VANCOUVER — The federal government is considering ways for employees to have more ownership and control in their workplace by tabling legislation to create a new Employee Ownership Trust legal structure.
Tuesday’s federal budget includes a capital gains tax exemption for sales of businesses to employee ownership trusts to allow for such control.
This would be a powerful tool to convert conventional investor-owned firms to employee-owned businesses without out-of-pocket costs to workers, say the authors of a new report, Expanding democratic employee ownership in Canada.
And with a major wave of succession decisions imminent among retiring business owners in Canada, this is a key moment to consider employee ownership, say Alex Hemingway and Simon Pek.
However, to tap the full potential of employee ownership, a much broader suite of policies is needed. In the report, Hemingway and Pek examine what an ambitious public policy agenda would look like to unleash the promise of democratic employee ownership in Canada.
“When we consider how our economy works and how it could work better, something to consider is who owns and controls the institutions that govern people’s daily working lives: our workplaces,” says Pek, associate professor at the University of Victoria’s Gustavson School of Business.
Workers create the value that becomes corporate profit, which largely flows to a highly concentrated set of owners. More worker ownership and control would counter this extreme inequality and increasingly concentrated and unaccountable economic institutions.
“Why should democracy stop at the door of the workplace?” asks Hemingway, senior economist at the Canadian Centre for Policy Alternatives, BC Office.
“Why should the institutions that govern our daily lives be beyond the control of the people who work in them and why shouldn’t working people be the owners and beneficiaries of their labour?”
While the possibility of businesses owned and controlled by workers may sound radical or far-fetched, economic research shows that employee-owned firms perform as well or better than conventional firms on measures like productivity, Hemingway and Pek say.
Decades of economic and social research suggest that employee-owned firms significantly benefit workers and society more broadly. And where they do exist, they are as or more productive than comparable conventional firms.
“Because workers own the business there’s a strong motivation to work productively,” says Hemingway. “The benefits can include reduced inequality, more job security, higher pay and strong productivity and resilience.”
Sky-high inequality and corporate concentration has led to deteriorating social cohesion and a growing need to better address the interests of working people and increase people’s control over their economic lives, the report notes.
“Through thoughtful, targeted public policy interventions, governments across Canada can help overcome the barriers that have made it difficult to create new democratic employee-owned firms from scratch or convert existing businesses to employee ownership,” says Pek.
Policy options outlined in the report to expand democratic employee ownership include:
- Providing seed grants to regional democratic employee ownership centres and development agencies.
- Making permanent the new partial capital gains tax exemption for sales of existing firms to Employee Ownership Trusts and extending it to worker cooperatives.
- Setting a lower corporate income tax rate for democratic employee-owned firms.
- Ensuring democratic employee-owned firms are eligible for existing public investment funds and business supports.
Hemingway and Pek note that most of these policies are in effect in jurisdictions with a significant employee ownership or worker cooperative sector, but nowhere have they been brought together in one place. They say that with a concerted public policy effort, Canada could facilitate a major expansion of democratic employee ownership.
For more information and to arrange interviews, please contact Jean Kavanagh at 604-802-5729, [email protected].
