Succession Planning and Management Blog

The number of employee owners was nearly 10 million in 2010 in large European companies (out of 32.6 million employees). The number of companies that have employee ownership was increasing (91.7%), as well as those having share plans for all employees (53.7%) and those with stock option plans (64.1%).

However, significant differences can be seen between countries: A significant increase in the number of employee owners in Spain, Poland, France and the Nordic countries (Denmark, Sweden, Norway, Finland), contrasting with a significant decrease in Belgium, Ireland and The Netherlands.

Overall, the capitalization held by employee owners rose back to 192 billion Euro in 2010. In % held, there was a slight decline for the first time for many years (from 2.82% to 2.71%). However, the share held by Top Executives has increased, while it is the “common” employees who have seen their share shrink.

All details are to be published in May in the next “Economic Survey of Employee Ownership in European Countries in 2010″. We will update this report to the blog when released

The prickly issue of succession has always troubled entrepreneurs, and particularly very wealthy ones. No one likes to confront the idea of dying, least of all a business owner who might have delusions of immortality. However, two decades of warnings from business advisers such as accountants and lawyers do appear to be getting through to wealthy entrepreneurs, who are not only putting in place strong succession plans, but going a step further by making them crystal clear to the wider market.

Melbourne property developer Bruno Grollo – who is perhaps most famous for building the Rialto office tower – is the latest to adopt this strategy. In an interview with the Australian Financial Review, Grollo has explained how he intends to split his empire between his three children: youngest son Daniel, who has run the family’s Grocon development business for more than five years; eldest son Adam, who is also involved in the family business; and daughter Leeana.Grollo says his father never split his business empire between he and his brother Reno; the two of them did it themselves in 2000 in an amicable parting of ways.Grollo said he wants the same for his children.

“I suppose I’ve got to get things in order before I die. I don’t want the kids fighting,” he said. “As a father you think your kids are happy just being your kids and owning everything. But they’re not, they want to own something and that’s fair enough.” Grollo is following a similar approach to the late Richard Pratt, who carefully carved up his empire well before his death and, perhaps most importantly, went on the record to explain to the media and the market how the split would work.

This is smart on two levels. Firstly, it ensures all the children know where they stand. If anyone makes a “land grab” after the entrepreneur dies, everyone in the market will know. Secondly, it ensures a smooth transition of the business to new ownership. Customers, suppliers and other stakeholders have time to come to grips with the change in ownership and work through any ramifications that might have. Whether the business is to be sold off, broken up or run by other family members, continuity is important.

SmartCompany editor James Thomson in todays Smart Company.

Without it, value is destroyed and everybody is worse of.

Many of you who know me well, know I am a fan of the St George Illawarra Dragons and recently we saw a transition from undoubtedly the best Rugby League coach to his asisstant Steve Price. Price, who was recommended for the job by Bennett, said the opportunity to coach in the NRL after a 10-year apprenticeship as an assistant was the realisation of a long-held dream. “I’ve always had aspirations to be an NRL coach and I’m very grateful and honoured to be given this opportunity,” Price said.”But my post doesn’t start till November 1, the big fella’s driving the bus, I’m just the little bloke sitting next to him for the time being and we’ve got a job to do this year.”
Interestingly, this transition has been announced seven months before the transition and more importantly Price has been groomed for the role and worked closely beside Bennett for three years – how successful will the new coach be – only time will tell – what is clear is that the successful transition has been managed effectively and communicated clearly.

Employee owned companies outperformed the FTSE All-Share in 2010, according to the UK Employee Ownership Index (EOI) published by Centre member law firm Field Fisher Waterhouse LLP. Employee owned companies’ share prices were up 16.3 percent, performing better than the FTSE All Share companies’ share prices, which went up by 11.3 percent over the year. The EOI, compiled by the firm’s equity incentives team, monitors the share price performance of listed companies, comparing the performance of 4 FTSE All-Share companies with companies that are more than ten percent owned by employees. Analysis of 2010 shows that in the final quarter employee owned companies also outperformed the FTSE All-Share, with shares up 11.5 percent compared to FTSE All-Share company share prices, which were up 6.8 percent.

The EOI shows that over 18 years, employee owned companies have outperformed FTSE All-Share companies each year by, on average, 11 percent. Over successive three-year periods they have outperformed by 38 percent and over five-year periods by 74 percent. An investment of £100 in the EOI in 1992 would have been worth £860 at the end of December 2010 whilst the same investment in the FTSE All-Share Index would be worth £249.

As part of managing our business risk and protecting our valuation we often use Trauma insurance - created in South Africa in the 1980’s as a new form of Personal Insurance to help families who sufferred a “Traumatic Event” and needed a lump sum of money to help recover. Most insurance companies offer policies that trigger a payment when any of the 30 to 40 listed events, the most common being Cancer, Heart Attack and Stroke occurs to the insured. One benefit that may be of interest to families is Family Protection (AIA) or Child Trauma benefits. Starting from as little as $5 per month a lump sum of $50,000 to $200,000 could assist a family when an unfortunate event effects a child between 2 and 16, by sufferring a listed ‘Child Trauma’ event. This could be very helpful for parents needing to take time off or need a lump sum of money to help children with the right medical treatment and time to recover. In many ways whilst we manage unplanned events and often use insurances to fund this aspect of a strategic business succession plan – having a child suffer a trauma could severely impact upon your time and energy available for the business – not to mention the stress and grief at having a sick/injured child – this funding is designed to reduce that pressure.