New Coalition Says Employee Ownership Is an Urgent Multi-billion Dollar Opportunity for Canada’s Workers

By Canadian Employee Ownership Coalition

A new organization launches today with a mission to bring the multi-billion-dollar wealth-building benefits of employee ownership to Canada.

The not-for-profit Canadian Employee Ownership Coalition (“CEOC”) says Employee Ownership Trusts (EOTs) are a tool for creating a stronger, more resilient economy and building middle-class wealth. At a time when, according to a recent report from the Canadian Federation of Independent Business (CFIB), 76% of business owners say they’re planning to exit their business over the next decade, CEOC believes Ottawa must act now to keep its commitment to introduce EOTs into the Income Tax Act, along with new incentives for retiring business owners to sell their companies to their employees.

The CEOC is a diverse, non-partisan network of Canadians from the business, banking, nonprofit, academic and charitable sectors who believe that with the right policies in place, employee-ownership will scale quickly in Canada, creating billions of dollars of wealth for everyday workers across this country. A recent report confirmed this potential, projecting as many as 750 companies could sell to EOTs within 8 years, creating as much as $9.6B in wealth for as many as 115,000 Canadian workers.

“Business owners across the country, including me, have a strong desire to eventually sell our businesses to our hard-working employees,” says Coalition Steering Committee member Tim Masson, CEO of Toronto-based Raise Recruiting. “It’s nearly impossible to do this in Canada, because the right policies and incentives aren’t yet in place. Unlike the U.S. and the U.K., Canada lacks a trust structure and tax incentives to make this sort of business succession plan viable.”

Ottawa pledged to study the barriers to employee ownership in its 2021 budget, and committed last year to introduce a new, dedicated Employee Ownership Trust to give retiring business owners more incentive to sell to their employees. The federal government has not yet released draft proposals or legislation.

“For many business owners, succession decisions can’t be put off,” says Heather Payne, CEO of Toronto-based Juno College of Technology and a member of the CEOC’s Steering Committee. “I’m ready to sell to my employees, so I’m hoping to see a clear policy soon.”

The Coalition is calling on the federal government to use Budget 2023 to introduce a dedicated Employee Ownership Trust, remove tax barriers to employee ownership by adopting the U.K.’s approach of a Capital Gains Tax exemption, and introduce clear, simple rules that protect taxpayers and employees.

EOTs are proven public policy. In the U.S., where these policies have been in place since the 1970s, 14 million American workers are already sharing in $1.7 trillion of wealth. Since the U.K. introduced these policies in 2014 it has witnessed rapid adoption, with 700 companies with more than 55,000 employees becoming employee-owned between 2014-2021. This past year has been record shattering in the U.K., with nearly 500 Employee Ownership Trusts being established in the last 12 months to the end of September.

At BMO, we are committed to helping our clients make real financial progress. We have a long history of supporting U.S. business owners who sold their companies to their employees, which benefited not only the workers but the broader economy,” says Christine Cooper, EVP & Head of Commercial Banking at Bank of Montreal and a member of the Coalition’s Steering Committee. “In the U.S., employee-owners earn higher salaries and build more wealth than their peers, and this is especially true for women and people of colour. We should be encouraging this at every step and making it a viable alternative for the growing number of retiring Canadian business owners.

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The CEOC includes one of Canada’s largest banks, small and large business owners, some of the country’s leading tax, accounting and public policy professionals, in addition to nonprofit and charitable sector leaders from across the country. Its members and advisors are united by a passion for the potential of employee ownership in Canada. The CEOC believes adoption of Employee Ownership Trusts, with appropriate incentives, will scale quickly, resulting in stronger companies that stay in their local communities for the long-term, and significant wealth-building for Canadian workers.

The CEOC will build awareness about the potential of employee ownership in Canada and add supporters over the months to come. Together with its Advisory Board of leading experts the CEOC will examine proposals and advocate for effective, straightforward legislation. This will ensure EOTs can “hit the ground running” in Canada, immediately fostering stronger companies with motivated teams that will keep jobs local and Canadian-owned over the long term.

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This post was previously published on newswire.ca.

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