As a business owner, you know how important it is to attract and retain top talent, so you’ve created an employee share ownership plan; recognition and engagement are important. This can be a great strategy to offer recognition of employees’ efforts in order to increase engagement and retention.
Recognition and Engagement
I recently read an article in Benefits and Pensions Monitor called “How recognition bolsters engagement and shields employees from burnout”, which indicated a few things that align with ESOPs. A report from Workhuman and Gallup, ‘Empowering Workplace Culture Through Recognition’ shows employees who believe that recognition is an important part of their organization’s culture are 3.7 times as likely to be engaged, 3.8 times as likely to feel connected to their culture, and half as likely to experience frequent burnout as those who do not. ESOPs can lead to greater company performance if the company can engage their workforce (recognition and engagement). This comes down to what the report is saying about recognition and culture “the research highlights crucial considerations for leadership in reinforcing strong organizational cultures.” Without building a strong foundation in the culture, programs and initiatives like ESOPs or more traditional recognition plans likely won’t see the success you desire.
According to the article, a very small number (34 percent) of employees say their employer has a recognition program in place, only 13 percentage of which rate it as excellent. What seems to be the key here is aligning recognition program with the values of the organization as employees who perceive that to be the case are 4.9 times as likely believe they know what is expected of them at work. This is also a key element within ESOPs and the plan is more likely to be successful when employees understand why the ESOP was put in place, how it aligns with the company’s values, or how they individually impact company success in their everyday work (again recognition and engagement).
“Employee engagement is critical to the productivity, morale, development, and retention of every organization’s workforce.”
Making the most out of your plan can be challenging
We offer ESOPlus®, which is designed to provide detailed tools and resources to support the ESOP after it has launched. These are designed to improve activities that establish an ownership culture and drive Plan success such as engaging employees and establishing participative practices. It is ideal for Plans that are meant to be ongoing, drive higher engagement from employees, attract new talent, retain team members, and support succession planning.
ESOP companies that have established an ownership culture through participation and engagement are more likely to see positive results like higher productivity, innovation, retention, engagement, and profits.
What’s included in ESOPlus®?
An engagement measurement tool (CORE4ESOP) to help you track and analyze Plan performance and ensure it is meeting its goals.
Templates and guides that are detailed, clear, engaging, and customizable to help integrate your Plan into other company strategies such as attracting and retaining employees.
Workshops along with direct access to an ESOP expert to assist the ESOP Committee and employee shareholders as a whole to truly engage and participate in ownership.
A workbook with templates for you to establish your Plan Committee and communication strategy, and set them up for success long-term.
Administration guides and third party portal access for employee visibility of company ownership
Exclusive access to the most recent and relevant data specifically from small and medium sized private Canadian companies that have an employee ownership program.
All with access to your own ESOP advisor.
Learn more about the benefits of employee share ownership and how ESOPlus® can help you effectively administer your ESOP by visiting the ESOPlus® page or booking a call.
Originally published Jan 2023. Updated March 31, 2023
Employee Ownership Design Models in Canada
Overall, there are a couple of ways to achieve “Employee Ownership” in Canada. EOTs could be an added design parameter to achieve Employee Ownership depending on the goals the owner would like the plan to achieve.
Employee Share Ownership Plan (ESOP)
Worker Co-op
The main difference between these two is that votes are equal in a co-op whereas in an ESOP votes are dependent on the shareholders’ type of share (voting or non-voting) and how many shares they own.
In Canada, we consider an ESOP the umbrella term, but there are different types of plans under an ESOP that achieve slightly different goals.
