It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
Do employees have the right to share in the profits they help produce? I believe they do, and I further believe that the government should require all large companies in Canada with more than 300 employees to share their profits with their workers.
Profit sharing is one of seven core principles I outlined in a recent column that spelled out how we could invigorate our economy and improve the living standards of all Canadians. It is a winning formula for economic prosperity.
When a company is small, its owner is much closer to its employees. The owner has to treat the employees well and pay them fairly or they’ll end up leaving. That’s what I did when I started Magna International. I always showed my workers how much money we had in the bank, and I created an informal sort of profit-sharing system.
Basically, I instituted a bonus system to help retain and motivate my employees. If we had a big order and got it done ahead of schedule, everyone pocketed some extra cash. But it was all very informal and ad hoc.
As my company got larger and I was more removed from the day-to-day operations and our growing workforce, I realized that I needed something more formal. That’s when we made profit sharing a core principle of our “corporate constitution.”
We made every employee a partner in profitability and required Magna to share 10 per cent of its annual profits with employees. After we formalized the right to profit sharing within the company’s constitution, I was amazed at the huge gains we made in both productivity and profits.
The reason why is simple: our employees were on the front lines of the factory floor and knew our products and production processes better than anyone else; they knew how to create greater efficiencies and how to work smarter.
Because they knew they would get a slice of the profits we generated, they put their hearts and souls into making quality products at competitive prices. In fact, it became our mantra at Magna: make a better product for a better price.
With profit sharing in place, profits soared. In hindsight, if I could do it all over again, I would have shared 20 per cent of our profits with employees instead of 10, though it was still a sizable chunk.
When a business is small, profit sharing should be left up to the discretion of the owner, who has to worry about reinvesting profits in product development and other issues related to getting the business up and running.
But when companies are making billions of dollars a year, they should have to share some of those profits with their employees. A company can’t make a profit without the hard work and ingenuity of its workers.
The truth of the matter is that although every businessperson wants fewer regulations, restrictions and government oversight, companies also have to realize that government has a higher duty to ensure the overall well-being of society.
Government also has the right to address the growing income inequality in our society. It can do so by imposing higher taxes and redistributing the income from those taxes in the form of social assistance payments and benefits. But in that case, no one wins in the long run because of the stifling effect that increased taxation has on productivity and economic growth.
Another — and I would argue, far better — way government can address income disparity is by requiring large companies to share profits. Under this scenario, everyone wins.
Sharing profits with workers would benefit companies, employees and governments. Companies would see an increase in productivity and profits. Employees would get more income. And governments would gain enhanced tax revenue due to the growth spurred by higher consumer spending.
But if we fail to allow workers to participate in wealth creation, and if the gap between the wealthy and the workers grows wider and wider, society will inevitably drift toward socialism, with growing cries to take from the rich and give to the poor.
Essentially, profit sharing is a philosophy that recognizes that a successful business is driven by three forces — managers, workers and investors — and that all three have a moral right to share in the success of the business.
If a national citizens’ movement adopted profit sharing as a key principle in the effort to restore Canada’s economic health, it would be a policy that millions of Canadians would likely support.
National Post fstronachpost@gmail.com
Frank Stronach is the founder of Magna International Inc., one of Canada’s largest global companies, and an inductee in the Automotive Hall of Fame.
Employee ownership is a term for any arrangement in which a company's employees own shares in their company or the right to the value of shares in their ...
May 24, 2022 ... A worker co-op is a democratic business model that gives equal ownership rights to employees. Employees purchase either shares of stock or a ...
Mar 15, 2023 ... An employee stock ownership plan (ESOP) enables employees to gain an ownership interest in their employer in the form of shares of company ...
An annotated list of the 100 largest U.S. companies 50% or more employee-owned through an employee stock ownership plan (ESOP) or other means, ranked by the ...
The typical ESOP owns a 10% to 40% interest in the company, with 10% to 15% of the plans owning a majority. At least one-third of all plans will eventually ...
