John Lewis | How do employee-ownership models work?

How do employee-ownership models work?

John Lewis announced last week that it was considering bringing an end to its 100% employee ownership. The move comes at a time of increased economic strain due to the cost-of-living crisis and marked shifts in the retail sector.

Sharon White, the chair at John Lewis, says this move would allow the retail giant to raise between £1bn and £2bn of new investment. The retail giant says plans are to sell a minority stake to an investor who embodies similar values, while employees will maintain having a majority of the company’s ownership.

But what even is an employee-owned business? And what implications does it have on employee experience?

Employee-owned businesses: why are they good for workers?

An employee ownership trust (EOT) was introduced by the government in 2014 as an extension of an employee benefit trust, their long-term plan was to encourage businesses to move to a model most famously employed by John Lewis. Since, over 700 organisations in the UK have adopted an EOT model.

With an EOT, shareholders are encouraged to sell their shares to a trust which is held on behalf of employees. For business owners and shareholders, there is an incentive to transition to employee-ownership because of some generous tax breaks associated with it. Businesses with an EOT are also able to pay tax-free bonuses to employees of up to £3600 per employee per year.

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Aardman Animations, known for creating the likes of Wallace & Gromit, Chicken Run and Shaun the Sheep, transitioned to an employee-owned model in 2018.

Addressing the shift, Aardman co-founder Peter Lord explained the reason for the company’s transition. He said: “This approach, the creation of an employee trust, is the best solution we have found for keeping Aardman doing what it does best, keeping the teams in place and providing continuity for our highly creative culture. And of course, those that create value in the company will continue to benefit directly from the value they create”.

“The statistics show that employee-owned companies are significantly more successful than conventionally owned companies. So, we are very excited by the prospect of seeing Aardman roll far into the future under this arrangement and can rest easy that those four decades which have slipped by have paved the way for many more years of great creativity”

The Rise of Globally Distributed Teams

The Rise of Globally Distributed Teams

While arguments over remote work continue, a quieter movement is rapidly overtaking hesitancy in the headlines: the rise of distributed work.

Employees discovered increased mobility and flexibility through remote work, while businesses grappled with uncertain budgets and new challenges to measure productivity and engagement.

Download this report to understand how distributed workforces are growing; how companies are optimising their headcount and operational costs in the age of remote work; and what different groups see in the future for remote work.

What you’ll learn from this report:

  • The most critical advantages businesses gain in international hiring

  • Why businesses use remote and distributed work policies to increase retention and productivity

  • The emerging employer of record (EOR) model for increased speed, flexibility, and compliance

  • Where leaders and employees expect remote work to grow or shrink in the next five years

  • Comparisons of in-office, hybrid, and fully remote organisations, and their respective advantages

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An EOT puts power and ownership into the hands of workers. It can lead to greater employee engagement and commitment, reduced absenteeism, a greater drive for innovation from employees, higher staff retention, and improved business performance.

One of the main perks of employee ownership is the positive internal culture it breeds, which translates to an attractive external brand. In fact, John Lewis’ former boss called changes to its employee ownership model a “tragedy”, largely because it would damage its long-existing brand and unique selling point.

This sentiment was echoed by retail consultant and broadcaster Mary Portas, who published an open letter to John Lewis “speaking on behalf of the British nation” saying that a departure from its employee-owned model would “let go of its soul.” In the same way B Corp certification indicates a company's commitment to environmentalism, a company that decides to be employee-owned indicates a firm commitment to the wants and needs of its workers.

Employee-owned businesses have few obvious downsides for workers, but this model still relies on trustees to behave with good conduct and make decisions in the best interest of the workers they represent, holding the company’s board to account when needed. So, trustees must be chosen carefully, ideally by the employees themselves.

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