Equity Plan
Stock Option Plan
EVOP™️ (Phantom)
Employees become shareholders through share purchase
An option is granted to employees to purchase shares in the future at a pre-set price
No ownership is transferred. Employees become unitholders. It’s like a “super bonus program”
1. Equity Plan
The owner or company sells shares to employees. This could be set up as a purchase plan using cash, payroll deductions, bonuses, loans, dividend reinvestment to name a few. The Canadian federal government has announced an Employee Ownership Trust (EOT) coming to Canada (see our special bulletin). This could be another way business owners can design an employee share ownership plan to help facilitate succession and exit planning. The two most quoted models using EOTs are in the US and the UK, the US also has specific ESOP legislation. The recommendations for Canadian EOTs was to model components of structures in these two countries. A purchase plan is the most common plan design that our clients implement for the reasons below. If you are considering implementing some form of employee ownership, identifying your goals is the first step. All of the ESOPs we have helped design and implement have not been created with EOTs (since there is no legislation for it) and have had success especially for Small and Medium Sized Enterprises (SMEs), which are privately owned.
Pros:
Creates the maximum ownership mentality when employees purchase shares. This doesn’t have to be a high financial commitment. Most clients have a minimum purchase requirement of $1,000 to $2,000 per year if the employee chooses to participate (this could be as low as $20 per pay cheque).
Employees understand how the company’s value increases and have more visibility on the relationship between their individual day-to-day responsibilities and the bottom line.
It is fairly straightforward administratively
Can be broad-based for all employees and new ones
Provides cash liquidity to founders/owners or keeps cash in the company for operational use
Employees may be able to use the lifetime capital gains exemption (LCGE) which is about $971,000 in 2023 and is an excellent long-term wealth creator
If legislation is created for an EOT that is similar to US and UK, potential for the owner to transition a significant portion of ownership through a trust to employees with tax benefits
Cons
Need for annual valuation (a formula can be used for up to 3 years, then the valuator should review and complete a new valuation)
Continuing communication and disclosure is needed to support the ownership culture created
In a purchase plan, perhaps not all employees are financially able to participate to the same extent as other. In the US and UK the EOT owns the shares on behalf of the employees and the employees don’t pay anything for the shares.
A certain level of financial disclosure is needed and not every owner is comfortable with that. The level of disclosure can be minimized in certain circumstances.
Unmanaged expectations from employees can impact the success of the plan
If legislation is created for an EOT that is similar to US and UK, it could be very costly and could restrict flexibility to design a plan that meets the owner’s goals
2. Stock Option Plan
Employees receive options to purchase shares at some future date at a set price. This is typically used to incentivize and motivate senior management and executives to create greater company value or in a start-up to attract employees to work in a high growth company with the expectation that there will be a sale or IPO in the future.
Pros
No risk to the employees, they don’t own the shares until the future. If the value has increased they would buy the shares at the pre-set lower price, and if the value hasn’t increased they don’t have to purchase the shares.
Focuses employees motivation on the growth of company value
Is fairly straightforward administratively
Can be used to attract and retain employees
No financial disclosure is required to option holders
No loss of control until the shares are purchased which might not be for up to 10 years
Cons
Need annual valuation of options as Generally Accepted Accounting principles (GAAP) require annual expensing of share options
Less able to achieve an ownership mentality because employees have not made a financial investment, no skin in the game.
Employees cannot access the LCGE until they trigger their options and have owned shares for 2 years
Provides no cash to the Owners
3. Phantom Plan
We call these Equity Value Ownership Plans (EVOP™️) since trying to communicate a phantom is…tricky…These create more of a “super bonus plan” since employees don’t become shareholders, but unitholders. It is more than a bonus or profit-sharing program because the units can go up and down in value as the value of the company increases or decreases (like a share would).
Pros
No financial disclosure
No loss of control of the company
Can be broad based to all employees
Can be converted to actual share equity in the future
Can be used to repay owner’s shareholder loan to the company, potential tax-free
Cons
When units are “redeemed”, employee must take value as income and pay the appropriate taxes
Employee cannot access the capital gains exemption, nor any capital gains treatment
Need for annual valuation (a formula can be used for up to 3 years, then the valuator should review and complete a new valuation)
An owner cannot use proceeds as a capital gain
Doesn’t actively create an ownership mentality
Employee Ownership Trusts
It is important to understand how the EOTs are structured in the US and UK to help determine if it might be the right design for your company if implemented in Canada.
