Does Richer Sounds mark the tipping point for employee ownership?

Last week saw the announcement of Richer Sounds’ move to employee ownership. As the Employee Ownership Association (EOA) prepared itself for this welcome announcement of another business owner taking the progressive step to securing the future of their business, we could not have predicted the response. For last week’s news seems to represent a tipping point in the employee ownership revolution.

Founder Julian Richer’s decision to sell majority ownership of his business to his employees via an Employee Ownership Trust (EOT) has been universally welcomed and his actions applauded across the economic, social and political divides. Every broadsheet, tabloid and broadcast news that reported the story did so with supportive commentary, and amongst organisations as diverse as the CBI and Unite, there was not one dissenting voice. Surprisingly there was more proactive support and interest in the news than has been witnessed in recent months when other high profile brands such as Aardman Animation, Riverford Organics or Lush made similar, recent announcements.

So what has changed?

Undoubtedly interest in employee ownership has increased recently following the publishing last year of the Ownership Dividend and the EOA’s own subsequent campaign to raise awareness is having effect, as evidenced by its partnerships with leading business bodies, its growing membership and its increased influence.

And the Labour party’s recent announcement of a policy commitment to introduce employee ownership via an ‘Inclusive Ownership Fund’ has started a useful debate amongst larger business communities about what defines employee ownership and how it can support business performance, economic resilience and wealth sharing.

In addition, reputable industry bodies such as the Institute for the Future of Work and the British Academy are citing employee ownership as a priority for their own work to develop a more inclusive and sustainable economy.

And all of this is happening at a time as the appearance of extensive research from the US of the economic and social benefits to its economy of more employee ownership.

Finally, professional advisors, funders, accountants and lawyers, are reporting a noticeable growth in the levels of interest in employee ownership by their clients. This has no doubt been stimulated by industry leading organisations such as Grant Thornton, BDO and RSM, who are developing their capacity to advise on the EOT model, supported by greater awareness raising through authority publications such as the ICAEW’s Corporate Financier magazine.

However in the same week that Richer Sounds made its announcement, it did not go unnoticed that global telecoms giant BT announced its own version of a move to ‘employee ownership’. Citing the need to improve employee engagement and drive better customer service, the commitment to a distribution of shares amongst its 100,000 employees was however reported with ambivalence rather than the same level of support secured for Richer Sounds. For whilst BT’s own choice of language for its announcement was ‘employee ownership’, it seems that this is an intention to distribute a small portion of equity amongst its employees, but, with no intention that this ownership stake would provide any meaningful influence or voice for the employees.

So whilst it does seem that we are at a tipping point in interest, appreciation and support for employee ownership, as evidenced by several broadsheet editorial pieces last week, we remain some way from being able to say that employee ownership is in the mainstream of business models.

And whilst we are undoubtedly moving towards this, it will be critical that we continue to protect the integrity of employee ownership as a model that offers both a stake and a say to all employees and that the simple use of share schemes is not dressed up to appear to deliver the same long term benefits that Richer Sounds is seeking to achieve.

Whilst the EOA will continue to campaign for cross party political support and advocacy of employee ownership, mandatory imposition of employee ownership is not the solution to wider take up. This instead requires sustained, funded, innovative policy support with targeted interventions that raises awareness, build advisor capacity and incentivises founders and employees, so that employee ownership can embed itself in its rightful place as an essential ingredient of UK industrial strategy.

In this way, we can be sure that more businesses can follow the example of early adopters like Julian Richer, contributing to a more resilient and inclusive economy, that benefits everyone fairly for generations to come.