More of the Companies You Could Join Will Be Owned by Their Staff

When a founder of a small or mid sized tech company decides to retire or step back, the usual options have been a sale to a competitor or to private equity. In some countries there is now another route that is becoming much more common. They sell the company to its own employees.

In the UK this often means an employee ownership trust. The idea was introduced in 2014. A founder sells a controlling stake to a trust that holds it on behalf of all the staff, and the tax rules make that sale attractive. Companies owned this way can pay staff bonuses with a tax free element each year, up to a set limit. The number of these companies has grown from a handful to well over a thousand. In the US, a longer established model called an employee stock ownership plan works on a similar principle.

So there is a good chance that at some point you will be offered a job at one, or the company you already work for will announce that it is becoming one. It is worth knowing what that does and does not mean.

It usually does not mean you personally own shares you can sell. In a trust model, the trust owns them on everyone's behalf. Your benefit tends to come through profit share bonuses and a voice in how the company is run, often through an employee council or elected trustees.

It does not mean decisions become democratic. Managers still manage. But you may be asked for your view far more often, and the company may be more willing to explain its numbers to you.

It can change the pace. Without outside investors wanting a fast return, some employee owned companies plan for steadier growth. That can mean more stability and fewer dramatic pivots, or it can mean less money for ambitious projects.

Ask good questions if you are offered a role at one. How is the profit share calculated, and what has it paid in recent years? How do staff actually influence decisions? Is the company still paying the founder for the shares, and how long will that take?

The answers tell you whether ownership is a real part of working there, or just a line on the website.

– Asael Shinder