For example, in the UK, the owner must sell a controlling stake to the EOT. The trust then owes that owner the value of the shares and over time, profits pay down the debt and payouts to employees (new owners).
With ESOPs in the US, a trust is established to purchase the shares from a founder (see this NCEO article describing how ESOPs work in the US). The company contributes funds to the trust or a loan can be acquired from a financial institution to buy the equity. The trust owns the shares and over time profits pay the loan (principal and interest) and allocate equity to the employees via the trust.
In the US and UK, legislated structures provide substantial tax benefits to the exiting owner and can create great ownership mentality. They are quite complex and costly to set up, and can be restrictive. Because of this, many small to mid-sized companies find that other models align better with their goals.
Unfortunately, while this could provide an additional mechanism for how to structure a Plan in certain limited circumstances, the proposed EOT has really missed the mark and the government does not seem to have listened to the recommendations given to create more Employee Ownership. These limited circumstances for its use would be a business that is steady, has stable cash available, not growing much, and the owner has no other exit options. As it is described now, there doesn’t seem to be much incentive, tax or otherwise, to create the Plan through the EOT. In the end, the employees do not actually own the shares, employees become beneficiaries of the EOT which owns the shares. The employees are only entitled to dividends while they are employed. It is perhaps more like an employee benefit trust rather than an EOT.
Our advice to the government would be:
Ensure that the legislation does not benefit the founder/selling owner at the expense of the employees
Allow the founder/selling owner to designate the percentage ownership to be transferred
Incentivize owners to sell to employees rather than an international competitor or PE
Allow employees to access preferred tax treatment
Make it as simple as possible to structure
Avoid restricting the design parameters too much
So, are EOTs right for Canada? In the right circumstances some owners could see a use for them. As we’ve said, the owner should first define the goals they want an ESOP to achieve and then strategically design the parameters using the options above based on those goals.
Resources for interested parties:
ESOP Association Canada
2023 Employee Ownership Conference – May 11-12 in Edmonton AB
What are the tax benefits to owners and employees?
When setting up an ESOP in Canada it is important to know there are no federal laws that govern ESOPs specifically. ESOPs are set up following securities legislation and The Income Tax Act of Canada. However, a major consideration to designing a plan is the tax treatment to employee shareholders. Plans can be designed so that employees of a Canadian Controlled Private Corporation (CCPC) who become shareholders would not be subject to tax when getting the shares and can access capital gains tax treatment when the shares are sold (50% of the gain is taken into income and taxed at an individual’s marginal tax rate, the rest is not taxed). They would potentially also be able to access the Lifetime Capital Gains Exemption or LCGE, which is over $900,000 in 2022. This would mean all gains made on sale would be tax free.
Does it have to be offered to everyone in the company?
Eligibility can generally be categorized as a broad-based plan or strategic-person plan (a.k.a. key-person plan). The intent of a broad-based plan is to allow the majority of employees to be eligible, however there is a qualifying or waiting period that the employee has to be employed for before becoming eligible. That period can range from 3 months to 5 years, but usually is 1 or 2 years. A strategic person plan is meant only for specified employees or those in a certain position and above. A company with a hierarchical structure may indicate that only those in a manager position, or above are eligible, while smaller companies with less hierarchy, might have the owner identify individuals who they feel contribute most directly to the success of the company. The latter example is less common as it is difficult to communicate eligibility in a fair manner since it is very subject to the owner’s thought process.
How do I make sure it is fair?
There are many considerations when it comes to perceived fairness. Generally, they all boil down to one thing; communication. Designing a plan in a participatory way has been shown to lead to greater success (the ESOP achieves its goals). A participatory approach just means that you are not only considering the technical requirements (legal and tax) but also the cultural elements. It is important to think about what questions employees are going to have; how does it benefit them as individuals and what are the risks. Defining all the design parameters, including ones that won’t be in a shareholder’s agreement, like eligibility, share allocation, and purchase methodology, clearly with input from potential participants creates the conditions for a successful launch and sustainable ESOP. Many people are unsure and concerned that employees with more money than others will be able to own more of the company. Having a specific and transparent allocation methodology addresses the issue of fairness because it is easy to communicate, and everyone knows what criteria is considered and to what extent. When designing the plan, companies will usually come up with a formula that includes 1 to 4 criteria, such as tenure, position, salary and/or performance. Many companies prefer to make sure that the number of shares an employee owns is related to level of responsibility and impact they have on success of the company, rather than how much money someone has.
