Iain Hasdell: Employee benefit trusts are popular option for employee ownership

Employee benefit trusts (EBTs) have received much attention over the past few years because of the success of employee-owned organisations such as Make Architects and John Lewis Partnership that have an EBT in their structure. 

Iain Hasdell

Such businesses consistently outperform their externally owned competitors.

EBTs continue to be a popular option for organisations wanting to implement employee ownership. They can appeal particularly to founding owners who are approaching retirement and who wish to sell their controlling interest in a business to their workforce.

In such circumstances, EBTs can provide an effective mechanism for immunising the business from an aggressive acquisition in future because the shares are held in trust for the benefit of the employees, rather than directly by them. At the same time, an EBT can effectively guarantee that the business is permanently accountable to the employees as the shareholders.

However, an EBT is not the only framework for building an employee-owned business. Many employee-owned organisations prefer the direct ownership model in which staff directly own the business’s share capital. This preference is usually based on a belief that creating a sense of ownership among employees and a culture of engagement and participation is optimised when the employees own the shares themselves.

In addition, a host of employee-owned organisations in the UK use a combination of an EBT and direct share ownership.

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EBTs are, and will continue to be, very much part of the employee ownership landscape. Their use is selective and dependent on whether an EBT fits the ethos and approach that the original business owners or creators are striving to establish or preserve.

Iain Hasdell is chief executive officer of the Employee Ownership Association