In response to growing popular discontent with traditional shareholder capitalism that works “for the few”, we increasingly hear calls across the political spectrum for widening the range of organisational forms, including ownership structures.
One such form is employee ownership and/or control. Indeed, employee-owned or controlled firms in the UK have developed into a vibrant and growing community, which aspires to be an integral part of existing institutions and has gained mainstream political support. Moreover, employee ownership has been given a boost with the 2014 Finance Act, which granted tax breaks to founder-owners selling their firm to their employees, and tax benefits to the employee-owners too.
However, firms with this ownership structure tend to rely on repayable loans for raising capital (with interest rates not dependent on the success of the firm), and are less successful at attracting external, non-repayable, explicitly risk-sharing equity investment. In what follows, we would like to propose a mechanism that locks worker interests in a partially employee-owned firm with those of investors, while retaining worker control over the firm. This, we believe, would create a solid base of mutual interests between the worker-owners, who can run the firm democratically, and external investors (also owners, but non-controlling), thus making investment in employee-controlled firms a more attractive proposition.
