Companies share ownership with employees for a variety of reasons. In every business there will be a time when the owner(s) will want to leave. Employee ownership is a flexible tool for business succession planning that allows owners to exit on their own timeline while sustaining their company’s mission and rewarding employees.
Additionally, employee ownership is an effective way to engage and retain talented employees during periods of transition and increase business efficiency and financial performance through the inclusion of employees in the ownership of a business. Transitioning ownership to employees is not a new or untested business strategy – it has been used by companies throughout the United States. For examples of recent conversions follow this link.
Converting to a cooperatively owned business can benefit the business, existing owner and the community:
– Studies show that the combination of employee ownership and employee participation yield substantial improvements in firm performance.
– As companies that maintain jobs and wealth in the community, employee-owned businesses often have loyal customers who patronize the business for their values as well as their services.
– Employee-owned businesses have been shown to attract talent and have above average retention rates.
– Depending on the form, employee ownership can have significant tax advantages that allow for increased working capital to grow and improve the business.
– Selling to employees is a flexible exit strategy. The selling owner(s) can reduce involvement in the company on their own timeline.
– The selling owner(s) can institutionalize the values and culture of the company they built, which is not generally possible in a sale to a competitor or private equity firm.
– Owners can protect jobs and reward the employees who helped make the company successful.
– In an employee-owned company, the profits of the business go to employees, not distant investors, building community wealth and strong local economies.
– Employee-owned companies provide quality jobs with better compensation and meaningful opportunities to participate in decision-making.
– As locally rooted businesses, employee-owned companies often give back to their communities by supporting local causes.