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The costs of employee share ownership schemes

Barnes, J. and Richardson, Ray (1991) The costs of employee share ownership schemes. CEPDP, 25. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This paper investigates the costs of the three most popular types of employee share ownership schemes in the UK. It offers a method of establishing these costs and provides some rough calculations of their actual size for a set of large firms in the UK. It ends with some observations on how managers perceive the costs of employee chare ownership. Overall for the sample of 55 firms, the cost of employee chare ownership was equivalent to a shareholder loss, or ''dilution'', of equity at a rate of 0.25% per annum. In absolute terms, the sample of companies spent somewhere more than ú250 million on their employee share ownership schemes in 1988; this amounted to 2.19 per cent of recorded profits, and 1.30 per cent of the wage bill. Where companies had all three schemes in a mature form, their costs accounted for 2.58 per cent of the profits, and 1.48 per cent of the wage bill. In contrast, the managers whom we interviewed tended to see the schemes run by their companies as essentially costless, and even as a cheap way of raising money. They also judged it to be virtually impossible to gauge whether their schemes produced any benefits for the firm.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 1991 The Authors
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Sets: Research centres and groups > Managerial Economics and Strategy Group
Research centres and groups > Employment Relations and Organisational Behaviour Group
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 25
Date Deposited: 21 Aug 2008 15:39
URL: http://eprints.lse.ac.uk/21118/

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