Shareholder returns in employee-owned companies rise 53%

Total return for shareholders in FTSE companies with employee share ownership rose by 53% in 2013, compared to 21% for companies in the FTSE All-share index, according to research by corporate finance firm Capital Strategies and the London Stock Exchange.

The UK Employee ownership index analysed 69 FTSE companies where employees own at least 3% of shares.

It tracked total shareholder return and compared it with the shareholder returns of the FTSE All-share index, which is calculated on a similar basis.

The research found that FTSE companies with at least 3% employee share ownership substantially outperformed the market in 2013.

Shares in organisations with employee share ownership have risen faster than the FTSE all-share in eight of the 11 years in which the index has been calculated.

Malcolm Hurlston (pictured), chairman of the Employee Share Ownership (Esop) Centre, said: “This is a landmark for employee share ownership. For the first time we have an index calculated to FTSE standards, which tracks how organisations with substantial and realistic employee ownership perform.

“It puts beyond doubt the value, to organisations and the national economy, of encouraging employees to be shareholders.

“The index has been calculated from 2003 and demonstrates that organisations with employee share ownership have substantially outperformed the market through boom and bust in eight out of 11 years.

“It promises to be live proof that employee ownership not only works, but works well. The Esop Centre will publish [the index] quarterly.”

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Nigel Mason, chief executive officer and founder of Capital Strategies, added: “Screening for employee share ownership creates a portfolio of businesses built on intellectual capital and earning high returns on tangible assets. 

“These companies are engaging their employee shareholders to deliver constantly superior returns.”