Setting The Agenda For Change

2019 Employee Ownership Australia Conference Recap

It's not often professionals from large multinational corporations that have been around for decades, and representatives of unlisted organisations, often only starting their journey, are presented with an opportunity to hear from and ask questions of people in similar situations to their own, all in one location. Employee Ownership Australia's (EOA) 2019 annual conference, Setting The Agenda For Change, allowed its attendees to find real benefit in getting together, learning from one another and discussing the recent industry developments. Despite the differences in organisational structure all EOA members share one thing in common - understanding of the importance of employee equity in driving performance in a challenging environment. And what better way to explore the best ways of dealing with inevitable hurdles than learning from the leaders in our space.

EOA Awards Night

In line with the tradition, the conference kicked off with an event celebrating achievements of organisations who set the benchmark for our industry for successful use of equity plans in fostering employee ownership. Congratulations to the below winners, and especially the representatives of these organisations who were in attendance on the night. These individuals dedicated countless hours setting up and rolling out these award-winning plans. It's fantastic to see their efforts recognised by the community.

GHD Group Limited has been an employee owned company for more than 90 years and was recognised for 'Best Performance in Fostering Long Term Employee Share Ownership (More than 1,000 employees)'. GHD’s core purpose is that “Together with our clients we create lasting community benefit”. Doing so whilst employing more than 10,000 people in over 200 offices across 5 continents is no easy task. By enabling employees to acquire and build an equity stake in the organisation, GHD has been able to build a sustainable community of owners who as employees and shareholders shape the future direction of the company.

Independence Group (IGO) took home the 'Best Performance in Fostering Long Term Employee Share Ownership (Less than 1,000 employees)' award in recognition of their efforts in reaching an impressive 46.52% Salary Sacrifice plan offer take-up only in the second year of plan's operation. The plan has proved an early success story for IGO's 250-people workforce.

Despite the challenging environment, AMP saw the opportunity to launch 2 new plans to coincide with the commencement of a new CEO. The company offered plans on a broad-based level for the first time in over 15 years. This signalled that share ownership in the organisation will support renewed employee engagement, as well as play a role in better aligning employees to the new organisational strategy and mindset. EOA awarded AMP with the 'Best New Employee Share Plan' award.

Coles won the 'Most Effective and Innovative Communications Program' thanks to their efforts that helped secure take-up of over 10% - an impressive result for a company in the retail sector and a plan where no company matching component was on offer. The team at Coles established a dedicated "Myshares" website which contained all relevant plan information. This was combined with regular updates and e-newsletters to all employees on the progress of the “Why not own a slice of Coles” campaign.

Aristocrat Leisure Limited's SuperShare plan secured the 'Best International Share Plan' award'. The plan, offered in 21 countries, rewards employees for participation with 1 matching right for every 3 purchased share, and allowing for shares acquired through the plan to be sold at any point in time, without triggering the forfeiture of matching rights so long as the employee remains employed.

Make Architects, winner of 'Best SME/Succession Plan', is a different kind of architecture practice. It has always been 100% employee-owned and follows the ‘John Lewis model’, in which every employee is an owner, receives an annual profit share and has a say in how the business is run. Make Architects case study prepared by the EOA can be found here.

EOA Conference

As expected, the conference agenda presented all attendees with an opportunity to learn about the latest developments in the industry. Whilst you can find the full list of topics covered and the names of all speakers here, I wanted to share the key highlights and my takeaways from the topics discussed.

• Insights into employee behaviour in employee share ownership plans

Andrew Pendleton, Professor and Head of School of Management at UNSW, kicked off the conference with an in-depth review of his findings from years of academic research into employee ownership in the UK. It was interesting to see evidence of what we all thought was true - companies with employee ownership enjoy on average a 2-4% increase in productivity. This can have a significant impact on various metrics - employee engagement and flourishing internal culture are some of them. Increased productivity by top performers can further drive the behaviour and motivate teams around them.

Research has shown that larger plan participation rates also enhance individual and company performance. This highlights the importance of offer management. Is your organisation investing sufficient resources and time into planning of your next offer or enrolment window? Perhaps it's time to consider what tools may be available to help increase awareness of the plan and its benefits. It's important to create an atmosphere around your offer widow that gets people excited about the opportunity to the part of the plan. Traditional approach of sending constant and lengthy email reminders may have limited impact in achieving that.

I also enjoyed listening to Andrew's point that employee plans represent a goodwill gesture by the organisations that ultimately leads to increased commitment of the employees. Organisations with committed and motivated employees are more likely to invest time and resources into their own training and development. It's clear to see how that can have positive impact on company's overall performance, and reputation in the eyes of job seekers.

• Creating an ecosystem

It was fun being part of a panel with Simon Morris (Lendlease) and Paul Pirie (Shareworks) moderated by Brett Tollman (Westpac) that lead the discussion on the role of plans in managing change. We covered areas of corporate actions, plan design, creating start-up culture within large corporates, and stakeholder theory. But it was the point raised by Paul that sparked the discussion on the floor - how can an organisation create an ecosystem where the share plan is directly linked to the company's vision, which in turn allows for seamless plan participant experience. We touched on increasing awareness of the plan, the ways to simply the offer acceptance process, ways to enable employees to play a role in company's future by exercising voting rights regardless of where they hold their securities. One of the suggestions raised was looking into ways to integrate share plan promotion into talent recruitment and initial employee onboarding processes.