May 13, 2021 ... According to recent research by the National Center for Employee Ownership, employee-owners have higher wages and net worths, receive better ...
A worker-owned cooperative is a company that is owned and controlled by the people who work there. The Board of Directors is made up of a majority of employee- ...
Oct 19, 2022 ... Employee ownership refers to an arrangement where no one person has a majority of shares or control over an organization. Models can be as ...
When employee owned businesses prosper, everyone shares in the rewards. Businesses grow and gain competitive advantage, employees become stakeholders and grow ...
Oct 2, 2022 ... This report focuses on three prominent EO models in the United States: Employee Stock Ownership Plans, Worker Cooperatives, and Employee.
What If Labor Owned Its Workplaces? Worker-owned firms have less wage inequality, greater job security, higher job satisfaction, stronger community ties, and greater resilience during economic downturns. The model needs to spread.
Source: Jacobin Jacobin’s David Moscrop recently talked with Canadian Centre for Policy Alternatives senior economist and public finance policy analyst Alex Hemingway about his new cowritten report, Expanding Democratic Employee Ownership in Canada: Policy Options and why now might be the time for labor to finance ownership of the means of production. Models of Worker Ownership
David Moscrop
What are we talking about when we talk about a democratically owned business?
Alex Hemingway
At its most basic, we’re talking about firms that are owned and controlled by the people who work there, rather than by a narrower set of capital owners. That can take different forms and structures. The traditional form is a worker cooperative, which is a form of collective ownership. There can be a lot of variation in how those are run.
It could be operated in a relatively flat, nonhierarchical way, or it could have a more traditional hierarchy with managers that are — and this is an important distinction — elected and recallable by the rest of the workers. So workers have more control, and they share in the value of what they produce. In this model, usually worker cooperatives are started from scratch, but they are sometimes created by the conversion of existing businesses.
The other model I’d want to highlight, which is quite an interesting one, is called an employee-ownership trust. This is a quite powerful model that allows a trust to acquire a firm on behalf of its employees. And importantly, this happens without workers paying anything out of pocket. Instead, the outgoing business owners agree to take deferred payments that come out of the firm’s profits over several years. After that, the profits begin flowing to the workers.
This is a more indirect form of worker ownership where employees will sit on the board of the trust structure. The trust is more at arm’s length from the day-to-day operations of the company, which could in theory continue operating in much the same way if that’s what the trustees decided. In practice though, you do tend to see mechanisms of day-to-day participation for workers emerge on the operational level, and that’s important to realizing the benefits of democratic employee ownership.
David Moscrop
Why aren’t these models more common in Canada?
Alex Hemingway
There are barriers to creating democratic employee-owned firms, and they come in a few categories. It’s really helpful to have clear legal structures that enable the creation of these types of firms, so we’re actually just now in Canada in the process of passing federal legislation that will create an employee-ownership trust structure in this country. So that’ll give a new option for creating employee-owned firms. And that comes with the capital-gains tax break for owners who want to sell to their employees.
Another, broader, set of barriers to employee ownership is accessing capital. Now obviously workers don’t have a lot of capital at their disposal, almost by definition. If they’re looking to start a worker cooperative together, they will often find that banks and other lenders are less familiar with democratic employee-ownership models in Canada because we don’t have many of them. And that can lead to challenges in accessing loan financing. We need policy interventions to deal with that.
There are also collective action problems that arise when you’re trying to create a worker cooperative from scratch. Starting any business is challenging, and it normally requires a lot of legwork by a relatively small set of individuals at the outset. So employee-owned firms don’t offer a ready way to compensate for that start-up work and the risk inherent in it.
Entrepreneurs have an incentive to structure their businesses as a conventional investor-owned business. One way around that collective action challenge is to convert existing businesses to employee ownership rather than starting them from scratch. But another is to have institutions that can help support and incubate new democratic employee-owned firms. And that’s what we see in jurisdictions where these models have been particularly successful. You have sectoral organizations, you have business services companies that are already set up to assist employee-owned firms and worker cooperatives, and that makes getting them off the ground a lot easier. And you also have public capital being put to work — patient capital — to enable the start-up of these types of firms from a financial perspective. Worker Ownership Is Good for Everyone
David Moscrop
Once a business is stood up as a worker-owned and -controlled enterprise, there seemed to be two categories of goods that emerge. One is economic goods for both the worker and society at large, and the second is the inherent value of democratic control over your workplace. What do these goods look like in practice?
