How can employee-owned businesses shake up Canada’s business scene?

When Heather Payne, CEO of Juno College of Technology in Toronto, told her employees that she was handing over ownership of the company to them, some were lukewarm about the idea, but other employees expressed some cautious optimism.

Payne, one of several Canadian entrepreneurs, is considering transferring his company’s ownership structure to an employee equity trust (EOT). It is a legal entity that allows employees to become shareholders in their company by purchasing shares from business owners. Employees can earn extra shares every year.

“At the end of the year, at the end of 10 or 20 years, they will understand what is going to happen in the company and I think it will be very comforting,” he said. CurrentlyMatt Galloway.

EOTs are a relatively new venture in Canada. The federal government has announced in its 2022 budget that it will amend the Income Tax Act and introduce an employee rights fund to promote the business rights of employees.

Peter b. Simon Beck, an associate professor at the college, said: “Companies that have done this in the United States and the United Kingdom.”

“If they take the time to think about this and think about the dynamics properly, they can create a ‘Canada-made’ solution that works very well and has a good chance of achieving all the goals they have,” he said. . Said Currently.

Payne said Juno, a professional university with 34 employees, was pleased to be one of the first Canadian companies to take this approach.

“There is still a lot to learn about employee-owned trusts, but we hope … we hope to explain the benefits of that trust to many more,” he said.

Public campaign for employee rights

The Government’s commitment follows the publicity campaign of Social Capital Partners, a Canadian non – profit financial institution, to create a dedicated EOT in Canada and the advice of shareholders.

According to Managing Director John Sheals, part of making EOTs more attractive is that they provide employees with the means to become “free” shareholders in their company.

“Every employee becomes a shareholder in the company for free through the trust, and they receive additional shares each year, allowing their wealth to increase over time,” he said. “When they leave the company or retire, the company repurchases their shares for cash.”

In addition, it offers an additional option for mid-sized companies, Shell says, which are mostly family or founder-owned.

“Their options are usually to sell to a competitor, which leads to a greater focus on the economy; or to a third party, such as a private equity fund,” he said.

“So the whole point of EOTs is that they give owners the option to sell to employees who seem to like them.”

For Payne, who has been running Juno since its inception in 2012, this was one of the main reasons he approached Shells to learn more about EOTs, which he considered to be the perfect model for his business.

“The idea of ​​buying the company and selling it to someone who could break it and remove the team … was not very attractive,” he said.

“For me, the goal is to create something 100 years from now, so I feel that employee trust is the best way to make sure it happens.”

Democratic cooperation is another option

EOTs are not the only way to tell employees how the company they work for works. There are also labor cooperatives, where the cooperative is owned and operated by workers.

Community researcher Marcelo Vieta said: “In EOT … the community or employees are co-owners. So they are the owners, but they do not have to have a democratic voice in the management of the company.” CurrentlyMatt Galloway.

“In a co-operative, the members share ownership and have a democratic view of the management of the company, what is done in terms of revenue and the strategic direction of the company.”

Through their program, Vita and his team have tracked approximately 255 business transitions for cooperatives in Canada, 181 of which are still active in various sectors.

Studies show that cooperatives increase business efficiency and productivity, and provide greater stability in communities and specific businesses.

Beck believes that the key to successful labor cooperation is how democratic it is.

He said: “If you take the idea that there is a workers’ co-operative, working members will have a voice and a referendum to determine the future of the organization and to reap those benefits … it is very important to act in a democratic way. ”

But according to Becken, some potential challenges could arise if the democratic process is not carried out properly.

“If you do not structure democratic practices properly, if you keep the pulse and do not progress over time, what will happen is that a particular subcommittee tends to take over the leadership of the people or stay in those positions over time.”

This is called organizational degeneration. This could lead to an increase in the level of indifference from members of the public workforce over time, Beck said.

It’s not just about co-op. Beck said regulatory decay can also occur in EOTs.

While there is no silver bullet to prevent this from happening, Beck said there are ways to revive democracy in these organizations.

“There is a big movement in the field of political science right now that focuses on doing things like civic meetings or civic groups,” he said. ⁇[They’re] It basically consists of randomly selected citizens and focuses together and then makes decisions that represent the diversity of the entire population.

“I think it could also be used in cooperatives and workers’ businesses to provide a more nuanced but comprehensive perspective on what workers really want in a given situation.”

Long-term construction

Although he made Juno EOT, Payne understands why other business owners want to increase profits and sell at a higher price, for which he does not blame them.

But for her, turning her company into EOT is more than just money.

“It’s more … Creating something new in the field of education will take a long time,” he said.

Published by Muhammad Rashini. Produced by Alison Massman.