Inclusive Democratic Business Models
1. Employee Ownership
Discover how employee ownership can empower your team and boost business success.
What is Employee Ownership?
Think about a company where everyone who works there also owns a part of it. That is the idea behind an employee owned business model (Companies may have their own criteria regarding the minimum duration of employment). In this setup, the workers are not just employees, they are also co-owners. This means they share in the company’s profits and have a say in important decisions. If the company does well, everyone benefits, not just the owners or shareholders.
This model not only fosters a fairer and more democratic business but also builds a lasting legacy. It gives employees a meaningful stake and a real say in how it’s run, helping to keep the business anchored in Scotland. This legacy drives improved performance and boosts economic wellbeing, creating a more motivated and engaged workforce. The business gains a committed team, and employees have the chance to share in the rewards, ensuring the company’s success and positive impact endure over time.
How the finance work in employee-owned businesses?
For companies looking to transfer ownership to employees, the most common method is through an Employee Ownership Trust (EOT).
Here’s how it works: the current owners sell their shares to the EOT, which means the EOT now owes them money for these shares. The company then uses its profits over time to make payments to the EOT, which the EOT uses to gradually pay back the original owners. This process, called vendor finance, allows the company to become employee-owned without needing a large upfront payment.
How does ‘employee engagement’ work?
Businesses can engage employees in various ways, which is essential for good governance. Some options include:
- creating an employee council or consultation group
- establishing a constitution that outlines the company’s values and its relationship with staff
- having employee directors on the board with equal responsibilities as other directors
- collaborating with trade unions on pay and working conditions
It’s important to regularly engage with employees in creative ways beyond just boardroom updates.
Introduction to Employee Ownership – A Video by CDS Scotland
Examples of Employee-Owned Businesses
1. Auchrannie Resort, Isle of Arran, Scotland
Auchrannie Resort in Arran, Scotland, is a prime example of a rural employee owned business. The business originally started in 1988 by Iain and Linda Johnston to provide indoor recreational facilities for locals and tourists, it has grown into a highly successful, award-winning resort with an 85-90% occupancy rate, generating about £10 million a year. In 2017, it became the first employee-owned hotel in Scotland, with a trust board that ensures the business aligns with its values. Ownership is held by an Employee Ownership Trust (EOT), and staff are beneficiaries, with no financial risk. Profits are reinvested, and any surplus is shared as a bonus among team members with over a year’s service.
Auchrannie Resort, Isle of Arran, Scotland.
Auchrannie’s Organisational Structure
2. Aquascot, Ross-shire, Scotland
Aquascot, a major UK seafood processor, is one of Scotland’s largest employee owned businesses. Founded in 1987 in the Scottish Highlands, it quickly grew through partnerships with major supermarkets. After being acquired by a global seafood company in the 2000s, locals bought it back in 2004, returning it to local ownership. In 2008, Aquascot began its journey toward employee ownership, becoming fully employee owned in 2016. Now, every employee is a partner in the business, with a real stake in its success and future plans.
Want to move your business to employee ownership or co-operative model?
Are you considering transitioning your business to a democratic model but unsure which approach is the best fit? Don’t worry! support is available to guide you through the process.
Here are some organisations that can help you along the way.
Co-operative Development Scotland (CDS)
Co-operative Development Scotland (CDS) is the only public sector funded service in Scotland dedicated to supporting economic growth by increasing the number of co-operatives. CDS supports companies and community groups across Scotland that want to adopt employee ownership or co-operative business models.
They can provide one-to-one sessions with a specialist advisor to help you choose the best business model for your needs and set it up. They can also provide a feasibility study to help you decide if this is the right choice for your business. If you decide to switch, their specialist advisors can advise you on how to implement the new model.
For more information and support, visit; Contact – Co-operative Development Scotland