Alex Hemingway
What we see is that employee-owned firms lead to less inequality in terms of wages, greater job security within those firms, and higher pay for the workers since they’re sharing in the profits.
We also see employee-owned firms having more resilience during economic downturns. It tends to be the case that workers get together and try to avoid layoffs. In those situations, they might decide that everyone’s going to temporarily reduce their hours and pay to weather the storm. So there’s that resilience factor. Also, when you have employee-owned firms that are more anchored in the community, the owners are by definition part of that community and more committed to the broader community interests.
We see more job satisfaction, not surprisingly, in employee-owned firms; it turns out that being alienated from your labor in the Marxian sense isn’t such a good thing for job satisfaction. Workers like having some control over their daily lives rather than being at the whims of a boss who’s not accountable. And they’d rather be paid full value for their work. So, not surprisingly, if you look at the polling in the United States, three-quarters of people say they prefer to work in an employee-owned firm — and that preference crosses party lines.
Economic research also shows that employee firms are equally or more productive than conventional firms once you’ve got them stood up. And again, that makes sense when you think about the motivation for workers to contribute to a firm that’s truly their own.
David Moscrop
In the report, you write “We generally take for granted, at least in principle, that everyone has the right to a say and certainly a vote in what our governments do. But in the corporations and workplaces that rule many of our waking hours . . . these minimal democratic rights are largely absent.”
You also point out that revenues in the private model are concentrated among owners, not workers. Why have workers and the country more generally been slow to prioritize a shift to worker-owned and controlled businesses?
Alex Hemingway
I think it goes back to some of those barriers we talked about earlier. As we’ve seen from the polling, there is a lot of latent interest among workers in this type of model. It’s not easy to start up from scratch, and it’s particularly not easy when you’re a working-class person without the capital to put up to start a firm. I think from a worker perspective, it’s pretty straightforward in that sense.
Over the past few years in Canada we’ve seen the emergence of the Canadian Coalition for Employee Ownership, which includes many business owners among its members. There is a section of capital that is interested in this model. I think plenty of business owners who might be retiring in the years ahead are thinking about their succession planning and don’t necessarily want to sell off their business to a large corporation or to a competitor, and they may not have kids that they want to pass it on to or who want to take over the business.
The polling of these owners shows that lots of them are interested in selling to their employees. So, there’s a big window of opportunity in this country for the expansion of employee-owned firms. And combined with the introduction of this new employee-ownership trust legal structure, this conversion process will become easier and more attractive to business owners. It’s being combined with the capital-gains tax break at least for the next few years, since it’s only a temporary tax break at this point. A Specter Is Haunting Canada
David Moscrop
It sounds to me like we’ve reached a critical juncture. With boomers retiring, there’s going to be a generational shift in capital and control of businesses. How do we tear down the institutional barriers and the psychological barriers that prevent democratic employee ownership of businesses from flourishing?
Alex Hemingway
It’s an interesting question. I think part of the answer relates to many of the other struggles that are needed right now, whether that’s union organizing or fighting for redistribution of wealth through something like a wealth tax. Part of it just comes down to continuing to build up centers of working-class power to fight for these types of priorities in the political system.
I think the ground is fertile in many ways, some of which will result from the retiring boomers, some in terms of the recent policy developments. But we’re also in this era of extremely high inequality. I think there’s growing social and political polarization and disillusionment with institutions, so I think there’s an opening for some fundamental shifts in the way our economy runs. It’s not a great leap for many working people to imagine that life might be better with ownership and control over the company they work in.
