SuperInvestor.com.au

» Articles - Attracting staff with employee share schemes

Offering employees a share in a business in an effort to retain talented staff is a tactic more companies seem to be taking up to address the skills shortage in Australia.

The question is, what effect does attraction of staff have on the share pricing and can loyalty deliver better returns?

Brett Davies Lawyers chief executive and Law Central managing director Brett Davies, a SuperInvestor member, says the share price is only one factor in attraction of staff but loyalty, and employee share schemes in particular, can enable a business to flourish.

"Staff tend to be more loyal even if they only own a small part of the business", Mr Davies said.

Integrated Legal Holdings (ILH), of which Brett Davies Lawyers and Law Central are a part, listed on the Australian Stock Exchange last August. The idea is for law firms to operate within ILH as they did before joining the company but be given the freedom to access capital to fund growth and release the wealth of partners that was previously trapped in the individual business. ILH also provides the mechanisms to operate employee share schemes, to retain key personnel.

ILH has made two acquisitions since its listing, which was oversubscribed (this was interpreted as an endorsement of the company’s business model).

"In my personal view, the two acquisitions we have made since listing have come about only because we were listed", Mr Davies said. "I doubt whether we could have attracted those practices in such a short period of time without the future employee share scheme opportunity".

Mr Davies believes a law firm will dramatically increase its profits, for both partners and shareholders to take advantage of, when it is acquired by ILH. He says older partners can pay out any partner loans, they can remove personal guarantees on loans, overdrafts and leases, put a floor in their income via their salary and benefit from sick, annual and long service leave and implement a succession plan where younger partners can replace retiring partners in a smooth transition.

"Older partners, through the profit sharing and expected growth in profits, increase their overall income in the medium term... (and) receive fair capital value for their practice now, rather than later – a value that you might not have otherwise got – and continue to grow and gain greater income from the practice", Mr Davies said.

The benefits for ILH shareholders are also noteworthy.

"By using the advantages that ILH provides – employee share schemes, shared best practice, greater corporate approach via chief executives, keeping employees and clients within the group – this encourages law firms to grow", Mr Davies said. "The increased profits are then divided between the shareholders, via dividends, and principals, via profit share. It allows lawyers and non-lawyers alike to share in the high profits and future growth of law firms".

 

Eliza Adamthwaite
www.SuperInvestor.com.au

Now that you have read this, what do you think?  Do you have other ideas?  Please share you views with other members (eg by blog or discussion form) and/or request professional member(s) to contact you directly.

Back

 

» Article Feeds

RSS Feed   Atom Feed