Tuesday, 17 September 2013

Big fanfare but "shares for rights" is a dog's dinner of a policy!

By Amanda Vigar, Managing Partner, V&A Bell Brown LLP

There was a lot of brouhaha in the spring about ‘shares for rights’ recommendations by a lesser-known ‘governmental advisor’ called Adrian Beecroft. Those proposals, widely derided at the time, have this month snuck into law.

The general idea is that Shares for rights would offer business start-ups some degree of deregulation. In return for losing certain rights and protections, including unfair dismissal, statutory redundancy pay and the right to request flexible working, employees are offered shares worth between £2,000 and £50,000.

It all seems fine and dandy in principal but how many start-ups are able conjure up shares to the tune of several thousand pounds at the very least? How big a slice of their business would they need to give away to make this even possible? 

Imagine the bureaucracy! It seems almost as if a new admin post will have to be created simply to deal with all the extra work. It all seems a bit like a modern-day serf’s contract and a questionable way to ‘bribe’ workers into keeping quiet if they have a grievance. 

Unsurprisingly, small businesses have showed a considerable lack of enthusiasm. A consultation by the business department showed the policy had full support of fewer than five out of 209 businesses asked to respond. Only a “very small number” said they were interested in taking it up. 

I can’t remember the last time there was such a scheme where there are so many unanswered questions. What happens when the share price plummets as well as rises? What happens when an employee has a genuine grievance? Are disgruntled employees able to go to the European Court of Human Rights to plead their case? I bet they are! 

Now that is has been implemented (as of September 1st) how many employees are likely to go for it? The idea is of course to foster more of a stake in a business, with all the productivity and motivational gains that should result. However that’s in an ideal world and we are most certainly not living in a perfect world. In fact, I can’t help asking if the people who dreamt up this scheme have ever lived in the ‘real’ world! 

Unfortunately, as a nation, we are not born entrepreneurs. Mr or Mrs Average will not take the inherent risk of giving up something tangible in the form of rights for something more uncertain in the form of shares. Only time will tell if this new scheme is the expensive white elephant I expect it is!