In terms of how this plays out over time, I think one of the exciting things about the introduction of the employee-ownership trust structure in Canada is that we’ve seen this become very successful in a short period of time in the UK. Now there are hundreds of employee-owned businesses created in that country each year since the model was introduced in 2016. And I think the expansion of that sector can hopefully be self-reinforcing and create a new resource base for working class-power and struggles complimentary to the union movement and social movements.
I think there’s no doubt that if democratic employee ownership is able to reach a critical mass in Canada one day, it’s going to start making big capital pretty worried. So, like any other struggle, it comes down to having that base of organized working-class power to sustain it and push it forward.
Alex Hemingway is an economist with the Canadian Centre for Policy Alternatives and co-author of: Expanding Democratic Employee Ownership in Canada: Policy Options
Mental health and wellbeing is boosted by employee voice
ARTICLE BY: Ann-Marie Conway,
Associate Director Employee Ownership - Seetec
| Published: 17 OCTOBER 2021
MENTAL HEALTH ISSUES INCLUDING ANXIETY AND DEPRESSION INCREASED SIGNIFICANTLY DURING THE COVID-19 LOCKDOWNS, WITH THE UK CHARITY THE HEALTH FOUNDATION EARLIER THIS YEAR REPORTING THAT DEPRESSION RATES HAD DOUBLED SINCE THE PANDEMIC BEGAN. THOSE IN PRECARIOUS ECONOMIC POSITIONS AND GROUPS INCLUDING THE YOUNG, DISABLED AND WOMEN WERE DISPROPORTIONATELY AFFECTED.
Many of these disadvantaged groups are supported by employee-owned Seetec Group, which operates across the UK and Ireland and helps individuals and communities to fulfil their potential through employment, skills, and rehabilitation services.
During the pandemic employees faced new – and more isolated – ways of working which, presented the group with the challenge of how to maintain the wellbeing of its colleagues, so they could continue to support service users.
It has always been an organisation with strong values, but our employee ownership structure made sure that employee voice was at the centre of our response to the challenges that our service users and our colleagues faced.
The pandemic had an impact on the personal lives of many colleagues, from family members being unwell to not being able to visit and support extended family, members of their households being furloughed creating financial difficulties, to the challenges of home schooling. However, Seetec has benefited from having an established Health and Wellbeing Strategy, and its employee voice has helped to contribute to and implement this.
We have a dedicated employee ownership network of colleagues. They formed a Health and Wellbeing working group to respond to the needs of frontline colleagues, which brought real benefits to our people.
Support included loaning laptops to families to reduce digital exclusion, providing Covid grants for employees with an immediate financial crisis and setting up a safe online space to provide discreet information to anyone facing domestic abuse, mental health or drug and alcohol issues.
This has built upon other successful initiatives such as activity groups, ranging from online yoga and zumba classes to a Strava virtual walking group and mindfulness sessions, plus a vital home school support group helping families with remote learning. These came from the voice of our people. Our employee ownership structure means that rather than going through a complex approval process, employees had the confidence and authority to put support in place quickly.
When the Covid-19 pandemic struck, the first priority was how it could continue to deliver services to those most in need. The expertise and influence of the employee voice empowered the organisation to act quickly and deliver support that works, reaching the most vulnerable and helping to bring communities together. Employee ownership really sits with our values and beliefs. We work with people in the community, helping them to take ownership of their futures and their lives.
There’s a perfect synergy between that and giving ownership to our colleagues and giving them a say in the future of the organisation.
The Covid-19 pandemic highlighted how the diversity and wisdom of our people improved decision-making in the business and improved outcomes for not just ourselves but our service users.
Despite the pandemic, annual employee engagement survey highlighted a 12% improvement in health and wellbeing scores.
Response to the welfare needs of colleagues during the pandemic has just been highly commended in the ‘Best Health and Wellbeing Initiative – private sector’ category at this year’s CIPD People Management Awards.
Group HR Director Sasha Ashton says: “Our commitment to ensuring that employee owners have a stake and say in Seetec’s destiny means we work in the best interests of service users, while looking after our own people.
