Employee shareholding goes beyond the simple financial concept. It redefines the relationship between the company and its employees, transforming work dynamics. By becoming shareholders, your employees are no longer simple executors: they become partners invested in joint success. Each victory of the company results in a valuation of their investment. It is an innovative approach to closely link your employees to the trajectory and prosperity of your business.
With 3.2 million employee shareholders, France stands out as the European leader in employee shareholding, a position reinforced by a favourable previous economic context.
According to an IPSOS study carried out for the Proches agency in June 2019, 83% of the professionals questioned believe that employee shareholding reinforces employee loyalty to their company.
In addition, 80% consider it an excellent way for the company to value and recognize its employees.
A study by the London School of Economics and the University of Toronto conducted on 3,800 employees in nine countries, including the United Kingdom, United States, and Germany, highlighted the positive impact of employee ownership on employee engagement. The results are impressive:
These figures show that employee ownership is not only beneficial for the engagement of your employees, but also for the retention of your talents and the overall performance of your company. Employee shareholding is positioned as an essential strategic tool for modern companies seeking to optimize their human capital.
Employee shareholding is a mechanism that offers employees of a company, whether listed or not, the possibility of holding a share of its capital. Although the Commercial Code does not offer a strict definition, it specifies the actions to be considered in order to determine the “participation of employees in the share capital”. Among them, we find the actions integrated into the Business Savings Plan (PEE) and the Corporate Mutual Investment Funds (FCPE).
Eligible businesses? Any joint stock company (SA, SAS) can set up an employee share ownership plan, whether listed or not. Only LLCs are excluded.
This approach offers a new dimension to the employer-employee relationship, placing trust and collaboration at the heart of business strategy.
The capital increase reserved for employees consists in creating new actions to offer them primarily to employees. It is a way of strengthening their involvement without diluting existing shareholders. In France, for example, the law requires that any increase in capital be first offered to existing shareholders (preferential subscription right). However, this right may be abolished by an Extraordinary General Meeting to allow a capital increase reserved for employees.
Implementation: This operation requires an extraordinary general meeting to approve the capital increase. Employees generally have a right of first refusal on new shares issued.
Example: A company wants to raise 1 million euros by increasing its capital. It could reserve 30% of this increase, or 300,000 euros, for its employees, allowing them to subscribe to new shares at a preferential price.
In 2019, around 3.5 million employees in France held shares in their company, representing nearly 10% of the capital of SBF 120 companies.
Unlike a capital increase, the sale of shares does not create new shares. It consists in selling existing shares to employees, often at a preferential price. This can be achieved by a shareholder who wants to reduce their stake or by the company itself if it has its own shares. According to a 2018 study, 20% of CAC 40 companies have implemented an offer reserved for employees in the last three years.
Implementation: This operation requires a formal offer made to employees, specifying the number of shares available, the price and the terms of payment.
Example: A founder owns 500,000 shares in his company and wants to sell 10%, or 50,000 shares, to his employees. It could offer them these shares at a price reduced by 20% compared to the market.
The PAGA allows shares to be awarded to employees without financial compensation. These actions are often conditional on the achievement of performance objectives or on the presence of the employee in the company for a defined period of time. In 2020, the number of free shares granted increased by 25% compared to 2019 in CAC 40 companies.
Implementation: The award of free shares requires a decision by the board of directors or the supervisory board, after authorization by the general meeting. Beneficiaries should generally keep these shares for a minimum period of time.
Example: A company could decide to award 100 free shares to each employee with more than 5 years of service, provided that the company reaches a turnover target for the following year.
Advice: AGMs are particularly suited to fast-growing companies or companies that have achieved exceptional performance. They make it possible to share the fruits of this success with employees, thus strengthening their commitment and their sense of belonging.
BSAs give the holder the right to buy shares at a fixed price. They are often used to associate managers with company performance. BSA can represent up to 10% of the share capital of a company, according to French regulations.
Implementation: BSAs can be issued during a capital increase or during a fund raising. They have a limited lifespan and expire if they are not exercised before they expire.
Example: As part of a 2 million euro fund raising, a company could issue BSAs allowing managers to buy up to 5% of the capital at a fixed price, provided that the company doubles its turnover within 3 years.
