Employee ownership: cocktail glass half full?

Posted by RM2 at 11:45 on 15 Jun 2015


Last week, I got into a discussion on LinkedIn with a couple of acquaintances in the world of employee ownership. The story was that employee-owned company CH2M (based in Denver) was taking on investment from a New York-based private equity company, Apollo Global Management, to the tune of around 20% of the equity.

My acquaintances viewed this approach with concern, seeing it as potentially the end of employee ownership in the business, and citing other companies where a similar move had reduced employee participation and involvement over the years to the point where employees only had a minority stake.

I take this point of view on board, but I think we also have to be realistic. Employee owned businesses are businesses like any other, and sometimes they have to take difficult commercial decisions.

If CH2M sees that the way to grow is by diluting employees’ interests, then that may just be the best way to go. As Gary McArthur, Finance Director of CH2M said, this approach “provides an incentive for fifty-something engineers to work very hard … knowing that each dollar of profit they can bring in will add … to the comfort of their retirement”. To me, that looks like a company looking after the interests of its shareholders – whether they are employees or not.

Not all companies succeed; not all companies last forever; some companies fail, and some are subject to takeover by other businesses. That applies to employee-owned companies too – corporate change should not be automatically be taken as a failure of employee ownership. Instead, business owners should look to the many reports and studies from a variety of sources which suggest that, generally, employee-owned companies benefit from higher productivity, stronger investment returns and increased employee engagement.

John Spedan Lewis once said that the problem with traditional corporate structures was that the employees shook the cocktail, but the owners got to drink it. Employee ownership means everyone gets to drink the cocktail – it’s just that sometimes, it might not be the cocktail you expected!