“During the pandemic, working together with employee owners has enabled us to deliver support where it is needed the most, leading to improved wellbeing and mental health for all.”
The Preamble is the founding document and statement of principles and visions for the IWW. It has not changed considerably since the union’s founding conference in Chicago, 1905. It is a powerful statement of intent which pulls no punches and refuses the compromises and ‘partnership’ attitudes of most contemporary unions. In the context of intensifying employer and government crackdowns on our hard-won pay and conditions, the Preamble resonates as strongly in the contemporary period as it did when it was first written.
The working class and the employing class have nothing in common. There can be no peace so long as hunger and want are found among millions of the working people and the few, who make up the employing class, have all the good things of life.
Between these two classes a struggle must go on until the workers of the world organise as a class, take possession of the means of production, abolish the wage system, and live in harmony with the Earth.
We find that the centering of the management of industries into fewer and fewer hands makes the trade unions unable to cope with the ever growing power of the employing class. The trade unions foster a state of affairs which allows one set of workers to be pitted against another set of workers in the same industry, thereby helping defeat one another in wage wars. Moreover, the trade unions aid the employing class to mislead the workers into the belief that the working class have interests in common with their employers.
These conditions can be changed and the interest of the working class upheld only by an organisation formed in such a way that all its members in any one industry, or in all industries if necessary, cease work whenever a strike or lockout is on in any department thereof, thus making an injury to one an injury to all.
Instead of the conservative motto, “A fair day’s wage for a fair day’s work,” we must inscribe on our banner the revolutionary watchword, “Abolition of the wage system.”
It is the historic mission of the working class to do away with capitalism. The army of production must be organised, not only for everyday struggle with capitalists, but also to carry on production when capitalism shall have been overthrown. By organising industrially we are forming the structure of the new society within the shell of the old.
Friday, July 05, 2024
Assets in Common: Leaders in Collaborative Business and Shared Ownership
This is the fourth of an eight-part series centered around the themes of an inspiring new book, “Assets in Common,” published by Common Trust and Purpose. The series explores innovative employee ownership models, shared services cooperatives, mutual credit systems, steward-owned holding companies and more, all based on research into real initiatives working at scale. More than a dozen working examples are outlined in the book, which light the way for an economy that can help reverse wealth concentration, community fragmentation and environmental destruction. Learn more and get a copy of the book at assetsincommon.org.
In today’s society, celebrities get major airtime just for how they look. Talking heads clutter the broadcasts, spouting convenient generalizations, but most don’t have first-hand experience to back up their opinions. It would seem there are no viable solutions for moving the world forward. But there are. The problem is that the people building real solutions are too busy doing the work. From rural towns to bustling cities, pioneering enterprises are challenging conventional notions of ownership, governance, and economic exchange. These trailblazers are reimagining fundamental structures and forging pathways to shared prosperity.
Six innovative models
In this article, we give a teaser to a diverse array of case studies that illuminate the path toward reshaping our economic systems, one innovative model at a time.
Clegg Auto is a group of four auto repair shops in Utah. They transitioned to employee ownership by restructuring into a Perpetual Purpose Trust as the sole shareholder. This trust owns a holding company which in turn owns the four subsidiary auto repair shops. This three-tier ownership design allows for performance incentives and profit-sharing at both the subsidiary and overall company levels. In their first year post-transition, Clegg Auto doubled its profits compared to the prior year, with two newer shops becoming profitable. The founder attributes this surge to employee owners taking greater ownership and driving efficiencies while maintaining high customer satisfaction ratings. Notably, Clegg Auto was able to provide health insurance to all employees – a rarity in the auto repair industry. The transition aligned incentives for performance gains without compromising service quality, contrasting with private equity’s typical cost-cutting approaches.
