A Personal Stake: Why Employee-owned Businesses Return More than a Profit

By Andrew Bibby

Employee-owned businesses remain an oft-overlooked option for companies as a means toward ramping up productivity, profit and morale.

But a new study shows that the overwhelming success of companies like UK-based John Lewis is due to innovative mechanisms to encourage employee participation and cultivate a culture of ownership. This article explores how this company model of a fully or majority employee-owned business is not only self-sustaining and successful, but is in fact widely applicable.

Oxford Street is home to London's premier shopping area, a magnet for locals and tourists alike, where British and international retailers have their flagship stores. Yet one store on Oxford distinguishes itself in a surprising way - it is owned by 63,000 people.

John Lewis, which has traded in the United Kingdom for almost 150 years, is the largest fully employee-owned company in the UK, with 27 department stores and almost 170 supermarkets. All 63,000 permanent staff are known as "partners", and together they ultimately control the business. There are no external shareholders; rather, all company shares are held in a specially created employee benefit trust.

Dr Antonio Fici of the law faculty of the University of Rome points out, trade unions have also often been cautious of schemes to encourage workers to invest financially in their firms. "They fear that direct involvement of employees will change the system of industrial relations in terms of individualism and contrary to conflict, thereby diminishing the protective role they play," he says. But Dr Fici, who has studied employee participation particularly in relation to cooperatives and social enterprises, says that it is quite possible to develop forms of employee participation which the social partners can embrace. It helps, he says, to appreciate the distinction between profit-sharing and real forms of employee ownership. Certainly, JOL sees no difficulty here. As its Shared Company report puts it, "There's nothing about employee ownership that rules out a strong, positive role for unions."

(ILO World of Work)