What is EO?
The definition for employee ownership is taken from the Nutall Review 2012 - and ‘offers a meaningful stake and a say for all employees’:
- A meaningful stake - more than 25% of the businesses has to be in the hands of employees. Most commonly employee owned businesses have a majority stake of more than 51% or are 100% employee owned.
- A meaningful say - there needs to be representation of employee voice in the operational and strategic direction of the business.
There are three different types of employee ownership:
Direct - using one or more tax advantaged share plans, employees become registered individual shareholders of a majority of the shares in their company.
Indirect - held in trust on behalf of employees – currently the fastest growing option for succession is via an EOT.
Hybrid - combination of both – often seen when a family business likes to retain some family shares alongside employee ownership.
"The last thing we wanted was for Aardman ever to be treated just as a commodity to be bought and sold. To avoid that outcome, our solution was to create an employee trust; it seems to us the best way to retain our independence, to keep in place the people that we trust and value and to preserve as far as possible the special creative culture of which we’re very proud."
- Aardman founders, David Sproxton and Peter Lord
The top 5 reasons why businesses choose employee ownership:
- Succession – offers the exit the owner/founder wants while sustaining the business for future generations.
- It fits with the values and purpose of the business.
- Putting it in the hands of the people who know customers the best/ reward the hard work of employees who have helped to build the business.
- To drive innovation, customer excellence, increase productivity.
- To future-proof the business and drive resilience.
Check out our simple guide to employee ownership