Sardex S.p.A. is an alternative currency for local businesses in Sardinia. They operate a subscription-based digital platform that allows members to trade with each other using Sardex credits to lubricate the exchange. Businesses become members through an application process, pay a subscription fee, and are extended a line of Sardex credit to trade goods and services within the network. While Sardex units serve as a unit of account pegged to the Euro and facilitate trade as a medium of exchange, they cannot be exchanged for Euros or other fiat currencies. This contrasts with cryptocurrencies that can be traded back to conventional money, fueling speculation and hindering their use for real-world use as a medium of exchange. The platform promotes self-governance through membership agreements specifying rules and limits on transaction volumes and credit lines. Sardex facilitates hyperlocal trade circuits built on trust and reciprocity, with brokers supporting deal-making. The lack of transaction fees and emphasis on social agreements reduce the need for external regulation, although the scheme is fully compliant with EU laws and members must pay taxes on Sardex income in Euros.
ROSCAs are informal lending clubs. Their members contribute a fixed amount to a common fund, which is then given in a lump sum to one member on a rotating basis (usually monthly) until all have received the pooled money once. This gives each member a lump sum periodically which they can put to use buying materials or making a large purchase they wouldn’t normally have the cash flow to afford. With no legal backing, ROSCAs rely on social cohesion and trust among self-selected members, often within immigrant communities. Each group selects an administrator to organize meetings, track contributions, and distribute funds. While operating as self-organizing bodies, members have a voice in formation and can set parameters on fund usage. ROSCAs foster community, enable mutual savings and support, provide dignified access to funds, and require little paperwork to initiate among trusted networks. Face-to-face interactions play a vital role in building trust and relationships within these groups.
The Industrial Commons (TIC) is a group that is advancing the textile industry in North Carolina toward equitable outcomes. It is structured as a multi-stakeholder network of enterprises, interconnected through governance, economic interests, and market cooperation. As a non-profit organization, TIC owns the for-profit Carolina Textile District LLC, a match maker connecting suppliers and producers. The nonprofit also owns a public benefit corporation. This public benefit corporation enables TIC to hold founding shares in the worker-owned cooperative LLCs launched by the non-profit, granting it veto powers to prevent mission drift. In this way it serves as a hands-on incubator for worker cooperatives. Additionally, TIC has established a community land trust and a capital fund to support its mission. Through its ownership structure and governance mechanisms, TIC facilitates access to capital and resources for these cooperatives, leveraging its balance sheet. The network fosters local relationships, civic engagement, and integrated programs for workforce development and community learning. By promoting employee ownership and shared economic interests, TIC aims to build sustainable solutions deeply rooted in the local context.
Obran is an umbrella group of multiple worker-owned cooperatives. It is structured as a Limited Cooperative Association holding company, with underlying portfolio companies as subsidiaries. The cooperative is organized into three industry-focused divisions. One is focused on healthcare that owns companies that provide in-home nursing. Another specializes in staffing and HR, providing admin solutions to freelancers and creatives. The third division is based on shipping and logistics, starting with a third-party logistics company in Hawaii. Obran maintains a 51% controlling ownership stake in each portfolio company, positioning it as an active owner-operator rather than a passive investor. The governance structure allows worker-members to elect board representatives at both the subsidiary and parent cooperative levels, with limits on financial investor board seats that ensure worker control. A major growth strategy involves acquiring existing companies across healthcare, employment services, and logistics sectors, financed by an internal capital services team. Directors have performance incentives tied to increasing enterprise value and worker income gains. This innovative structure balances outside investment with preserving worker ownership, governance rights, and wealth-sharing within a diversified cooperative portfolio. Obran mixes the egalitarian values of a worker cooperative with the shrewd sophistication of a private equity fund.
Goodworks Evergreen is one of three components of a family office based in Montana. The three components include an impact-driven venture fund, a 501c(3) foundation, and a local small business holding company. Goodworks Evergreen is this small business holding company. Since 2018, GWE has acquired seven small, rural lumber and hardware supply stores in Montana, primarily funded by the family office and later supplemented by cash flow from the portfolio companies and outside investors. GWE has either promoted existing staff or brought in new general managers post-acquisition, while weaving most of the companies together as a single operation. GWE is heavily involved in operational improvements and integration, aiming for long-term employee ownership and community involvement. GWE continues to pursue new acquisitions and investor relations alongside supporting its existing businesses. With a shared CEO across the family office entities, GWE is closely attuned to local social needs and environmental as well as economic issues in Montana. While Goodworks Ventures focused on “new Montana” startups, GWE is an effort to preserve the state’s rural, independent character through business acquisitions and real estate projects like an 89-unit community land trust workforce housing development in Missoula.
