Employee ownership is fast-growing, doubling in the past three years, smashing through the 1,000 milestone in terms of number of companies.
The success of the employee ownership trust (EOT) structure has helped to change the shape and size of the sector, with tax breaks for business owners selling their business to the employees. Recent accelerated growth is linked to an increase in awareness, the pandemic forcing owners to think about their own mortality – making sure they have a succession plan – and businesses wishing to be more sustainable with better impacts for people and the environment.
Popular with both the left and right sides of the political spectrum, the latest statistics, provided by the Employee Ownership Association (EOA) researchers, the White Rose Centre for Employee Ownership, show the sector is delivering better business as follows:
■ Socially responsible: 71% of EOBs have a purpose statement, 96% have workforce wellbeing as a measure of success
■ Good governance: 97% of EOBs incorporate employee governance
■ Involved and informed: 90% give employees a say about working conditions, with 75% regularly sharing financial information.
Employee ownership can take three main forms:
■ Direct (individual) share ownership: each employee becomes a shareholder, holding a specified number of shares. Shareholders receive a profit share through dividends, have voting rights and the possibility of selling their shares at a profit
■ Indirect ownership: shares are held in a trust on behalf of the employees. The trust must manage the shares in the best interests of the employees. This is a simpler model to operate, often chosen by businesses wishing to benefit employees in the long term through trust influence over the company’s strategy and direction
■ Hybrid ownership: this combines ownership of a strategic block of shares in a trust with individual ownership.
According to White Rose, there were 1,030 employee-owned businesses in June 2022, with 2021 a record year for growth seeing 285 new EO businesses. The top five sectors represented are Professional services (38%), Construction (13%), Manufacturing (13%), Wholesale & retail (10%) and Information & communications (9%).
Northamptonshire hosts three large EO businesses – Scott Bader, a speciality chemical company based in Wollaston with over 700 employees worldwide; Cambridge Weight Plan, a manufacturer of slimming foods based in Corby, with over 200 employee owners; and, since 2020, Briggs & Forrester, a building services engineering company based in Northampton, with nearly 900 employees. In 2021 Scott Bader celebrated its centenary and 70 years as an employee-owned business.
Other well-known EO businesses include Arup, Unipart, Go Ape, Richer Sounds, the Wallace & Gromit makers Aardman Animations, as well as the biggest of all, the John Lewis Partnership.
Benefits for business…
Co-owned companies tend to be more successful, competitive, profitable and sustainable. As co-owners, staff in employee-owned businesses often tend to be more entrepreneurial and committed to the company and its success. With high employment standards, employee-owned businesses find it easier to recruit and retain talented,committed staff.
EO businesses are often more innovative as management consults, shares information about the company with employees, and gives staff responsibility. Employee-owned businesses also tend to have a strong commitment to corporate social responsibility, with a close involvement with their communities.
…and the economy
Successive governments have promoted employee ownership because they recognise its potential contribution to the economy. A range of factors make employee-owned businesses an asset to the economy:
■ A combination of shared ownership and employee participation delivers superior business performance.
■ Employee-owned businesses add to the diversity of the economy by offering an alternative model for business success.
■ Companies which are employee owned contribute £30bn to GDP.
Employee ownership is proving to be a resilient business model that is well suited to the challenges of 21st Century management and the societal pressures on business for fairer, inclusive capitalism. It is not a new concept – the Employee Ownership Association is itself over 40 years old. Has its time come?
The 2018 ‘Ownership Dividend’ report found that employee ownership delivers a more productive and inclusive economy in three ways:
■ Improved productivity – employees act with greater common purpose
■ Resilient regional economies – the sustainable business model anchors jobs locally with longer term investment
■ Engaged employees – inclusive models of governance motivate and reward individuals
Interested? Most organisations that become employee owned are assisted by the EOA, who help choose the right model, arrange visits to existing employee-owned businesses as well introductions to specialist advisors. The University is a member of EOA so if you would like to know more about this fast-growing sector, do get in touch.
Contact Adrian Pryce on 07720 297402 or email@example.com or visit www.employeeownership.co.uk