Reimagining Ownership

Updated: 14 April 2025

What if companies were owned not by distant shareholders or private investors—but by the very people who make them run every day? It’s a model that’s gaining global momentum, delivering stronger businesses, more resilient local economies, and a fairer distribution of wealth. Welcome to the world of employee ownership—a powerful, practical alternative to traditional business models, and a rising force in conversations around succession planning, economic justice, and long-term sustainability.

What Is Employee Ownership?

Employee ownership is a business model where the people who work at a company also have an ownership stake in it. Rather than operating solely for the benefit of external shareholders, employee-owned businesses focus on long-term value creation, reinvesting in their future, and sharing prosperity with the people who help build it.

There are several ways a company can structure employee ownership. Some use Employee Share Ownership Plans (ESOPs) or Employee Ownership Trusts (EOTs). Others operate as worker cooperatives, where employees collectively own and manage the business. Still others adopt hybrid models that combine profit-sharing with partial equity ownership.

At its heart, employee ownership is about alignment. When employees have a genuine stake in the company’s success, they tend to be more engaged, make better decisions, and take greater responsibility for outcomes. This shared commitment often translates into stronger performance—for the business and the people behind it.

ESOPs: The Classic Model of Employee Ownership

The most well-established model in North America is the Employee Stock Ownership Plan (ESOP). It’s a US-based structure under ERISA law, however, similar tools exist in Canada, Mexico, Australia, India, and a number of European countries. ESOPs are essentially retirement plans that invest primarily in the stock of the employing company. They allow businesses to transfer ownership to employees gradually—usually without requiring those employees to buy shares out of pocket.

Succession planning can be one of the most challenging aspects of running a business—especially for owners approaching retirement. An ESOP provides a compelling solution: it offers a tax-advantaged way to exit the business while preserving its legacy, keeping jobs in the community, and ensuring that the company remains locally rooted and employee-driven.

The tax advantages are many. If a business owner sells at least 30% of their stock in a C-Corporation to an ESOP and reinvests the proceeds in qualifying securities, they can take advantage of tax deferral on the capital gains tax from the sale. The tax liability will be incurred at the time of sale of said securities.

What’s more, contributions to an ESOP plan are tax-deductible for the company. They are also not taxable for employees until they are sold, thus deferring taxes for employees and allowing them to build retirement savings.

If the business is an S-Corporation, selling shares to an ESOP has an additional benefit in that it would not pay federal income tax given it’s a pass-through entity. In this scenario, the ESOP trust, which holds shares on behalf of employees, can build more value over time.

In summary, an ESOP is a tax-efficient exit strategy that allows business owners to sell their business to employees rather than external buyers or competitors. Owners can keep the company independent and ensure that the legacy and culture they’ve built remain intact while still benefiting from the sale.

Furthermore, ESOPs seem to promote worforce stability. For example, they have 20-50% lower turnover rates according to research from the National Center for Employee Ownership (NCEO). The difference is especially pronounced among long-term employees and one can speculate that being not just an employee but also a co-owner, and sharing in the growth and success of the company, might be a motivating factor.

Unsurprisingly, increased employee engagement has positive impact on performance. ESOP companies boast 4-5% higher annual productivity growth compared to their peers. Employees in ESOP companies reported higher levels of job satisfaction and organizational commitment, going beyond job requirements to help colleagues and improve the organization. They also rated their companies higher in terms of corporate social responsibility and ethical practices compared to employees in non-ESOP firms. This suggests that employee ownership may foster a more positive organizational culture.

Last but not least, ESOPs might help companies endure during economic downturns. During both the 2008 crisis and the COVID-19 crisis, ESOP companies were less likely to lay off workers, more likely to recover faster and more likely to retain health and retirement benefits. A 2022 report by the NCEO focusing on the U.S. food system during the COVID-19 pandemic found that 53% of ESOP companies reported an increase in revenue from 2019 to 2020, compared to 35% of non-ESOP companies.

In the U.S., over 6,000 companies are owned through ESOPs, including familiar names like Publix Super Markets and W.L. Gore (the makers of GORE-TEX). The structure is also becoming more prominent in sectors like manufacturing, engineering, and professional services.

National Center for Employee Ownership

Employee Ownership Trusts (EOTs): A Simpler, More Inclusive Model

While ESOPs have a long track record, they can be administratively complex and costly to implement for smaller businesses. That’s where Employee Ownership Trusts (EOTs) come in.

EOTs were first introduced in the UK as a way to facilitate the transition of businesses into employee hands. Under this model, a trust is set up to hold shares on behalf of employees collectively—there's no need for individual share purchases or stock allocations. Profits can be shared equitably, and decisions are made with employee input.

Employee Ownership Trusts offer a range of benefits that make them an attractive option for business owners thinking about succession and long-term impact.

One of the most powerful aspects of EOTs is that they create inclusive ownership. Rather than concentrating equity in the hands of a few senior employees or investors, EOTs ensure that all employees share in the success of the business. This broad-based ownership can lead to higher levels of engagement, productivity, and retention, as it fosters a sense of equity, shared purpose, and collaboration throughout the workplace.