Patterns of pioneers
What common threads can we see amongst these examples? The Industrial Commons and Goodworks Evergreen both have a close interplay of nonprofit and for-profit projects. Both of these groups are very rooted in the real needs of their local geographies, and exist to serve those needs in practical, hands-on ways.
Clegg Auto, Obran Cooperative, Goodworks Evergreen and Industrial Commons all have holding companies with portfolios of subsidiary companies. This enables economies of scale, shared staff, and the resilience of diversification. None of these companies are huge – the focus is mostly on stewarding small businesses. However, Obran does have the ambition to be the largest worker cooperative in the world, at present they only own a handful of businesses.
In the example of Sardex and ROSCA’s, money is used as a collaborative tool rather than a private treasure. These groups have designed ways to pool resources and encourage activity that wouldn’t otherwise happen if everyone was just looking out for themselves. In this way, collaboration is seen to directly benefit both individual interests and promote the strength of the broader community.
If you’re a business owner interested in employee ownership or steward-ownership, please reach out to the team at common-trust.com for support.
Tuesday, February 06, 2024
With UK dividends disappearing overseas, it’s time to resurrect employee ownership
Bartek Staniszewski Mon, 5 February 2024
Aardman Animation, makers of the iconic Wallace and Gromit films, is an employee-owned British company
Promoting employee ownership is an opportunity to empower Brits and boost the economy, writes Bartek Staniszewski
Buying British can be a little, everyday expression of patriotic fervour. By buying British products, the thought process is that one is helping British companies and the plucky Brits that run them. This desire is so strong that, recently, both Aldi and Morrisons added a ‘buy British’ section to their respective websites; around two-thirds of Brits are more inclined to buy a product if it is UK-made. Alas, today, increasingly many UK companies are British in name only.
Over the last few decades, the profits made by UK companies have increasingly gone not into the hands of locals, but to overseas investors. Currently, over 57 per cent of shares in UK firms are held by overseas investors, and increasing. As such, the brand of many UK firms may be British, but the ultimate beneficiaries are not. It is a relatively recent phenomenon; as recently as 1981, the same was true for only 3.6 per cent of UK-quoted shares.
This is not merely a disappointment for civic patriotism, but also a problem for the UK economy. Any profits that end up overseas instead of in the UK will most likely also be spent overseas. Money that could otherwise have gone to a UK greengrocer will instead fuel the retail sector in another country, and investment made from such profits will likely strengthen an economy overseas instead of helping the very country that produced them.
UK individuals, in particular, have lost out. It is they who, once upon a time, owned the majority of UK-quoted shares. In 1963, 54 per cent of shares in UK firms were held by UK individuals. Today, they own less than 11 per cent. The remaining 89 per cent belongs to financial institutions.
But it is UK individuals who need UK shares the most, especially now. Today, about a third of the UK population have less than £1,000 saved. About two-thirds would not be able to last for three months without borrowing money. Savings in the form of shares would be a natural means of remedying that. Dividends from said shares would also boost incomes, and individuals, unlike financial institutions, are overwhelmingly likely to spend said income locally, boosting the local economy.
Conversely, financial institutions are much more likely to spend the profits they derive from dividends abroad. Even when they do spend them in the UK, it is often either to pay their already relatively well-paid staff, or to make investments that are not always beneficial for Britons. Speculative investment in property, for example, has the potential to price out families looking for a home to live in.
The government should attempt to change the situation, but the firms that sold their shares to overseas investors presumably did so because it benefitted them. Any attempt at fixing the issue would have to offer firms some other benefit.
