ESOPs and Employee Relations

The impact of Employee Share Ownership Plans (ESOPs) on employment relationships and industrial relations is of fundamental importance in any assessment of this relatively new form of company organisation. In most UK ESOPs a concern to improve industrial relations has been an important, if not always the most important, factor behind adoption of this type of collective employee ownership. This ranges from the comprehensive strategies to increase employee participation and commitment found in some of the bus company ESOPs to less clearly formulated aspirations to improve traditional adversarial low-trust relationships in some of the manufacturing sector ESOPs. The attraction of ESOPs to managers seems to be that they can expand employee participation whilst at the same time maintaining ‘conventional’ management hierarchies and patterns of control (unlike many co-ops for example). For unions the collective nature of share-holding in ESOPs avoids some of the problems associated with other forms of employee share scheme and potentially allows an expansion of employee control of management decision making. The Conservative governments of the 1980s believed that ESOPs were a useful mechanism to generate employee commitment to the ‘enterprise culture’ and hence to weaken employee attachment to traditional trade unionism.