Royal Mail employees are to be offered shares worth up to £2,000 as part of the organisation’s privatisation process.
Vince Cable, business secretary, has confirmed that the government will give Royal Mail staff 10% of shares in the organisation, following its proposed flotation on the the London Stock Exchange.
The government intends to award the free shares under a tax-advantaged share incentive plan (Sip) and Royal Mail will communicate more details to its employees in the coming months.
Eligible Royal Mail employees will automatically receive an equal number of shares, irrespective of their grade, and there will be a pro-rata allocation for part-time employees.
Employees will also have the option to opt-out of the scheme if they wish and have the option to buy extra shares through the retail offer, as well as be given priority when shares are allocated.
Cable explained that the scheme, which means employees’ shares will be locked in for at least three years, will ensure that Royal Mail staff have a stake in the organisation.
Cable said: “The government’s decision on the sale is practical and logical. It is also consistent with developments elsewhere in Europe.”
But Chuka Umunna, Labour’s shadow business secretary, said the government’s decision is confusing and that the Royal Mail is being ‘sold off on the cheap’.
Moya Greene, chief executive officer of the Royal Mail Group, said: “Royal Mail aims to combine the best of the public and private sectors. Our employees will have a meaningful stake in the company and its future success.
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“As we move into the private sector, the current legal position is that all terms and conditions that apply to Royal Mail employees would remain in place, on the same basis.
“To provide further reassurance, we will create a legally-binding and enforceable contract with the [Communications Workers Union] CWU. Pay and protections could not be changed for the period of the contract without CWU agreement.”
The decision to give Royal Mail employees a stake in their employer is very welcome and provides a chance for workers to share in its future success. A wealth of UK and international evidence shows employee share ownership can lead to an increase in productivity, better company financial performance, lower staff turnover and absence, as well as improved employee advocacy, all of which benefits the wider economy as well as the employer and employee.
There is a common misconception that employees will sell their shares as soon as they are able to do so. Contrary to popular belief this did not happen after the privatisations of BT, BP or British Gas and there is no reason to believe Royal Mail employees will act any differently. In reality, most employees hold on to some, if not all, their shares for some considerable time, building up a nest egg for the future or simply saving for a rainy day both commendable public policy objectives.
The trade union has previously demonstrated a lack of awareness and understanding about what employee share ownership actually is. It has also refused to engage with us to discuss the issue despite numerous attempts to do so. We hope it will reassess their opposition in recognition of the many benefits share ownership can bring to its members.
I am glad that Vince Cable confirmed the shares will be assigned to individual posties rather than held collectively in trust. We have always pushed for Royal Mail employees to hold shares directly so that they are not treated as second-class shareholders.
Giving the shares for free provides recognition of the work they have already contributed to build the company.
It makes sense that employees should be given priority to purchase additional shares in the IPO, because as a group they have the long-term interests of the company at heart.
With so many individual shareholders, however, there is a risk that the voting power of the 10% stake will be diluted. Our proposal is that a trust is established for the collective voting rights attached to these shares to ensure that the employees have a strong and ongoing say in how the company is run.
The news that employee ownership could become a central feature of a privatised Royal Mail Group is very timely coming as it does a few days after the UKs first Employee Ownership Day. The recent announcement by Government that they intend to give a 10% stake to employees, plus priority in allocation for shares bought during the IPO, could make a real difference to the levels of staff engagement and well-being.
The privatisation of Royal Mail Group raises some profound sensitivities including the ability of Ofcom to secure the universal service in perpetuity and the sustainability of the agreement between RMG and its retail arm Post Office Ltd. But it also creates an opportunity to develop a more inclusive and engaged working environment.
Businesses that have significant degrees of employee ownership have highly engaged workforces and are more productive, more innovative and more competitive than organisations that are totally externally owned. Employee ownership could offer one of the ingredients for the future success of RMG and the EOA would be happy to help Royal Mail explore ways in which they can get the best from the model.
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