One day this could all be yours…

Nick Clegg’s recent suggestion that voters should be given shares when the almost nationalised banks are returned to full private ownership has received mixed reviews.  For many it is a throwback to the eighties and the swathe of privatisations initiated by Mrs Thatcher’s government in her attempt to transform the UK into a property owning share owning democracy. The iconic “Tell Sid” campaign to sell shares in British Gas was perhaps the most memorable privatisation, and the one evoked by many commentators on hearing Clegg’s proposals. 

Arguably though, it was the “free” shares which followed the demutualisation of a number of building societies from 1989 onwards that dramatically expanded the shareholder base in the UK, rather than the privatisations of the eighties, and these are probably a better comparison for what the deputy PM is trying to achieve. Therefore Nick may be onto something after all.

Widening share ownership has long been seen as a way of cementing the primacy of capitalism and giving people a real stake in the future wealth generation of their own, and the country’s, businesses. Whilst privatisations and demutualisations have hogged the headlines, the spread of employee share schemes, many of them tax efficient, have also played a key role. Whether through Save As You Earn share schemes, Enterprise Management Incentive schemes or bog standard share option arrangements, the carrot of participating in the future value of the business has become a key component of many employee packages.

“Ownership” of course is an interesting concept in itself. The contrasting styles of the “absentee landlord” institutions and the more “hands on” style of entrepreneurial businesses large and small are clear to see. Dealing with ownership by targets versus ownership by gut feel is a challenge for managers and employees looking to make their own contribution to the success of a business.

The move from employee to owner is an interesting one. MBOs are still a very popular exit route for many owner/managed businesses. However the difference between receiving a regular salary one day and suddenly being responsible for everybody else’s the next is quite a psychological leap, and one that many owners and employees need to think very carefully about when considering this option.

Business ownership theory is often focused on the financial side, hence the bias towards shares. And yet for it to be really effective as a tool for engagement and incentive surely it needs to be mental state as well. People need to feel like owners. Whether it is Nick Clegg giving away free shares in nationalised banks or an owner managed business selling to an MBO team, the head needs to be right if the wallet is to follow. Real ownership I would argue is all in the mind.

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