A different way to be your own boss - Keith Roulston editorial
Who’d have thought that the U.S., where to be accused of being a socialist is equated with being a communist, would be ahead of Canada in adopting a socialistic idea like employee ownership.
But that’s the fact that Matt Lundy reported last week in an article in The Globe and Mail. South of the border, 14 million employees hold a combined $1.46 trillion (US) in assets.
Lundy explained the way the system works. “A company sets up a trust to hold shares for its employees. The trust then usually secures a loan to purchase the shares, which is repaid from company earnings over time. In the U.S. model, employees receive shares in proportion to their seniority and pay, and then continue to accumulate them. By selling to their employees, a company’s owners are able to secure more favourable taxation of capital gains.”
Because of their sense of commitment to their work, employee-owned companies often have better performance, stronger job protections and higher levels of job satisfaction. At a time when the wealth gap is growing, employee ownership has the potential to reduce wealth inequality.
So why is Canada, generally more concerned with equality, lagging so far behind the U.S.? We don’t have the sort of legislation they have in the U.S. to make employee ownership attractive to the current owners of businesses, explains Lundy.
Britain, meanwhile, brought in tax reforms in 2014 to encourage employee ownership trusts (EOTs). The result has been hundreds of transactions.
But things are changing in Canada. The Liberal government, in last spring’s budget, said it would examine the barriers to creating EOTs. If it decides to act, it should have the support of the Conservative Party, which pledged in its election platform to allow the trusts to be established and create a tax advantage for sellers.
Encouraging employee ownership can’t come soon enough, according to one of the concept’s biggest boosters, Jon Shell, managing director and partner at Social Capital Partners, a Toronto-based non-profit financing company. In 2014, the most recent year for which figures are available, around half of the owners of Canadian medium-sized businesses (100 to 499 employees) were between 50 and 64. These owners will be looking at retiring soon. If they don’t have the option of keeping the business in the family, it can be hard to find a local buyer, committed to keeping the business in the community. Often the decision ends up being between selling to a competitor, further diminishing consumer choice, and selling to investors. Either situation may lead to eventual international control and loss of jobs to the community and the country – look what happened when the Sully family sold Champion Road Machinery to Volvo, only to see production moved to the U.S. with the loss of 500 jobs.
So why am I writing about this somewhat esoteric subject? Well, I have experience with the benefits of unusual ownership structures. North Huron Publishing Company Inc. was established in 1985 as a community-owned enterprise, in part because we (Jill and I and co-founder Sheila Richards) believed, from our experience with the non-profit Blyth Festival, that the community would be more dedicated to the newspaper’s success if many people shared a sense of ownership. That’s proved to be a wise decision, demonstrated again last year by the community support in the form of donations to help the newspaper combat the effects of the COVID-19 pandemic.
The proof of the concept of greater support when people have a sense of ownership is evident every week in this newspaper, especially when compared to neighbouring newspapers. Going back to the late 1960s, newspaper owners who were seeking to
retire began selling to ambitious competitors who wanted to accumulate mini-empires. When those empire builders wanted out, they sold to larger chains which sold to larger chains until newspaper ownership was concentrated in the hands of a few huge companies that cared only for the profit they got from the newspaper, not how well it was serving the community. As service declined, so did the number of people subscribing and advertising, which led to another round of cost-cutting.
As well, one of the great advantages The Citizen has had in surviving the pandemic is that Publisher Deb Sholdice and her staff are right on the spot, able to see new opportunities and act on them quickly.
Although The Citizen and The Rural Voice are not owned by their employees, the staffers are incredibly dedicated because they know that all the benefits aren’t going to distant owners.
So here’s to speedy passage of new laws that encourage employee ownership – keeping businesses grounded in their communities and empowering employees.