On the other side of the room, Chris Galway (EY) led the discussion as of the unlisted breakaway session. During this session, Simon Lincoln (Partner and Architect) at Make Architects, noted the unique culture at the organisation because of their structure. Make Architects' model is not something that we really see replicated here in Australia. This highlighted the need to consider the distinctive characteristics of company's culture and plans, and dissect the benefits and challenges associated with different ways of offering employee ownership, in order to find a unique blend that works best for your organisation.

• Communication is still key

You probably would have noticed that this topic is brought up at every single industry event. Whilst everyone communicates to their employee participants, it's clear that not all messages are heard. Industry figures suggesting average AGM participation below 5% amongst employee population is a clear example of how standard communication approach of mass mailing simply doesn't work. It may be time to accept that sending email reminders won't make too much of a difference. But the challenge of building an ecosystem where employees connect with their equity and feel proud to be part owner remains.

A great discussion took place about the ways to deal with inertia - how organisations can reach employees who seem to ignore all communications and appear to refuse to take any action. Whilst it's easy to focus attention on individuals that never show interest in participating in the plans, employees that do take up the initial offer to participate but disengage immediately present a bigger challenge. Consideration of your employee demographics could be key to selecting the appropriate communication channels and methods. However, the content itself may play an even more vital role. The attendees agreed that increasing knowledge and financial literacy of employee population when it comes to participating in share plans might be the way to increase engagement.

• Financial literacy

As suggested by the results presented by Andrew Pendleton, whilst income and age group are some of the key factor impacting participation choices that employees make, financial literacy and knowledge also impacts behaviour of participants in the plan. Increasing your take-up percentage is a big win for the organisation, but the experience of the employees post allocation and during vesting events can sometimes be overlooked from continuous education standpoint.

Employee share plans offer an easy way for employees to start accumulating wealth. One of the reasons for this is the trust that employees have in their employers, and faith they put in the company's future prospects. This is where financial literacy comes into play. Whilst long-term participation in the plan can provide employees with significant financial benefits for successful companies, there unfortunately many examples where over-investment and lack of diversification significantly increased the risk profile of plan participants.

Perhaps the rise of the fintech sector, and improved access to financial markets thanks to the rise of passive investing options through microinvesting apps and low-cost ETFs, can present companies with an opportunity to re-position share plans, and make participation in them a more attractive proposition. I envision that companies will be able to capitalise on greater public awareness of the equity instruments. At the same time, organisations will need to consider revisiting the traditional way of promoting and supporting financial and tax education. You could argue that traditional lengthy format of the tax guides, FAQs and offer booklets may have to evolve to make financial education less daunting and more accessible.

• Industry developments and the role of EOA

A panel facilitated by James Marshall (Computershare) covered the latest developments and challenges faced by the listed corporations. It's fair to say that it has been an eventful year, with the Royal Commission, 2018 AGM season and APRA's discussion paper on remuneration requirements APRA dominating the media headlines. Mathew Ronald (EY) discussed the focus on corporate governance as a result of recent events, and the resulting impact on the firms within financial serves sector and beyond.

It's clear that executive remuneration, LTI plan design, choice of hurdles will all be heavily scrutinised in the upcoming AGM season. The panel agreed that the Boards will be expected to be held more accountable in areas of governance oversight, risk management and remuneration. It is evident that these expectations will have a direct impact on the employee and executive plans, as highlighted by some of the recent trends presented by Matt Reed (Computershare) and Tom McCarty (Link).

In light of these developments, EOA remains the champion and advocate for employee ownership in Australia. Andrew Clements, Deputy Chair of EOA, shared his thoughts around policy change and recipe for effective Employee Ownership reform. The overarching message is the aim to promote simplicity and consistency of Employee Share Schemes, whilst considering the changing landscape and the rise of the gig economy. Rolling our effective changes will involve a lot of listening and frank discussions involving the employee ownership community and the relevant regulatory bodies.

• Thriving in the face of change

There is always natural resistance to change, and tendency to play it safe. However, times of great uncertainty often present the best opportunities to take the challenges head-on and build foundation for future success. This can be easily applied to the world of employee equity.

Academic research certainly suggests that share plans can be seen as an expression of goodwill and can promote reciprocal behaviour of employees. We can also learn from this year's award winners AMP, who despite the challenges did not shy away from launching new share plans to get the buy-in from their employees, and start writing a new chapter in their history, which focuses on entrepreneurial spirit, growth, and mutual trust.

Perhaps change is the trigger we need to unlock the underutilised ability of share plans to unleash the potential of employees. Share plans can help organisations to shift the narrative, by allowing them to facilitate growth with the help of engaged workforce. Given the current climate, I have no doubt that this time next year we will be recognising 2020 award winners for doing just that.

In the meantime, I would like to thank EOA, Link Group and Westpac for organising and hosting this year's conference, and all the speakers and attendees for contributing to what was a great learning experience.

?About Employee Ownership Australia

Employee Ownership Australia (EOA) is an independent not-for-profit, member based organisation that represents a diverse range of members; from listed companies with employee share schemes (ESS) through to worker-owned co-operative and mutual enterprises (CMEs). EOA leads the charge in advocating for the advancement of public policy, promotion of thought leadership and creation of resources for employee owned businesses.

Find out how to stay up-to-date with EOA and become a member here.

Further updates on employee equity in Asia-Pacific region

Keep up to date with all the latest news and updates from our team at Shareworks.