Welcome to Nuttall Shares, the first in a new semi-regular series of articles by Graeme Nuttall OBE, Partner at FieldFisher and Fellow of Ownership at work.
There is a gap in the research base around understanding what effective trusteeship looks like in employee ownership trust (EOT) owned companies. As part of my work with OAW on addressing this gap, I’ve looked at the history of paritarian governance.
“Paritarian” means jointly managed on an equal or parity basis. Many EOT trustee boards make successful use of a paritarian composition of trustee directors. They may not realise it but if they have the same number of directors drawn from senior management as from employees as a whole then this is paritarian governance.
Robert Oakeshott (1933-2011) was founder of the UK Employee Ownership Association (EOA). (In that role, he also established the charity vehicle which subsequently launched as Ownership At Work in 2019.) Robert was instrumental in promoting this model of governance for employee trusts and securing its introduction into UK law as officially endorsed good practice.
Robert lobbied for the change in the 1994 Finance Act which introduced paritarian governance for employee trusts to the UK statute book. Since then this governance approach has had further endorsement in legislation and more widely, in the UK and has established itself as good practice in mainland Europe.
It was recommended in the Nuttall Review of Employee Ownership in 2012 that the composition of directors of an employee trust should comprise equal numbers from management and staff with one or more independents. Paritarism has since featured in EOA presentations on forming effective EOT trustee boards.
The simple conclusion is that anyone establishing an EOT should look at Robert Oakeshott’s suggestion of paritarian governance as good practice and take that as the starting point when deciding on the composition of their EOT trustee directors.
Please read a more detailed account of how Robert Oakeshott made paritarian governance good practice for EOTs.