Manager holdings allow a group of managers or managers to collectively hold a share of the capital. It is a structure that reinforces the alignment of managers' interests with those of the company. In LBO transactions, managers can hold between 5% and 20% of the company's capital via their holding company.
Implementation: The creation of a holding of managers requires an adequate legal and fiscal structure. It can be put in place during business buyouts or fund raising operations.
Example: Let's imagine a company valued at 10 million euros. A holding of managers could be created to hold 20% of the capital, i.e. a stake of 2 million euros. Managers could then be invited to invest in proportion to their participation in the holding company.
BSPCEs are the sesame for unlisted start-ups. They give employees the chance to buy shares at a price set in advance, reinforcing their commitment to business growth. This is a major asset for startups that seek to attract and retain talent without significantly diluting their capital. Their particularity? Unlike stock options, they evade income tax when granted and raised. Taxation only occurs when the shares are sold, with the added bonus of an allowance for the duration of ownership. BSPCEs can represent up to 15% of the share capital of a startup, according to French regulations.
Implementation: BSPCEs are awarded by decision of the board of directors or the supervisory board, after authorization by the general meeting. They have a limited lifespan and must be exercised before they expire to be converted into shares.
Example: An early-stage startup could use BSPCEs to attract a top-level CTO, by offering them the opportunity to buy shares at a very attractive price, reflecting the current value of the startup, not its potential future value.
Advice: If you're running a startup or a burgeoning startup, BSPCEs could be your best asset. However, one caveat is necessary: it is essential to clearly define the procedures for awarding and discharging BSPCEs to prevent possible future disagreements.
Stock options are options to buy company shares offered to certain employees at a preferential price. They represent a promise: that of being able to buy, in the future, shares at a price defined today. If the company sees its value increase, employees can then exercise their options and buy the shares at a price lower than their market value. It is a way for the company to link employee compensation to its future performance. The big difference with BSPCEs lies in taxation: stock options are taxed as soon as they are exercised, unlike BSPCEs, which are only taxed when shares are sold.
Implementation: The award of stock options requires a decision by the board of directors or the supervisory board, after authorization by the general meeting. Beneficiaries generally have to keep these shares for a minimum period of time to fully benefit from tax benefits.
Example: A growing company could offer stock options to its key executives, allowing them to buy shares at $20 today, even if they could be worth $50 or more in a few years.
Strategic point: Stock options are often used by more mature companies, especially those listed on the stock exchange. They make it possible to attract and retain talent by offering them an earning potential linked to the company's performance. However, the heavier taxation of stock options compared to BSPCEs may be an element to consider in your compensation strategy.
It is the compass for your plan. It sets the rules of the game for setting up a shareholding plan: eligibility conditions, subscription terms, share prices, etc. And to avoid any legal pitfalls, a specialized lawyer will be your best ally.
Whether online or on paper, the important thing is to make life easier for your employees. To do this, you need to define how they will be able to subscribe to shares.
Managing shares, which are securities representing a company's capital, can be complex. If your CFO has the necessary skills, they can manage actions. Otherwise, consider outsourcing this management to an external service provider or a bank.
Your employees should be the first ambassadors of your plan. Inform them, train them, take them on this adventure! For example, remind them regularly of the advantages of shareholding: a strengthened sense of belonging, sharing the benefits of growth, tax advantages (for example, an exemption from capital gains tax after 5 years of holding shares via a PEA).
Employee share ownership has many advantages, both for the company and for employees. First of all, it reinforces employee engagement. By becoming shareholders, they feel more involved in the life and decisions of the company. This increased involvement often results in strengthened loyalty and a desire to contribute to the success of the company. In addition, employee ownership can provide a company with a stable source of funding, which can be particularly beneficial in times of economic uncertainty. Finally, offering an ownership plan is a great way to attract and retain talent.
Employees see this opportunity as a recognition of their value and their contribution to the company.
However, employee ownership is not without its drawbacks. For existing shareholders, this may mean diluting their share of capital. Setting up and managing a shareholding plan can also be complex. It is often necessary to call on legal experts to ensure that the plan complies with current regulations. Finally, although employee ownership can be seen as an advantage, it also involves financial risk for employees. If the business does not perform well, they may lose some or all of their investment.
In conclusion, employee ownership is an excellent way to strengthen employee engagement and associate them with the success of the company.
With thoughtful implementation and effective communication, it can become a powerful tool for your business. And you, where are you in this process?