Can it be offered to non-employees such as independent contractors?
Independent contractors can participate in an ESOP. However, according to securities legislation, there is a rule that non-employees are considered investors and if the company has more than 50 non-employee shareholders, it may need to meet additional requirements such as issuing a financial prospectus. Employees are exempt form this rule. Out of ESOP Builders clients, owners who desired to include independent contractors are in the minority.
How do I get my money out?
Owners typically want their ESOP to achieve multiple goals. One of those goals is often an exit plan. Owners should, but don’t always, think of 3 things when it comes to planning for their exit. How to get their money out, how the company will run without them (or succession planning), and how to maintain their legacy. An exit doesn’t necessarily mean selling 100% of the company. A recent client of ESOP Builders set it up to achieve his exit and sell 50% of the company (his shares) in 10 years. When one of the goals is to exit, the owner should define their timeframe. The most convenient way to get their money out is to sell their shares directly to the employees rather than issuing new shares and diluting the owner’s ownership. Many companies might start off with a five-year time frame and plan to sell 10 to 20 percent in that timeframe, however consideration needs to be given to what employees can realistically acquire. This is why defining the exit timeframe is important and having multiple financing methodologies (cash, payroll deduction, loans, use of bonuses, etc.) can help.
While many businesses deferred thinking about implementing a shared ownership plan back in April, now may just be the right time to start taking action. Businesses have adapted and started to see the beginning signs of operations picking up again.
There are around 7,000 ESOPs in the US according to Mary Joseph’s article in Forbes (2020). A Deloitte (2018) found that about three quarters of publicly traded companies offer ESPPs (Employee Stock Purchase Plan). However, we want to see Canadian plans continue to rise. A plan can be set up many ways driven by the goals of the owner, the company, and the participants.
Joseph outlined some reasons why an ESOP should be implemented. In this blog we will use her concepts to similarly highlight some reasons but from a Canadian perspective.
Company Performance – The most compelling purpose for a time like this is that ESOPs outperform non esop companies during tough times. This is seen in studies comparing companies’ sales, profits, hiring activities, etc. For example, the researchers at the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers University found that ESOP companies grew sales during 2008-09 11.1% while non-employee-owned companies grew by just 0.61%.
An Ownership Mindset – Employees are also owners and they have a different mindset toward their company and how it works compared to non-employee owners. Think about a renter of a building versus an owner. Employees think about things like their paycheck, Fridays, time off, or the “me mentality”. Owners think of things like sales, profit, expenses, clients, company projects, cash flow, etc. or the “us mentality”. Employee owners understand the bigger picture and are likely to find ways to boost sales and/or cut costs more so than if they were not an owner. When the company does well, everyone individually does well too. As a customer would you prefer to deal with the owner or someone who doesn’t have that level of stake in the company’s success? Usually the owner will be the one giving the best service. When all your employees are also owners client satisfaction soars. Research from the NCEO shows that employees at ESOP companies are less likely to be laid off. Recent research from Rutgers University (2018) also indicates that retirement accounts of employees at ESOP companies are significantly greater than those at non-ESOP companies.
Successful Exit for the Founding Owner – It makes sense for the founding owner because sale to a third party is only successful about 50% of the time. Selling to your employees on the other hand has an 80% success rate. Why is this you may wonder? For a small or medium sized private Canadian company, third party offers may be hard to come by, and when they do they may not meet the expectations of the owner in terms of what the company is worth and what will happen to the company once the deal is done. Many of our clients want to share the success that their employees have helped create and continue the legacy of their business. The employees are already invested by way of the time and effort they have committed over the years, they are more likely to want to see the business succeed. Not to mention they already know their jobs, know how the company works, and know the clients. Additionally, the owner doesn’t have to share extensive financial and confidential information with a third party. The fact that it is also a lucrative and effective way for an owner to exit is an added bonus.
