a restricted right to sell their stock. Moreover, "employee ownership companies have lower workers' compensation insurance rates than comparable non-employee ownership firms". (Employee Ownership Companies Pay Less for Workers' Compensation Costs, 2002)
All these make employee ownership beneficial for the companies. What about the staff though
It is important to take into account that the material methods of motivation are not the only method to make the employees committed. It is important to pay heed to the corporate culture, development of the workers' creativity, boosting the team spirit, etc. Possessing a part of company's shares is able to ensure all this. Being shareholder of their own company helps the employees keep up the team spirit, smoothen any possible social contradictions, and all in all, it improves the corporate climate. Becoming a partner is a very strong motivational factor for many employees. In fact, when the emplpyees possess the stock of the companies they work for, they often unite into certain temporary labour collectives for solving particular problems, and often come up with the innovations of some sort. In this way, there is a friendly environment in the company that makes every member of staff feel a unique personality. There is an atmosphere of mutual respect, and people feel their own value for the organization. Moreover, they are given the chance to be creative.
A staff member who holds a motivating holdings of shares is in a very advantageous position: on the one hand, he knows the problems of his company and, especially, the department he works in, and on the other hand he is personally interested in the company's competitive advantage and better performance.
Why might traditionally owned businesses perform better
What are the disadvantages of employee-owned businesses In some cases, the liquidity of some companies' stock is quite low, or the dividends are too small. In this case, the profit people actually gain from possessing the company's stock is so insignificant that people do not even regard these papers as investment, and are happy to sell them once there is such an occasion. In such cases, there is always a possibility that the stock will be purchased by the competitors.
The company's management is able to decrease the value of their company's stock by additional emission of more shares. Of course it may be beneficial for the top-management, however it is very discouraging for the staff and causes negative attitude to holding the company's stock and to the company in general.
Conclusion
All in all, employee ownership of the company's shares seems a positive phenomenon. Since it is very difficult to make people like doing something, the problem of staff motivation is very topical for HRM, and systematic approach to motivation is required. Employees' owing a part of their company's stock seems to be a very powerful method of motivating staff. I am sure that for me, being a shareholder of the company I work for would be an extremely strong motivational factor that would influence my performance in an extremely positive way.
Works Cited
1. Broadly Granted Stock Options Improve Corporate Performance, 2002. Retrieved on February 27, 2007 from The National Center for Employee Ownership (NCEO) database: 2. Employee Ownership Companies Pay Less for Workers' Compensation Costs, 2002. Retrieved on February 27, 2007 from The National Center for Employee Ownership (NCEO) database: Read More
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