Canadian companies seeing dividends from employee ownership

The greying ranks of aging entrepreneurs planning for their leisure years is helping spark increased focus on selling businesses to the people who work for them.

“A small but growing percentage of companies are interested in going towards employee ownership,” Patrick O’Brien of the 148-member ESOP Association of Canada said Tuesday.

“(It’s) not least because we have tons and tons of companies run by baby boomers, and they want to retire.”

O’Brien is chairman of the non-profit Employee Stock Ownership Association’s annual conference in Edmonton’s Fantasyland Hotel June 4-6. The event features information about equity sharing from employee-owned companies and advisers.

He said efficiency and commitment generally increase when staff have a stake in the operation.

The move also lets bosses know that the organization they’ve developed will carry on after they’re gone.

“You spend 30, 40 years building a company and you don’t want to sell in a fire sale just because you want to retire. Also, you want to have a legacy,” he said. “Your employees know your company better than anybody else. Even if they don’t own it already, they’re invested in the success of the company because it’s their livelihood.”

Tom Redl, chief executive of Edmonton-based Chandos Construction Ltd., said the three partners who started the firm in 1980 offered shares to a key employee within a year. About 170 of the 400 full-time and contract staff are now shareholders, he said.

“We see ourselves as an opportunity employer,” explained Redl. “Our purpose, after giving value to our customers … is we’re here to provide personal and professional development opportunities to our employees, as well as investment opportunities.”

Although the top two shareholders own about one-quarter of Chandos stock, independent members of the board to which Redl reports represent all the workers.

Financial returns aren’t the company’s sole focus, but it consistently performs in the top quartile for the industry, he said.

In a 2017 ESOP blog post Redl wrote that during his 18 years at Chandos the annual revenues had grown to almost $400 million from $23 million.

“We’re a business,” he said. “Yes, we have to make money … but it’s not all about money.”

Redl added their ownership structure allows them to work on sustainable projects that they might not otherwise pursue.

“We attract a certain type of people and they tend to be a little more committed … People are joining us because of what we believe, not just because of what we do.”

One downside to their collaborative management style is that decisions can take longer.

But generally they’re better, Redl said.

While Canadian data isn’t readily available, figures from the United States — where the laws on employee ownership are different — indicate about 20 per cent of private-sector workers hold company stock or stock options.

O’Brien, who works in Medicine Hat for Denver’s Metcalf Archaeological Consultants, said his firm has been entirely owned by staff since 2007 and the move has gone well.

“We really do see a broader range of employee-owners engaging at a higher level, so the company does better.”