When Heather Payne, CEO of Juno College of Technology in Toronto, told her staff that she was eventually going to hand ownership of the company over to them, some of them were tepid on the idea — but other employees expressed some cautious optimism.
Payne is one of a number of Canadian business owners who are considering moving their company ownership structure to an employee ownership trust (EOT). It’s a legal structure that allows employees to become shareholders in their company by buying shares from business owners. Employees can also earn additional shares every year.
“This is a place where they understand what’s going to happen to the company at the end of the year, at the end of 10 years or 20 years, and I think that could be very comforting,” she told The Current‘s Matt Galloway.
EOTs are a relatively new initiative in Canada. The federal government said in its 2022 budget announcement that it would amend the Income Tax Act and introduce an Employee Ownership Trust, to encourage employee ownership of businesses.
Simon Pek, an assistant professor at the Peter B. Gustavson School of Business at the University of Victoria, said Canada is in “a good position” to implement this change correctly because “we can learn from other jurisdictions and also from experts and practitioners and organizations that have done this in the U.S. and the U.K.”
“There’s a high possibility that if they take the right time to reflect on this, think through the mechanics correctly, they can make … a ‘made in Canada’ solution that will work really, really well and meet all the objectives they have,” he told The Current.
Payne said she’s excited for Juno, a private career college with 34 employees, to be one of the first Canadian companies to adopt such an approach.
“There’s still so much to figure out with employee ownership trust, but we’re looking forward to … hopefully, show lots of other people the benefits of it,” she said.
Public campaign for employee ownership
The government’s commitment follows a public campaign from Social Capital Partners, a Canadian non-profit financing company, to create a dedicated EOT in Canada, as well as stakeholder consultations.
Jon Shell, managing director of Social Capital Partners, says part of what makes EOTs so appealing to workers is it gives an avenue for them to become shareholders in the company ‘for free.’ (Submitted by Jon Shell)
Part of what makes EOTs so appealing is it gives employees an avenue to become shareholders in their company “for free,” according to managing director Jon Shells.
“Every employee becomes a shareholder of the company through the trust for free, and they earn additional shares every year, allowing them to grow their wealth over time,” he said. “When they leave the company or retire, the company buys back their shares for cash.”
On top of that, it gives an additional option for mid-sized companies — which Shell says are usually family- or founder-owned — to sell to.
“Their options are generally to sell to a competitor, creating more concentration in an economy; or to a third party, like a financial buyer, like a private equity fund,” he said.
“So the point of these EOTs is it gives owners a choice to sell to employees that they really seem to like.”
For Payne, who’s been running Juno since she founded it in 2012, that’s one of the key reasons why she reached out to Shells for more information about EOTs — and why she feels it’s the right model for her business.
WATCH | Flexibility expected to be key to return to work:
Flexibility expected to be key to return to work
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With more people returning to their offices, many employers are acknowledging that flexibility and a few perks will be needed to entice workers back to their desks.
“The idea of having to shop the business around and sell it to someone who might just break it up and lay off the team … was really, really unappealing,” she said.
“For me, the goal is to build something that’s going to be around still in 100 years, and so I really feel that an employee ownership trust is the best way to make sure that that will happen.”
Democratic co-ops another option
EOTs aren’t the only way to give employees a say in how the company they work for is run. There are also worker co-operatives, in which the co-operative is owned and self-managed by the workers.
“In an EOT … the community or employees are co-owners. So they own, but they don’t have democratic say, necessarily, in the running of the firm,” social researcher Marcelo Vieta told The Current‘s Matt Galloway.
“In a co-operative, the members co-own and have a democratic say in the running of the firm, and what’s done with revenues and the strategic orientation of the business.”
Social researcher Marcelo Vieta says co-operatives give members ‘a democratic say in the running of the firm, and what’s done with revenues and the strategic orientation of the business.’ (Submitted by Marcelo Vieta)
Through his project, the Conversion to Cooperatives Project, Vieta and his team have tracked about 255 business conversions to co-operatives in Canada, of which 181 of them are still active across different sectors.
He said studies have shown that co-ops increase firm performance and productivity, and provide greater stability in communities and in specific businesses.
Pek believes the key to a successful worker co-op is how democratic it’s running it.
“If you take the idea that a worker co-operative … exists so that the worker members can have a say in deciding on the organization’s future and to get those benefits … it’s really important for it to run democratically,” he said.
But according to Pek, there are some potential challenges that can arise if the democratic process is not done properly.
“If you don’t structure the democratic practices right, and if you don’t kind of keep a pulse on them and improve them over time, what can happen is that a certain subset of individuals tends to take on leadership positions or even stay in those positions over time,” he said.
This is called organizational degeneration. Pek said this can result in growing levels of apathy from the broader worker membership over time.
Simon Pek, an assistant professor at the Peter B. Gustavson School of Business at the University of Victoria, says one of the key challenges facing worker-owned co-ops and EOTs is organizational degeneration. (UVic Photo Services)
It’s not limited to co-ops either. Pek said organizational degeneration can also happen in EOTs.
Although there’s no silver bullet to stop it from happening, Pek said there are ways to revitalize democracy in these organizations.
“There’s a big movement now in the political science realm, focused on doing things like citizens’ assemblies or citizens’ panels,” he said. “[They’re] basically comprised of randomly selected citizens to lean and deliberate together, and then come up with decisions that represent the diversity of the entire population.”
“I think those could be used as well in co-ops and worker-owned firms to give a more refined but also more inclusive perspective on what worker members really want in a particular situation.”
Building long-term
Even though she’s turned Juno into an EOT, Payne understands why other business owners might look to maximize returns and sell to the highest bidder — and she doesn’t blame them for it.
But for her, converting her company to an EOT is about more than just the money.
“It’s more about … creating something new in the educational sector that will last a long time,” she said.
Payne founded in the Juno College of Technology in 2012. She hopes it will still be operating in 100 years, which is why she is changing its ownership structure to an EOT. (Submitted by Heather Payne)
Written by Mouhamad Rachini. Produced by Alison Masemann.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
