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ProShare Presents A Strong Case For Share Plan Reforms

22 July 2021

A report commissioned by ProShare and written by the Social Market Foundation pinpoints 14 key recommendations for making employee share plans even more effective and accessible. After gathering feedback from members, ProShare will present its case to the Government – and at EQ, we’re keen to hear the thoughts of our clients.

It’s a mark of the benefits that employee share plans have brought to so many people that the structure and governance of the plans themselves have changed little over the past 20 years. Yet working patterns have undergone a transformation over that same period. People move jobs far more frequently, employee expectations have altered significantly and, as well as the impact of the gig economy, we’ve now also experienced the extraordinary upheaval of the pandemic crisis.

This backdrop of change has prompted ProShare to call for a review of share plans, for the benefit of everyone from employees and employers to stakeholders and wider society. Earlier this year, it commissioned the Social Market Foundation (SMF) to write A stake in success: Employee share ownership and the post-COVID economy, a detailed report that sets out the case for an expansion of employee share ownership in the UK, and for the share ownership agenda to form a key part of a “fair and strong economic recovery” narrative as we emerge from the Coronavirus crisis.

The report covers a range of policy recommendations and sets out 14 areas for change.

“We had two key aims,” says SMF Research Director Scott Corfe. “The first was to demonstrate the compelling case for employee share plans to politicians and policy-makers. The second was to identify the barriers to share plan participation and rollout, and how they can be overcome.”

At the time of writing, ProShare was finalising the process of gathering feedback from its members – feedback it describes as every bit as constructive as the extensive media coverage that followed the launch of the report in May.

More flexible SIPs

One recommendation that has received particularly strong and almost universal support is a call for the Government to cut the tax-free period of share incentive plans (SIPs) from five years to three, reflecting the tendency of modern workers to move jobs far more frequently.

Employee Ownership Commission

The report also recommends that the Government should establish an Employee Ownership Commission “tasked with developing the institutional support required to widen rates of employee ownership”. This would include reviewing business access to support and advice on employee ownership, financial support and the marketing of employee share plans. The commission would also take a lead role in identifying and removing barriers to employee share ownership.

Financial hardship

Share plans are an important tool for bolstering the financial resilience of UK households.

The tax advantages of share plans to workers are obvious, so a major concern of ProShare and the Social Market Foundation is whether some lower-paid workers are held back from participation due to a perception of affordability – something that may be further exacerbated through financial hardship triggered by the pandemic crisis. It’s this thinking that lies behind another well-received report recommendation that would see SIP rules amended to allow companies to offer free shares to lower income workers.

Transparency

Another big theme is transparency. For instance, the report proposes that the Audit, Reporting and Governance Authority should require company annual reports to include information on what type of share plans are being operated, the extent to which each plan is taken up by eligible UK-based workers and the average value of employee shares.

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“The report is very much welcomed by us,” says Jennifer Rudman, EQ’s Industry Director, Employee Share Plans.

“It’s a powerful demonstration of the value of share plans and raises important issues in relation to broadening participation and addressing issues such as financial hardship. We’re glad to be part of the widespread discussions that the report has prompted and are keen to hear our clients’ thoughts.”

For David Mortimer, Head of External Affairs at ProShare, the underlying message of the report is that share plans provide benefits for everyone - and that the 14 recommendations can make those benefits even more tangible and accessible.

“The lovely thing about working in this industry is the focus that everyone has on providing benefits to employees,” he says.

“Yet share plans also bring significant productivity gains to the employers that provide the plans. And as a result, shareholders benefit, and society as a whole benefits. Once we’ve had the opportunity to gather full feedback from our members, we believe we’ll be in a position to present a very strong case to the Government for changes that will bring value to everyone.”

Read the full report here, along with a recording of the launch event panel discussion hosted by Claer Barrett, Consumer Editor, Financial Times.

Find out more

Do you have any thoughts about the report recommendations that you’d like to share with the team at EQ? Then please do get in touch with your Client Relationship Lead.

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