Why Isn't there more Employee Ownership?

Employee Ownership Models are proven to be effective, so why don't we see more of them?

Photo by Christin Hume on Unsplash

With the proven reliability of employee-owned businesses, we often question why more businesses don’t opt for the model. In a recent Forbes article, Mary Josephs lays out several of the reasons why businesses may not adopt the model. While she mostly focuses on ESOPs (Employee Stock Ownership Plans), many of the issues are shared by other employee ownership models.

One of the biggest issues she discusses is the complexity of adopting an employee ownership model. Newly restructured businesses have to work with new operating rules and regulators. they also have to repurchase their shares and teach their employees about the model. Considering the general lack of knowledge regarding employee ownership, adopting this model can be a struggle. However, there are some solutions. Tim Masson, a Canadian business owner wants to sell his business to his employees and believes the government should help him work through it. He thinks the government should offer incentives, such as tax benefits as well as an educational program to walk employees through the adoption process. In the United States, we are seeing the beginning of this sort of policy. The Worker Ownership, Readiness and Knowledge Act (Work) seeks to put government programs in place to educate workers and owners about employee ownership options. Tim Masson even believes that incentives for employee ownership models should be so strong that it would be the best transition option for a business.

Another issue that Joseph highlights is that the benefits of the employee ownership model do not become clear until after it is adopted. While some benefits like tax savings are easy to understand, others like improved employee culture are not. It is difficult to quantify the benefits of improved employee culture. This is why it is so important that employee ownership advisors emphasize and explain these benefits.

Ultimately, it seems that one of the main reasons that employee ownership models are rare is due to a lack of education and resources. This is why government programs to promote and explain the model are so important. If every employee and owner understands what employee ownership entails for their business, chances are we will see much broader adoption.

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