Will share ownership decrease employee turnover rates?
September 12, 2012 | BY
clpstaff &clp articlesNew draft Regulations will allow companies listed in China to offer stock ownership plans that could increase staff retention, but without additional incentives employees may be reluctant to participate
The China Securities and Regulatory Commission (CSRC) announced the move to allow more staff to benefit from stock ownership at the beginning of August. The draft Regulations set out an Employee Stock Ownership Plan (ESOP) that entitles employees of listed firms to purchase stocks on the secondary market.
“When employees' personal wealth is bound together with the company, they will keep business goals in mind, strive to find more customers and be devoted to cost savings that eventually benefit the company as well,” said Wang Lixing, a partner with King & Wood Mallesons.
Employees investing in their own company can also strengthen staff retention. Employee turnover rates in China reached 19% in 2010, well above the 5% rates commonly found in the EU and US, according to Roland Berger Strategy Consultants. The Plan offers a way to minimise high turnover rates, but whether employers will build on this remains to be seen.
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