New Employee Ownership Options On The Way

Small business owners are planning to retire in waves. Although COVID-19 is hindering some of these retirements, it’s helped accelerate the exit for other others. The Canadian Employee Ownership Coalition has been focused on bringing new employee-ownership options to Canada in an effort to replace SME owners with a staff-focused business model. The CFIB found that more than three-quarters of small business entrepreneurs planned to retire from their businesses in the next 10 years. That leaves a window of opportunity for owner replacements, but also has the power to make the Canadian economy even more vulnerable. An exit can lead to closures and layoffs, affect community stability and change the future of the business entirely.

CEOC is comprised of a diverse team of academics, charitable organizations, non-profits, and corporate leaders. They all have one attainable goal: to advance the Canadian profile through the employee-ownership which has seen great success in the United States and the United Kingdom.

Employee-Ownership: What Canadians Need To Know

The coalition is committed to applying new employee-ownership models to the country for the benefit of Canadian workers and the economy as a whole. CEOC believes that the model may help prompt a more inclusive and resilient economy that generates billions in wealth for Canadian workers. The association is comprised of Christine Cooper, executive vice-president & head of BMO Commerical Bank, Chad Friesen, CEO of Friesens Corporation, Heather Payne, founder & CEO of College of Technology, Jon Shell, managing director of Social Capital Partners, Tiara Letourneau, chief financial & operations officer of Rewrite Capital and Tim Masson, CEO of Raise Recruiting. The group has spent the previous two years understanding the model more in-depth and is now urging the Canadian federal government to use it in the 2023 Budget. Employee-ownership is essentially a legal model that allows employees to become shareholders in their company without paying directly for their shares. The shares are held in a trust and the business owners are repaid for the shares out of the company’s revenues.

“This is a place where they understand what’s going to happen to the company at the end of the year, at the end of 10 years or 20 years, and I think that could be very comforting,” says Payne of College of Technology. Under this model, the business employees are less at risk of buying into the company through stocks using their own money. That’s one of the primary reasons that employee-ownership is so intriguing and appealing to Canadian workers. It allows them to become shareholders in their company through “the trust for free” and grow their wealth over time.

Letourneau joined the coalition because of its potential, especially in advancing equity. “Capital holders are predominantly white and male,” she says, reflecting on a report from the Canadian Centre from Policy Alternatives, “and low-income earners are predominantly racialized minorities and women. Employee-ownership could be a powerful tool to interrupt that unequal status quo.”

Most businesses in Canada are SMEs with under 500 employees. The CEOC believes that these small businesses are exactly the type that the employee-ownership model would support. The biggest roadblock to the model is tax legislation, however, the coalition hopes the draft legislation will include a provision that defers capital-gains tax on business sales to an employee-ownership over a large firm.