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Employee Share Ownership (ESO) schemes are key to true broad-based empowerment


Employee Share Ownership (ESO) schemes are the key to true broad-based empowerment as long as appropriate and sustainable oversight mechanisms are in place, as well as the required policies. ESO schemes are designed to reward black employees with an opportunity to own shares in the company they work for. By implementing such a scheme, black employees are able to enjoy the fruits of their labour.

Following the launch of Thudana Citrus Trust, San Miguel, looks at the benefits of ESO schemes. “The requirements for a valid employee share ownership scheme are strictly defined,” remarks Andries du Preez San Miguel country manager, the lead behind the launch of Thudana Citrus Trust. “Organisations investing in ESO schemes need to ensure that participants receive their claim and distributions. The rules stipulate the requirements for the appointment and expectations of trustees as well as the rights and responsibilities of participants.” Trustee training and development

Many ESO schemes have failed because the employees haven’t understood what it means to be part of a trust or board. By investing in training and development, companies ensure meaningful transformation while addressing ownership requirements. By explaining everything to participants in a way they understand, allows them to make informed decisions about the management of the scheme. Another obstacle is trust participants being denied an active role in the shareholder management of the company; and not adequately represented at shareholder meetings. Through the mentorship of experiences leaders in business, Thudana Citrus Trust aims to educate individuals on the role of shareholders, the responsibilities and the discussions held in board meetings and subsequent decisions. du Preez adds: “The answer lies with companies acknowledging that BEE is an economic and social imperative. Business leaders need to understand and appreciate the value that their employees can bring to ESO schemes, and during the initial stages, understanding when and why individuals neglected their duties to the scheme as they understand their new role.

The benefits of employee empowerment

The benefits of ESO schemes include increased productivity; greater employee retention; attracting and retaining talent which could result in increased scoring on management control; and businesses are saved from the difficulties of finding a suitable BEE partner. Critics could argue that implementing an employee share ownership scheme has the same effect as merging with a black-owned SME because the scheme would have minority voting rights and therefore employees of the scheme have little say in the decision-making powers. But this isn’t the case. Employees who are beneficiaries and recipients of economic interest through an ESO scheme ensure that they contribute to the success of the business through their individual skills that they were hired to perform in the first place. Even if the shareholding was a mere 25%, these employees’ voices would be heard at shareholder meetings and companies would be wise to listen. A scheme of this nature is also an investment in the business itself as a result of the additional potential revenue that can be generated from a higher B-BBEE score.



Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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