At The Essilor Group, an ophthalmics company based in France, employees are the largest group of company shareholders. To date, 55% of Essilor’s 67,000 global employees are shareholders, and they own upwards of 8% of the company’s share capital. All employees, regardless of seniority, are eligible to use their wages to purchase shares.
Essilor, a $49 billion company that recently merged with eyewear maker Luxottica, matches each employee’s investment up to a certain amount, which depends on the country where they work.
According to Essilor’s CEO and chairman, Hubert Sagnières, this corporate governance model — also known as an employee stock ownership plan — is the most effective. He told Business Insider that it “aligns the interests of the financial investors with the interests of the employees.”
Owning shares of the company can give employees a say in larger decisions
Holding shares as an Essilor employee not only means that you own a part of the company you work for. If you join the employee shareholders association, Valoptec, you also play a role in making key organizational decisions.
Valoptec members (there are currently about 10,000) are able to attend an annual meeting with Essilor leadership and vote on aspects of company strategy and human-resources policy, such as how employees are trained and managed. Each Valoptec member gets to cast one vote, regardless of how many shares they own.
“Your voices are equally important to me, so I want to give more weight to the person voting than the number of shares that they have,” Sagnières said.
The annual shareholders meeting (for all shareholders, not just Valoptec members) is more traditional. One share is equivalent to one vote, so the more shares you own, the more sway you have in the company.
However, senior leaders at Essilor also meet with elected Valoptec representatives every two months, where they might discuss issues such as closing a manufacturing plant and potentially putting people out of jobs. Three Valoptec representatives also sit on Essilor’s board.
Employee-owned firms may have a better survival rate than non-employee-owned firms
Although employee-owned firms are relatively rare, Essilor isn’t the only company where employees are a large group of shareholders.
Publix Super Markets (a private company), for example, is owned by associates and members of the board of directors. According to Investopedia, all Publix employees receive 8.5% of their annual salary in the form of company stock, once they’ve been with the company for at least 12 months and worked at least 1,000 hours. The company has been on Fortune’s list of the best workplaces in the US for 21 years.
Interestingly, a New York Times article describes how Sears, which recently declared bankruptcy, once set aside 10% of pretax earnings for a retirement plan for full-time employees. By the 1950s, The Times reports, employees owned one quarter of Sears. (The company phased out this profit-sharing plan starting in the 1970s, The Times reports.)
The Times article contrasts Sears with Amazon, which in October, 2018, stopped the practice of giving two shares a year to warehouse employees.
And while not every organization is suited to employee ownership, 2017 research conducted by Rutgers University professor Doug Kruse found that employee-owned firms tend to survive longer than similar, non-employee-owned firms. Kruse speculated that it was because employee-owned firms “retain workers to maintain ownership culture and promote long-term productivity.”
What’s more, Kruse found, employee-owned companies tend to have higher total compensation levels.
Essilor’s employee-ownership plan has its roots in the merger between two French companies, Essel and Silor, that created the company, in 1972. Essel started as a worker’s cooperative.
Sagnières said that employee ownership reflects Essilor’s overall mission of improving people’s lives — for both customers and employees. “It’s all about absolutely being clear and vocal about the overall purpose of the company,” he said. “It should not be lip service; it has to be totally credible. It has to drive the strategy, and not the opposite.”
Per approfondimenti: European Federation of Employee Share Ownership