When Heather Payne, CEO of Juno College of Technology in Toronto, told her employees she would eventually hand them ownership of the company, some were lukewarm about the idea — but other employees expressed some cautious optimism.
Bain is one of a number of Canadian business owners considering transferring their company’s ownership structure to an employee equity (EOT) trust. It is a legal structure that allows employees to become shareholders in their company by purchasing shares from business owners. Employees can also earn additional shares each year.
“That’s where they understand what’s going to happen to the company at the end of the year, at the end of 10 or 20 years, and I think that could be very comforting,” she said. PresentMatt Galloway.
EOTs are a relatively new initiative in Canada. The federal government said in its 2022 budget announcement that it will amend the income tax law and introduce an employee ownership fund to encourage employee ownership of businesses.
Simon Beck, associate professor at Peter B. College, said: Organizations that have done so in the US and UK”
“There is a good chance that if they take the time to think about this, and think about the mechanics properly, they can make… a ‘Made in Canada’ solution that will work really well and meet all the goals they have,” he told Present.
Payne said she is excited for Juno, a career college with 34 employees, to be one of the first Canadian companies to adopt such an approach.
“There is still a lot to learn about employee ownership trust, but we’re looking forward to … we hope to demonstrate the benefits of that trust to many other people,” she said.
Public campaign for employee ownership
The government’s commitment follows a public campaign by Social Capital Partners, a Canadian not-for-profit financing company, to create a dedicated EOT in Canada, as well as stakeholder advice.
Part of what makes EOTs so attractive is that they give employees a way to become shareholders in their company “for free,” according to managing director John Shiels.
“Each employee becomes a shareholder in the company through the trust free of charge, and they earn additional shares each year, allowing them to grow their fortune over time,” he said. “When they leave the company or retire, the company buys back their shares for cash.”
Moreover, it provides an additional option for mid-sized businesses – which Shell says are usually family- or founder-owned – to sell.
“Their options are generally to sell to a competitor, which leads to more concentration in the economy; or to a third party, such as a financial buyer, such as a private equity fund,” he said.
“So the point of EOTs is that they give owners the option to sell to employees they really seem to like.”
For Payne, who has been running Juno since she founded it in 2012, this was one of the main reasons she reached out to Shells for more information about EOTs — and why she felt they were the right model for her business.
“The idea of having to shop the company and sell it to someone who might break it up and lay off the team…was really, really unappealing,” she said.
“For me, the goal is to build something that will still be around in 100 years, and so I really feel that employee ownership trust is the best way to make sure that happens.”
Democratic cooperation is another option
EOTs aren’t the only way to give employees a say in how the company they work for is run. There are also labor co-operatives, where the co-op is self-owned and operated by workers.
Social researcher Marcelo Vieta said, “In the EOT…the community or employees are co-owners. So they own, but do not have, necessarily, a democratic say in the management of the company.” PresentMatt Galloway.
“In a cooperative, the members share ownership and have a democratic say in the management of the company, what is done with the revenue and the strategic direction of the company.”
Through his project, Transformation into Cooperatives Project, Vita and his team have tracked approximately 255 commercial conversions to cooperatives in Canada, of which 181 are still active in various sectors.
He said studies have shown that cooperatives increase company performance and productivity, and provide greater stability in communities and in specific businesses.
Pek believes that the key to successful worker cooperation is how democratic it is.
He said, “If you take the idea that a working cooperative…exists so that the working members have a say in deciding the future of the organization and getting those benefits…it is really important that it operates in a democratic way.”
But according to Beck, there are some potential challenges that can arise if the democratic process is not done properly.
“If you don’t build democratic practices properly, if you don’t keep their pulse and improve over time, what can happen is that a certain subset of individuals tend to take on leadership positions or even stay in those positions over time.”
This is called organizational degeneration. This could lead to increasing levels of apathy from the broader worker membership over time, Pek said.
It’s not just about co-ops either. Pek said that regulatory degeneration can also occur in EOTs.
Although there is no silver bullet to prevent this from happening, Beck said there are ways to revitalize democracy in these organizations.
“There’s a big movement right now in the field of political science, that’s focused on doing things like citizen meetings or citizen committees,” he said. “[They’re] It essentially consists of citizens chosen at random to focus and deliberate together, and then come up with decisions that represent the diversity of the entire population.”
“I think it can also be used in cooperatives and worker-owned companies to give a more nuanced but also a more comprehensive perspective on what workers really want in a given situation.”
long term construction
Although she has converted Juno into the EOT, Payne understands why other business owners are looking to increase returns and sell to the highest bidder — and she doesn’t blame them for that.
But for her, converting her company to EOT is more than just money.
“It is more about … creating something new in the education sector that will last for a long time,” she said.
Posted by Muhammad Rashini. Produced by Alison Masman.