EOTs also help preserve the founder’s legacy. For owners looking to retire or step back, transitioning to employee ownership ensures that the business remains aligned with its original mission and values. Because employees already understand the company culture and purpose, continuity is more likely. Many founders choose to stay on in an advisory or mentorship role, supporting the transition without feeling the pressure to remain indefinitely. This kind of mission-driven exit is particularly meaningful for social enterprises, B Corps, and community-based businesses that care about the future of their work and their people.

There are also compelling tax advantages. In the UK, where EOTs are more established, tax relief has been a major incentive—especially for small and medium-sized enterprises where the founder might not have a clear or financially viable exit strategy. Selling a company to an EOT can be completely exempt from capital gains tax, which has helped fuel the rapid growth of EOT-owned firms over the past decade. In addition, employees in the UK can receive annual bonuses free of income tax, up to a set limit.

While EOTs are newer in places like Canada and the U.S. compared to traditional ESOPs, interest is growing—especially among values-driven business owners who want a straightforward way to secure their company’s future, reward their teams, and keep the business rooted in its original mission.

Employee Ownership in Canada

Canada has long lagged behind countries like the UK and U.S. in employee ownership adoption—but that’s starting to change.

In 2023, the Canadian federal government announced the creation of a legal framework for Employee Ownership Trusts, a major milestone in the growth of employee ownership in the country. This new framework aims to make it easier for Canadian business owners to sell to their employees, preserve jobs, and retain community-based businesses. It includes tax benefits such as a temporary capital gains exemption, an extended capital gains reserve, an exemption from the 21-year deemed disposition rule and an extended shareholder loan repayment period.

Nearly 75% of small business owners in Canada plan to retire in the next decade and this impending wave of retirements puts over $2 trillion in business assets at risk. . Many lack a clear succession plan. Small and medium-sized businesses (SMEs) make up over 98% of businesses in Canada and employ the majority of private-sector workers. If these businesses close or are sold to absentee owners or multinationals, local jobs and community wealth may be jeopardized. This challenge is particularly acute in rural areas, where one business closure can mean the loss of a vital community anchor. Employee Ownership Trusts (EOTs) and worker co-ops provide an alternative buyer: the employees themselves.

In a volatile economy with rising interest rates, global supply chain disruptions, and local affordability crises, economic stability matters more than ever. Employee-owned businesses are more likely to stay local, reinvest profits, and weather downturns. Employee ownership roots businesses in place — they are less likely to relocate or shut down when ownership resides with people who live in the community – this helps with keeping jobs and maintaining economic sovereignty. More than that, employee-owned companies invest more in training and innovation, which can make them more resilient.

The benefits of employee ownership, however, go far beyond the business itself. Canada, like many developed economies, is facing rising income and wealth inequality. Wages have stagnated for many, while business owners and investors capture a disproportionate share of economic growth. This gap fuels social unrest, financial insecurity, and declining trust in institutions. It also limits economic mobility, especially for racialized, Indigenous, newcomer, and younger workers who are less likely to own assets. Sharing ownership is one way to ensure workers also share in the wealth they help create. Giving workers a real stake in their companies is one way to narrow the wealth gap. It can also help shift workers from wage-earners to asset-holders, which is key to building long-term security and generational wealth.

Alternative Ownership Structures

In Canada and aboroad, policymakers and workers are exploring policy tools to incentivize employee ownership as part of broader economic development strategies and democratization. In the social enterprise and nonprofit sectors, models of worker ownership and hybrid ownership structures are also emerging. For example, the union co-operative model integrates worker ownership with union representation, combining democratic governance with collective bargaining. This structure allows workers to have a significant say in business operations while benefiting from the protections and negotiations facilitated by unions. Such models are gaining traction in sectors where employee engagement and equitable profit distribution are prioritized.

Although different from employee ownership, social acquisitions are another innovative tool available to purpose-driven business owners looking to transition out. Some nonprofits in Canada and the US are establishing or purchasing for-profit subsidiaries to generate revenue that supports their social missions. These subsidiaries operate commercially but are owned by the nonprofit parent, ensuring that profits are funneled back into community programs and services. This approach allows nonprofits to diversify their income streams while maintaining a focus on their core objectives.

Organizations like the Canadian Worker Co-op Federation, Social Capital Partners, and Purpose Ownership Canada are at the forefront of this movement in Canada, providing education, policy advocacy, and support to businesses exploring the transition. Some organizations internationally include Mondragon (Spain), the European Federation of Employee Share Ownership (EU), Employee Ownership Association (UK), The Democracy at Work Institute (USA) and the National Center for Employee Ownership (USA).

Reclaiming the Future of Work

Employee ownership is more than just a business strategy—it’s a reimagining of who benefits from our economy, who gets a voice at the table, and how we build wealth that lasts. In an era marked by rising inequality, aging business owners, and the search for more sustainable and resilient models, employee ownership offers a hopeful path forward. It keeps businesses rooted in their communities, gives workers a real stake in the outcomes they help create, and creates the kind of shared prosperity our economy so urgently needs.

Whether through ESOPs, EOTs, worker co-ops, or emerging hybrid models, employee ownership isn’t just a theoretical ideal—it’s a proven, practical solution already transforming companies and communities around the world. As Canada begins to embrace this model more fully, there's a once-in-a-generation opportunity to shift our economic story—from one of extraction and consolidation to one of inclusion, stewardship, and shared success.

The question isn’t whether we can afford to support employee ownership. The real question is: Can we afford not to?

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