Flexible Transition – Control can still rest with the founding owner until such time that they are ready to fully transition controlling ownership. Employee owners are not typically provided a seat on the board until they hold a significant ownership percentage. See our last blog post which talks about participation and what that can look like.
Overall, it is a win for all, the founding owners, the employees, and the economy. An added bonus is that it can support democracy by strengthening the wealth of the middle class without government intervention.
By Joanna Phillips, CHRL, CVB, Vice President, and Perry Phillips CPA, CA, CBV, President
Employee ownership works. It makes companies, on average, better, faster, and stronger. The typical employee-owner stays with his or her company longer, and many of them come up with the kinds of creative ideas that can push expenses lower than managers thought possible, or that open up new lines of business. Overall, the statistics show that, on average, everyone comes out ahead with employee ownership.
Not surprisingly, some companies do far better than their peers, and some employee-owned businesses do not get any performance benefit at all, or may even do worse.
What separates the companies that outperform from the ones that underperform?
A successful ESOP requires open communication. The Plan itself creates the conditions for company success, however strong communication and participation make the plan successful long-term in order to experience the benefits everyone expects.
Studies have shown that participative ESOPs that are fully and clearly communicated enhance employee engagement (rather than their desire to control the company) leading to high productivity, increased profits, and increased wealth for all.
If people are going to think and act like owners, they need a basic level of understanding of the plan through which they have that ownership. Here are some of the methods our clients have used to communicate an understanding of their ESOP to their employee-owners.
Hold meetings: Bring everyone together in large groups to announce the ESOP and to cover some of the most common questions about the plan. Do not go into great detail just yet.
Set up a peer-to-peer training group to further communicate the ESOP in small groups. People can be elected or invited to join a training group and given the time and resources to create a training program. The most successful groups have the active support of the CFO, who can make sure that they have accurate information and can answer all of the group’s questions. These communication groups may even talk with similar committees at other companies so they can share PowerPoint slides, handouts, and agenda items.
Have written materials: Provide information about the ESOP in written format for the people who need to see things in black and white. Employees’ spouses can read them as well.
Let the ESOP sell itself: Most employee ownership plans are good deals for the employees. If they trust the information they receive, rather than suspecting it of being sugar-coating or emphasizing only the positive, they will likely come to their own conclusion that the plan is a good thing.
Target “just in time” information: People learn best when the learning is digestible and repeated. Young employees who have just joined the company do not need to know all the details about the timeline on which they will be paid out when they leave the company, but they probably do want to know the eligibility rules.
Share stories: Not much is as persuasive to human beings as stories. Talk about people who have retired from your company with substantial value in their ESOP accounts, or, if your plan is newer, use examples from other employee-owned companies. Tell the story of why your company became employee-owned. What were the other options? Why did the company choose employee-ownership over those other options?
Use statistics: Some people prefer to see the numbers, so don’t hesitate to show them research—but only the highlights– on the implications of employee ownership for employee-owners, your company and ultimately the community. Good sources of data, even though most are from American companies, are the National Center for Employee Ownership (NCEO), the ESOP Association (US) and the ESOP Association Canada.
Back in 2011 EBI watched with interest as EllisDon, a long-time ESOP company, took the recession in stride as one of Canada’s Top 100 Employers for 2012. In The Globe and Mail article, the firm’s vice-president of leadership and entrepreneurial development shared that in the previous year, 84 percent of employees who were offered shares accepted, an increase from the usual rate of around 70% — because they believed in the ESOP and the company. Our president, Perry Phillips, told the Globe and Mail “the employees who are engaged as owners will now do whatever it takes to get that company through tough times. I’ve seen this constantly. A lot of companies survive downturns and come back up very quickly because they’re still around, thanks to their employees.”
