"Visions of World Benefit & Global Responsibility: Perspectives of McGill Students

Thursday, July 26, 2007

Equity Share Ownership

The main goal of a corporation is to maximise short term profits with little regard for moral factors. For instance, employees can be fired, departments eliminated or production lines closed if they are not profitable enough. Thus, human values are often overlooked or simply not taken into consideration. Moreover, the corporate image has been destroyed due to companies such as Enron, WorldCom, Parmalade and numerous others that lied to their employees whose pension funds were decimated as a result of the company`s deceit. This situation has to be reconsidered by trying to redefine the way we do business, thereby restoring the positive image of corporations. One answer to these problems comes from a new concept called Equity Share Ownership that allows all employees to be partial owners of the company they work for, thereby provides a more effectively way to manage a company.

In the 1950s, Louis Kelso, an American lawyer and a social theorist, invented Equity Share Ownership. His goal was to establish a plan which would help workers to participate actively in the decisions taken by top managers. Additionally, managers will also more deeply respect the contribution of their employees. The plan highlights three major concepts:
§ Build a culture that helps people think, feel, and act more like owners.
§ Make sure all employees understand the business and their role in its success.
§ Offer equity in amounts significant enough to effect employees’ financial lives.[1]

The ESOP concept is crucial for the 21st century, for it brings together investors and employees to work collectively. Under this idea, the business structure changes by brining the ideas of employees into the equation thereby increasing efficiency while incentivising employees to work harder. For example, employees at Stone Construction Equipment aren’t treated as a number, but as owners of a major multinational corporation. Workers are deeply involved in the company. They bring new ideas, a better way of doing things or a new method of keeping costs low and customers happy.

In the future, more corporations will opt for the ESOP model because it recognizes that workers need more than just a paycheque to feel satisfied in their jobs. They want to feel that they can contribute to the company by bringing new ideas and see themselves as part of the organisation.
[1] Rosen C, Case J, Staubus M,. Equity share ownership, Harvard Business Review Press. Page: cover page. (2005)

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