Employee ownership would be particularly valuable in sectors where average pay is relatively low – the resultant boost in otherwise low-paid employees’ savings and incomes could go a long way to improving the UK’s wealth and income inequalities, killing two birds with one stone.
Whoever ends up in Number 10 at the end of this year must not let the employee ownership opportunity go amiss.
Thursday, May 19, 2022
This Illinois company was just sold for $3 billion, but hundreds of employees are getting a cut. Some will get $800,000
Robert Channick, Chicago Tribune Tue, May 17, 2022, 10:15 AM·4 min read
When private equity firm KKR announced the $3 billion sale Monday of C.H.I. Overhead Doors to steel company Nucor, it created a windfall for hundreds of hourly workers at the plant in tiny Arthur, Illinois, who will receive between $20,000 and $800,000 each when the transaction closes.
The deal represents a huge return on investment for KKR, which bought the garage door manufacturer for $600 million in 2015. For employees, who were vested with equity in the company at no charge, the sale is potentially life-changing.
“I had no idea that was going to be this big of a deal,” said Rhonda Jamison, 60, office manager at C.H.I. Overhead Doors.
Jamison, a 17-year veteran of the garage door company, learned about the sale and her six-figure payout at an all-employee meeting last week. The payouts vary based on seniority and salary, with some long-tenured truck drivers — the highest-paid hourly workers — hauling home upward of $800,000 from the sale. More than 630 hourly workers and truck drivers will receive an average of $180,000 through the sale, the company said. Located in Arthur, a village of about 2,100 residents south of Champaign, Illinois, the 41-year-old company makes garage doors for commercial and residential use. When KKR bought the company in 2015, it allowed all 800 workers — including salaried employees — to participate in the stock ownership plan as a free benefit.
Employees who earned more than $100,000 per year were also allowed to invest their own money into the stock plan.
The program has been rolled out by New York-based KKR at 25 companies in its portfolio since 2011. The garage door manufacturer, which generated KKR’s highest return on investment in more than 30 years, proved the value of the equity plan for both ownership and employees.
“We do it because obviously it’s good for the workers,” said Pete Stavros, 47, co-head of private equity at KKR and chairman of C.H.I. Overhead Doors. “And it turns out, it’s also smart business. It leads to a more engaged, stable, financially resilient, less likely to quit workforce, which yields better outcomes for companies and investors.” Stavros, an Arlington Heights native whose dad was a union road grader with a Chicago construction company, developed the model for vesting hourly employees with equity ownership at no cost. In addition to an ownership stake, employees were allocated $1 million per year for enhancing the factory, investing in everything from air conditioning to new break rooms and a cafeteria. Productivity flourished, Stavros said, with revenue growing by 120% and the earnings margin increasing from 21% to 35% during KKR’s ownership of C.H.I. Last month, Stavros helped launch a nonprofit, Ownership Works, to help proliferate the employee ownership model at more companies.
Founded in 1981, C.H.I. Overhead Doors is the largest employer in Arthur, which is about three hours south of Chicago. The manufacturer, which has had four private equity owners during the new millennium, plans to continue its operations at the same location under the new owner, Nucor, a North Carolina-based steel producer.
The sale, which is expected to close in June, pending regulatory approval, will generate more than $360 million in payouts for 800 employees. Hourly employees will receive about $114 million of the proceeds, while salaried employees will get about $250 million, the company said.
When Stavros announced the deal in front of about 400 employees last Wednesday, with potential payouts projected on a large screen, Jamison and her co-workers were overwhelmed by the news.
“The whole crowd went crazy,” Jamison said. “Grown men were crying. I just about fainted.”
Jamison, who lives in nearby Atwood, Illinois, will receive “several hundred thousand dollars” from the sale. She plans to pay off her home mortgage and several loans, and use some of the proceeds from the sale to help a grandson with special needs.
She doesn’t plan to quit work anytime soon, however.
“There’s no reason for me to leave,” Jamison said. “I want to stay as long as they’ll have me.”