We can expect the same resilience from ESOP companies today as we all get back to work. Finally.
Now, 9 years later in the midst of a global crisis, Canada’s EllisDon announced recently that a final agreement was executed under which 100 per cent of the company’s equity will be transferred to the company’s employees.
Electrical Business Magazinereported that the majority shareholder, Smith family shareholders, have signed off on an agreement to allow the company to be 100 percent employee-owned over a specified period of time. The company’s Board of Directors chair, Gerald Slemko, the Smith family, and representation from EllisDon’s shareholder employees were the parties driving this agreement forward. EllisDon will continue to be governed by an independent Board of Directors. “EllisDon’s share structure and independent governance will ensure that we continue to strive together for complete fairness in equity of ownership across all employees, both present and future,” said CEO Geoff Smith. “Shares will continue to be offered to employees every year and loans will still be offered on an interest-free basis. Shares will always be purchased and sold at book value, ensuring the ability of every employee shareholder to participate fully in the share value created while they are at EllisDon, and then to pass that opportunity on to future employees.”
By Joanna Phillips, CHRL, CVB, Vice President, ESOP Builders Inc.
The shut-down of the economy has lasted for almost 2 months and businesses are either facing negative impacts from the COVID-19 crisis, along with most Canadian businesses, or are among the minority of businesses experiencing positive impacts.
It’s likely that very difficult business decisions have had to be made to ensure your company’s existence through the crisis. Part of the challenge is having to lay off valued employees, and maintain a positive culture.
Although things are still changing rapidly, business owners are likely considering long-term impacts on the company’s ability to retain their employees, but also to attract top talent once the crisis is behind us. The many reasons why owners turn to an ESOP (Employee Share Ownership Plan) include to exit the business, to establish a succession plan, and especially to attract and retain the top talent in the industry. In some sectors ESOPs are de rigueur and companies cannot be without one. Rather than turning away from investing in your business growth now, this may be exactly the right time to take opportunities to work on your business rather than simply in it.
As your company grows and time goes on, your workforce demographics naturally become younger. It certainly seems that ESOPs appeal greatly to Millennial workers who are looking for something more out of their companies. More studies are confirming this as more millennials enter the workforce. Every business owner knows how much time it can take to put together the “perfect” team. Additionally, employees overall are not staying in one job, or one company, for long compared to in the past. For these reasons, an ESOP can be a very strategic and valuable tool to attract and retain your team which you have invested in and worked hard to establish. Many studies of ESOPs in the US conducted by the NCEO indicate that ESOP companies have a greater resilience for staying in business through economic downturns. While the current crisis is unprecedented, these studies do suggest companies who have a participative ESOP will be more likely to come out of the crisis and emerge in a relatively strong position.
In ESOP Builders’ ESOPs as an Attraction and Retention Tool (November 2019) survey of Canadian ESOP companies 75 percent of respondents indicated their ESOP offers an edge on the competition to attract and retain talent. Therefore, it is likely that taking these steps will set your company up for success against your competition by ensuring you have the team to bounce back incredibly strong once the country experiences a positive shift in the economy.
By Joanna Phillips, CHRL, CVB, Vice President, ESOP Builders Inc.
Our April 2020 survey gathered responses from ESOP companies across Canada to help understand their strategies undertaken to manage operations as an ESOP during the COVIC-19 crisis. The survey summary is illustrated below.
Louis Kelso is the founding father of the modern ESOP movement. He was a merchant banker who believed deeply in democracy. His fear was that if the economy continued along its current path it would result in 10% of the people owning 90% of the wealth of the country which would destroy the middle class and result in the total demise of democracy.
“Kelso long believed that he had not originated a new economic theory but simply discovered a vital fact that the classical economists had somehow overlooked. This fact was the key to understanding why the private property, free market economy was notoriously unstable, pursuing a roller coaster course of exhilarating highs and terrifying descents into economic and financial collapse.
