Employee Ownership: Have we nailed it in the UK?

I am too socially considerate to embark uninvited on a conversation about employee ownership, but I find being asked what I do for a living is an irresistible prompt to start talking.

And whereas just a few years ago this would be met with a blank stare or worse – my questioner’s eyes visibly glazing over – the response now is far more likely to be one of recognition – “Oh, you mean like John Lewis?”.

We have come a long way.  Employee ownership is beginning to form part of the mainstream of UK business.  Household names such as John Lewis are leading the charge, and a growing number of smaller companies, spanning a wide range of business sectors, are also choosing to become employee owned.  When clients tell us “the result was transformational“ and “the impact has been incredible”  it looks clear that their move to employee ownership has been a good call.

If employee ownership is so positive it might be tempting to expect, viewed from our warm UK bubble, the same levels of enthusiasm in other countries.  Might it be interesting, I reasoned, to see what’s happening beyond our shores?

So it was with great enthusiasm and curiosity that I accepted an invitation from the Canada ESOP Association https://www.esopcanada.ca/  the not for profit body promoting employee ownership in that country, to their annual conference at the beginning of this month.  The plan was for me to tell delegates about what we are doing in the UK, and learn about employee ownership works in Canada.

Employee ownership advocates there feel that there is enormous untapped potential.  With a number of highly successful employee-owned companies, such as Chandos Construction and Banff Lodging Co, companies contemplating a change already have some excellent models to consider.  Introducing tax breaks similar to those we have secured in the UK may, as it has done here, speed up the adoption of employee ownership, but those who have already done it – the early adopters – feel passionate enough to have done so without such incentives.  Employee ownership exponents in Canada are now facing similar challenges to those we faced only a few years ago (and to a degree still do): how to move it beyond the early adopters and launch it into the mainstream?

Is anything different? Yes, how employee ownership is structured.  The Canadian approach very commonly involves personal share ownership, with employees typically making a personal investment to buy shares.  Avoiding “entitlement” is a key driver.  Just as we experience, employees rarely have any spare money to invest in shares, so they are commonly offered a loan to be repaid from future dividends.  Contrast this with the approach often (but by no means always) applied here in the UK, where indirect ownership through an employee ownership trust (called a perpetual trust in North America) is often favoured.  This is seen to have the advantage of simplicity and avoiding a need to find buyers when employees who have acquired shares personally wish to sell.

So, different ways successfully to achieve engaged and committed employee owners.  A great research project would be to look at whether one is better than the other.

I enjoyed a fascinating couple of days with some committed and fun people, and hope that we can continue to exchange ideas and intelligence around employee ownership.

Robert Postlethwaite  June 2018