Developing a made-in-Canada approach to employee ownership trusts will address multiple public policy challenges, according to a new report by non-profit Social Capital Partners.
Employee-owned companies — where a broad base of employees own a significant stake in their employer — are associated with better company performance, stronger local economies, long-term investment and higher wealth and income for workers, said the report.
Currently, these trusts are most prominent in the U.S. and the U.K. In the U.S., policies to support employee ownership trusts have led to 14 million American workers at 6,400 companies sharing in US$1.4 trillion in wealth. In the U.K., in 2021 alone, 210 business owners sold to employee ownership trusts, creating around 20,000 new worker owners. However, employee ownership trusts don’t exist in Canada.
Throughout the coronavirus pandemic, employee-owned companies have proven to be more resilient than their privately-owned counterparts, found the report. In addition to data about the performance of employee-owned companies throughout the pandemic, it also included new research into the benefits of employee ownership for women and people of colour.
“Employee ownership provides workers with pathways to wealth building that would not otherwise be available,” said Bill Young, founder of Social Capital Partners, in a press release. “Two years into the COVID-19 pandemic, many people with assets are financially better off, while those without assets have suffered.”
As demographics change and a generation of business owners sell their companies, Canada has a historic number of opportunities to see companies transferred to employees and accrue the related benefits, like growing middle-class wealth for workers and protecting local jobs, noted the report.
“With so many owners retiring and selling their businesses, Canada will miss a huge opportunity if we don’t act fast to put policies in place to support employee ownership,” said Jon Shell, a partner and managing director at Social Capital Partners. “We know selling to employees is good for owners, workers and communities. And once a business is sold, that opportunity is gone forever.”
The federal government’s 2021 budget included a commitment to investigate the potential for employee ownership trusts. The report is encouraging the government to solidify its commitment to employee ownership in the 2022 budget as part of an optimistic pro-growth agenda.