This missing fact, which Kelso had uncovered over years of intensive reading, research and thought, drastically modifies the classical paradigm which has dominated formal economics since Adam Smith. It concerns the effect of technological change on the distributive dynamics of a private property, free market economy. Technological change, Kelso concluded, makes tools, machines, structures and processes ever more productive while leaving human productivity largely unchanged. The result is that primary distribution through the free market economy (whose distributive principle is “to each according to his production”) delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contributions through labor.” (Wikipedia)
First is the philosophy of personal wealth creation. Employees are motivated by financial gain and ESOPs deliver wealth.
Second is the philosophy of cultural engagement on a personal basis. The Theory of Group Wisdom holds that groups are more successful over individuals due not to the intellect of each person but due to the social interaction of the group. ESOPs create the conditions of group success through a participative culture of engagement.
The combination of personal wealth creation and social interaction create a synergy that few non-ESOP companies can match. The results are ESOP companies with higher productivity, higher profitability, more innovation, and wealthier employees.
Over 20 years we have had the honour of meeting many business owners who wanted to implement an ESOP for their company. We have also interviewed thousands of employees of these companies on their desire to become owners.
In our opinion there are two types of owners. The first we call Founding Owners. These are people who start a business where none existed before. They have an idea, a passion, and a skill which they believe will be wanted by clients and customers. Then they risk everything to start the business. Many go without salary, raising funds from family and friends and putting up their own assets as collateral for bank funds. The highest risk for a business is the first 5 years as most start ups fail during this period. But this risk does not deter Founding Owners.
The Canadian tax deadline is May 1st and as we all know only two things in life are certain – death and taxes. And for a lot of people doing taxes is a death defying experience.
It is estimated that less than 10% of the workforce actually own their own business. That means over 90% are employees. This statistic is important because owners and employees differ in how they think about business issues.
Most owners of privately-held companies are also the founders. Why? At some point in the past, they had a dream and a desire to own their own business. For many, this required giving up a secure job working for someone else and entering the uncertain and ambiguous realm of an entrepreneur. Although there was a huge risk, they believed in themselves and their dream, and they took the leap. For many, this required using their own savings, as well as putting their house and everything they owned on the line as collateral. This was not an easy decision on their part.
What is the foundation for effective employee engagement within your ESOP?
Trust.
Actually, trust is the foundation for every relationship, in any area of your life. And the only way to create a workplace environment for greater connection, collaboration, innovation, creativity, and success, is by building incrementally higher levels of trust every day.
A basic understanding of neuroscience can allow us to have a simple, understandable dialogue about some of the elements that instill trust, employee engagement, and can lead to an even more successful Employee Share Ownership Plan (ESOP).
Canadians born between 1979 and 2000 now outnumber baby boomers for the first time in history. The Millennials (or Generation Y) form a distinctive segment of the work force, aged 16 to 37 years old. There are two types of Millennials: those aged 16 to 27 have been called the iGeneration Millennials since they were raised with iPads; while those aged 28 to 37 are called the Net Generation Millennials as they were brought up on the internet.
When business owners think of offering their employees equity in the company, a stock option plan often comes to mind.
Stock options can be a great tool for owners to engage their employees and attract and keep talented staff. So let’s discuss what stock options are, and in what scenarios they perform best.
Our experience shows there are key attributes that suggest a company is a good candidate for an employee share ownership plan (ESOP). Read through these questions to learn if an ESOP is a good fit for your company:
Our experience shows there are key attributes that suggest a company is a good candidate for an employee share ownership plan (ESOP). Read through these questions to learn if an ESOP is a good fit for your company:
In a meta analysis of 225 academic studies by Sonja Lyubomirsky, Laura King and Ed Diener (as reported in the 2012 Harvard Business Review) it was shown that happy employees have a higher productivity rate by 31%, increased sales by 37% and are 3 times more innovative and creative.
The combination of personal wealth creation and social interaction create a synergy that few non-ESOP companies can match. The results are ESOP companies with higher productivity, higher profitability, more innovation, and wealthier employees.