Europe has long supported employee share ownership with a variety of tax free and/or tax advantaged share ownership plans. Yet, despite these advantages, and the rise and rise of such plans in the technology sector, overall employee share ownership has declined. When we refer to ‘employee share ownership’, we are referring to wide and deep share ownership – across and down through all levels of the company, not simply executive ownership.

The conclusions arise from the recent publication of the European Federation of Employee Share Ownership (EFES) “Annual Economic Survey of Employee Share Ownership in European Countries in 2022“.

Wide and deep employee share ownership continues its slow erosion in Europe. This is evidenced by all significant indicators, with three exceptions:

1. The percentage of employees’ ownership stake
2. Capital held, and
3. The number of companies with employee share plans.

The share held by employees has risen to 3.26% and EUR447bn in 2022. A record!

But most of this is held by executives. Executives hold the lion’s share (EUR224bn for 9,600 people), Other employees’ ownership has stalled (EUR223bn for 6.8m employees). A significant disparity between the two employee cohorts.

In European listed companies, the share held by executive directors now clearly exceeds that of other employees, whereas 15 years ago executives together held only 1.06% of all shares, compared with 1.60% for other employees.

The 9,600 managers (an average of four in each company) now own more shares than the other 34m employees of large European companies.

The math works out to more than EUR20m on average for each executive, and ~EUR33,000 for each other employee shareholder.

Overall, the share held by employees is at the same level as it was fifteen years ago. Employee share ownership peaked in 2011 in large European companies and has been steadily declining ever since.

This is not for wont of trying. An increasing number of large European companies are setting up employee share plans. In 2022, 95% of large companies had employee share ownership, 88% had share plans of all kinds, while 57% had plans for all and 54% had stock option plans.

The number of employee shareholders is decreasing. This is the case in all European countries (with the notable exception of the UK). A decrease is also apparent in the number of large companies where employees hold a significant share.

The number of employee shareholders is lower today than it was ten years ago. There are currently 6.8m employee shareholders in large companies. Assuming one million employee shareholders in SMEs, the total number in Europe is only 7.8m, compared to 8.3m in 2011. The decrease in the number of employee shareholders is across all European countries, other than the UK.

Some may have the view the national fiscal policies that support employee share plans have reached their limits. Without further support, the average employee cannot afford to invest financially in their employer company.

The European Federation of Employee Share Ownership (the Federation) suggests that employee share plans and policies are becoming less effective in large companies. The Federation contends that government support is national, while the employees of large companies are increasingly based outside their home country. Sixteen years ago in large European companies, almost one out of every two employees was located in the home country, where they could benefit from the political incentives of their country. Today, this is true for a third of employees, the other two-thirds working outside the home country.

This means the share of employees who can benefit from home country plans and policies is getting smaller. Thus, overall, employee share ownership policies have lost 30% of their effectiveness in a few years, simply because they remained national. This explains why recent legislative efforts in several countries (Pacte Law in France, fourfold increase of tax incentives in Germany) have not had any significant impact on employee share ownership in large companies.

This does not seem to follow from the evidence. Most large companies, European or otherwise, tend to adapt employee share policies for each domicile in which they have operations. Nevertheless, see for yourself. The results of the survey can be found HERE.

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