Employee involvement gets the best
Employee-owned companies consistently perform better, according to new research. But in the Gulf, they are few and far between.
September 7, 2010 3:51 by Sam Potter
According to a recent report by the Cass Business School in London, businesses in which the employees own a share are more resilient in tough times. It suggests that, by giving employees a share of the company through stock options, the business would fare better in a downturn like the one that has so recently engulfed the world.
Emirates 24-7 also reported that findings of the study suggest employee-owned businesses create jobs faster and typically outperform companies in which employees have no stake.
But these insights are likely to be lost on most companies in the region, according to Gulf News. The paper points out that businesses in the Middle East offering this kind of model are much less common than in the UK or US due to the local ownership regulations. “In most cases, stock options for employees are simply absent,” it says.
“The set up in the UAE is not very conducive to employee-owned companies as our law here does not support stock options,” Prashant Gulati, the secretary general of the Indian Business and Professionals Council in Dubai, told Gulf News. “It’s not easy to build mutli-levels of shares and it makes it difficult for people to use share holding as a form of incentive for employees.”
The term employee owned business encompasses any business owned wholly or partly by its employees. The situation often comes about when employees are given a share of the business after working for it for a certain period of time. But if local companies wanted to implement this option, “an offshore structure will have to be created which can be complicated and expensive,” says Gulf News.
“Although it is possible to build an employee-owned business in the UAE, the sponsorship model, the majority expat population, the transient nature of the work force, and company law requirements create an environment in which employee-owned businesses are more challenging to build and run,” Dr Armen V Papazian, financial economist and CEO of Keipr, a consulting firm that specialises in business analytics and intelligence told the paper.
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