Nobody is more engaged in a business than the owner – right?

I was writing something the other day when I made this headline statement. However, as I completed it, I found myself challenging it and realised that it was one that can be very easily challenged.

This was quite a shock, because the fundamental premise underlying everything I do, and all I am writing about, is that employee ownership creates the highest level of employee engagement. Nor am I alone, for that, after all, is the whole principle behind employee share ownership plans and share options. It is also evidenced by the superior service and mark-beating returns offered by employee owned businesses. So why was I suddenly questioning my own convictions so strongly?

The challenge actually arose from a little bit of perceptual positioning and a shift to the more objective role of impartial observer and reappraisal of the whole subject of business ownership. The obvious question then, was to ask how engaged the investor or share-holder owner is in a business. Needless to say the answer was most discouraging.

The undeniable fact is, shareholders of listed businesses – whether individuals or institutions – are primarily concerned with the yield on their investment rather than being interested in the business for its own sake. Their involvement is ultimately remote. They tend to only rally to action when they have specific concerns or when there is a sudden deterioration in performance and they realise their money is at unanticipated risk.

So who really has the long term interests of the business at heart? I think we all know that it is the employees. Consequently it seems entirely logical to give them a greater stake in the business. In fact a strong argument could be made that it entirely defies logic not make employees co-owners.

For quoted companies, making employees co-owners would ensure that there was someone taking a longer term perspective (thereby countering some of the proven excesses that caused the recent economic meltdown) and, paradoxically, providing better protection for investors. For the remaining majority, owners are generally actively involved and so more likely to be engaged and looking to their long-term interests. Nevertheless they would stand to considerably improve their overall performance, and their returns, through an ownership arrangement that instilled the same level of employee engagement that they themselves have.

The scheme I am proposing thus offers a win-win solution. It mitigates against the disengaged owner whilst engaging the disengaged employee. Surely then it makes good business sense and is better for all concerned?

Discuss.