FAQs
- If I sell the company to employees, can I still get the right price for it?
- How do managers manage if employees own the company?
- How can employees afford to buy a company?
- Aren't employees risking their money by owning the company?
- Do there have to be employee representatives on the Board?
- What's the role of unions in employee owned firms?
- What's the difference between a worker co-op and an employee owned business?
- Do employee owned businesses survive?
- What kind of situations result in employee ownership?
- Without Stock Exchange ratings, how are shares in employee owned companies valued?
- Does being employee owned make staff more committed and productive?
- With staff in charge, can employee owned companies be really competitive?
- Is an employee buy-out more complicated than another type of sale?
- Why are trusts often part of employee ownership?
- What's the typical employee owned company's attitude to profit?
If I sell the company to employees, can I still get the right price for
it?
Yes – all the evidence is that a well-structured employee buy-out can deliver
a fair market price for the business; plus the added benefit that ownership
stays with the people who've helped build the company and who have the
strongest commitment to making it successful.
- More at Ownership Succession
How do managers manage if employees own the company?
Employee owned companies who are part of the Employee Ownership Association
all have highly professional management structures, and managers with
job descriptions any plc would recognise. The only difference is that
managers are more accountable to their colleagues – and co-owners –
than they would be in a company owned by outside shareholders. Most managers
who join employee owned companies find it a much more rewarding role
than managing in 'standard' organisations.
- More at Performance
How can employees afford to buy a company?
Employee buy-outs occasionally
involve employees putting up some of their own cash to buy some of the shares
? but usually the sums involved are small. Typically most of the shares
are bought - on employees' behalf - by a trust, financed by contributions
from the company itself, or a loan that's then paid back by the company.
- More at Employee buy-outs
Aren't employees
risking their money by owning the company?
Most employee buy-outs are financed via the company's own resources, or
business loans. Often the process will involve staff choosing to buy some
shares, but the Employee Ownership Association would always advise against
staff over-committing to share purchase. Having part of the share capital
in a trust is another way of ensuring employees are protected from being
exposed to financial risk when they own the business.
- More at Trusts
Do there have to be employee representatives on the
Board?
No – though many co-owned businesses do have some employee representatives
on the Board because they find it's a good way to make sure employee
views are heard. Co-owned businesses also tend to have employee representatives
on the trust body that controls some or all of the shares.
- More at Employees
What's the role of unions in employee owned firms?
Some employee owned businesses
recognise unions, or at least have significant union membership; others
employ few or no union members. There's nothing about employee owned companies
that rules out a union role, though some are so good at involving people
and treating them well that unions understandably prefer to concentrate
on other kinds of companies with less good records. Unions have led successful
all-employee buy-outs, as in Tower Colliery.
- More at Employees
What's the difference
between worker co-ops and employee owned companies?
There
is a wide variety of business and ownership models in the co-owned
business sector. Worker co-operatives are just one form of employee owned
company. True co-ops have to adhere to the seven principles of co-operation
such as the requirement that members have equal voting rights on a one
member, one vote basis.
- More at Performance
Do employee owned businesses survive?
Employee owned companies have an excellent
record of sustainability – at least partly because their employee co-owners
are so committed to making sure the business does well. In particular,
employee buy-outs have a much better survival record than management-only
buy-outs [MBOs]. A remarkable proportion of MBOs fail, usually under pressure
from the venture capital which will have funded the management takeover.
- More at Ownership Succession
What kind of situations result in employee ownership?
Easily the most common
trigger for employee ownership is business succession – typically entrepreneurs
family owners who want to sell the company, and choose to sell to their
own workforce and management. Another route into employee ownership can
be through employee buy-outs used to stave off insolvency or hostile
takeover. And some companies simply choose to be employee owned from the
start.
- More at Ownership Succession
Without Stock Exchange ratings, how are shares in employee owned companies
valued?
Companies where individual employees own all or part of the share capital
have what's known as internal share markets. These use a variety of measures,
often based on or validated by HM Revenue & Customs assessment, to allow
share values to reflect the state of the business and market. A frequently
used measure is a multiple of profit.
- More at Share schemes
Does being
employee owned make staff more committed and productive?
Not automatically. Employee ownership generally produces superior performance
and productivity only when it's accompanied by real employee involvement
and well thought out ways to let staff participate in the business.
- More at Advantages of EO
With staff
in charge, can employee owned companies be really competitive?
Very much so. Most employee owned businesses are run by Boards, with professional
managements, but their co-owners in the rest of the workforce tend to be
more involved in the business than would happen in other kinds of company.
The result tends to be highly competitive - staff in employee owned businesses
have a built-in reason to help make their company succeed.
- More at Performance
Is an employee buy-out more complicated than another
type of sale?
It needn't be, and can often be simpler than a management buy-out or trade
sale, as well as less antagonistic and quicker to make happen. A big factor
is whether the advisers helping with an employee buy-out are experienced
in the process, and understand the special factors involved.
- More at Employee buy-outs
Why are trusts often part of employee ownership?
Trusts play two vital roles
in making employee ownership possible and stable. They're an efficient vehicle
for buying and 'warehousing' the shares being bought out; while shares permanently
held in trust can't be bought and sold, hence don't need to be financed
again, and so become an extra guarantee that ownership is secure.
- More at Trusts
What's the typical employee owned company's attitude to profit?
Employee
owned companies like those who are members of the Employee Ownership
Association are strongly profit-driven. The two big differences from
other kinds of business is that dividends don't go to outside shareholders,
and employees – as co-owners – tend to get more of a say in how profits
are allocated and invested.
- More at Performance