Types of EO
Employee ownership can take one of three forms:
- Direct employee ownership – using one or more tax advantaged share plans, employees become registered individual shareholders of a majority of the shares in their company;
- Indirect employee ownership – shares are held collectively on behalf of employees, normally through an employee trust.
- Combined direct and indirect ownership – a combination of individual and collective share ownership.
Employee ownership typically happens in one of the following scenarios:
- Business succession or ownership succession – private owners, such as an entrepreneur or family business, decide to sell to their workforce. The most typical route into employee ownership.
- Insolvency or closure threat – employee buy – outs can prove an effective route to recovery for businesses that might otherwise fail.
- Independence – companies may decide that a significant and even majority employee stakeholding will demonstrate and help protect the company's independence.
- Privatisation – bus services and other privatisations have provided occasional opportunities for employee buy-outs.
- Owner vision – as in the case of John Lewis, Arup Group or Scott Bader, the founder of a business opts for employee ownership at the outset of the business or later.