New Coalition Says Employee Ownership is an Urgent Multi-Billion Dollar Opportunity for Canada's Workers

TORONTO, Jan. 24, 2023 /CNW/ - 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."

For more information visit: www.employee-ownership.ca

For inquiries contact: [email protected]

About the Canadian Employee Ownership Coalition

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.

The CEOC is calling on the government to:

1. Create an Employee Ownership Trust under the Income Tax Act in Budget 2023
2. Introduce clear and simple rules for an employee ownership trust that protect taxpayers and employees while encouraging understanding and adoption by the business community
3. Ensure the benefits of employee ownership trusts are broadly shared by adopting the approach of both the U.S. and U.K., which require benefits to be provided to all employees at no cost.
4. Improve likelihood of widespread adoption by following the U.K.'s model of providing a Capital Gains Tax exemption to owners who sell a majority of their company to an employee ownership trust.

About Employee Ownership Trusts

EOTs are a way for business owners to sell all or part of their businesses to their employees. They are most commonly used for the succession of privately-held companies with between 20 and 500 employees. This is a significant market in Canada, with over 140,000 companies employing almost five million Canadians, according to Statistics Canada.

Their unique design means that employees do not pay directly for their shares while still allowing owners to sell at fair market value. Lenders, often including the selling owner themselves, finance the transaction and are repaid over time out of company profits. Employee shares are held in trust and governed by a trustee, and the company continues to be managed traditionally. EOTs are a form of broad-based employee ownership, where all employees are included in ownership. Forms of EOTs have been established in law in both the U.S. (Employee Stock Ownership Plans) and the U.K. (Employee Ownership Trusts). Employee-owned companies tend to stay in their home communities, providing continuity of employment and company culture, which have proven to be strong motivations for founders to sell to employees.

Potential for Employee Ownership Trusts in Canada

A recent report by economist Brett House, a former Deputy Chief Economist at Scotiabank and current Professor at Columbia Business School, and Jon Shell, Managing Director of Social Capital Partners, projects a huge upside from Canada introducing new legislation similar to the U.K.'s to encourage employee ownership. Within eight years, says the report, Canada could unlock:

• 500 to 750 private companies converting to being employee-owned;
• 50,000 to 115,000 Canadians workers becoming employee-owners;
• Up to $9.6 billion in wealth shared by employee-owners; and
• About 200 Canadian companies selling to their employees every year, creating over 20,000 new employee-owners annually

Canada facing $2 Trillion succession crisis

A new report from the CFIB titled 'Succession Tsunami' illustrates the magnitude of Canada's succession crisis. As baby-boomers continue to retire, we are witnessing the largest transition of business assets in our nation's history.

The report says that more than $2 trillion in business assets could change hands in the next decade as 76% of small business owners plan on exiting their business. Only 9% of those planning to exit have a succession plan in place. A majority (53%) of small business owners would be more likely to sell to their employees if the option was available, with "protecting current employees" being the top ranked consideration.

With this backdrop, the CFIB recommends in its report that the government quickly introduce simple, straightforward EOT legislation and introduce a capital gains incentive similar to the U.K.

CEOC's Membership

The CEOC will continue to add to its membership over the coming months.

Steering Committee
Christine Cooper	Executive Vice-President & Head, BMO Commercial Bank
Chad Friesen	CEO, Friesens Corporation
Tiara Letourneau	Chief Financial and Operations Officer, Rewrite Capital
Tim Masson	Chief Steward & CEO, Raise Recruiting
Heather Payne	Founder & CEO, Juno College of Technology
Jon Shell	Managing Director, Social Capital Partners

Advisory Board
Brett House	Professor of Professional Practice, Columbia Business School
Paul McMillan	Vice Chair, Government and Public Services, Deloitte Canada
Matthew Mendelsohn	Visiting Professor at Toronto Metropolitan University
Roger Martin	(Formerly) Dean, Rotman School of Business
Wes Novotny	Partner, Tax, Bennett Jones LLP
Geoff Smith	President and CEO, EllisDon
Stephen Smith	Chairman, President and CEO, Amsted Industries
Ed Waitzer	Partner, Stikeman Elliot LLP
Grant Wilde	President & CEO, Spartan Controls Ltd.
Noah Zon	Principal & Co-Founder, Springboard Policy

Supporters
Richard Abboud	Founder & CEO, Forum Asset Management
Upkar Arora	CEO, Rally Assets
Karim Bardeesy	Co-Founder and Executive Director, Leadership Lab, TMU
Victor Beausoleil	Executive Director, The Social Economy Through Social Inclusion
Benjamin Bergen	President, Council of Canadian Innovators
Geoff Cape	Founder and former CEO, Evergreen Canada
Peter Deitz	Co-Founder, Grantbook
Narinder Dhami	Executive Lead & Co-Founder, New Power Labs
David Filipchuk	President & CEO, PCL Constructors Inc
Sean Geobey	Assistant Professor, School of Environment Enterprise and Development
Ken Grewal	Co-Founder & CEO, Forthlane Partners
Peter Hall	Former VP & Chief Economist, Export Development Canada
Graham Henderson	CEO, London Chamber of Commerce
Stephen Huddart	Former CEO & President, The McConnell Foundation
Richard Ivey	Chairman, Ivest Properties
Mark Kuznicki	Co-founder, The Moment
The Honourable Tony Loffreda	Senator
Alex Mazer	Co-CEO, Common Wealth Retirement
Karen Moores	Managing Director & Founder, Town Advocacy
David O'Leary	Founder & Principal, Kind Wealth
Danya Pastuszek	Co-CEO, Tamarack Institute
Mike Pedersen	Chairperson of the Board, Business Development Bank of Canada
Simon Pek	Associate Professor of Business and Society, Gustavson School of Business
Gerhard Pries	Founder & Chair, Sarona Asset Management Inc.
Rick Quinn	Executive Director, Terra Remote Sensing
Michelle Quintyn	President & CEO, Goodwill Industries, Ontario Great Lakes
Chris Rickett	Director, Economic Growth, Culture and Entrepreneurship, City of Markham
Mary Rowe	President & CEO, Canadian Urban Institute
Mike Rowlands	President & CEO, Junxion Strategy
Daniel Safayeni	VP, Policy, Ontario Chamber of Commerce
Nick Saul	CEO, Community Food Centres Canada
Vicki Saunders	Founder, Coralus (formerly SheEO)
Bruce Simpson	Senior Advisor to McKinsey&Co on ESG
Joel Solomon	Renewal Funds, CoFounding Partner
Dana Bass Solomon	Former CEO, Hollyhock Leadership Institute
Shauna Sylvester	Executive Director, Urban Sustainability Directors Network
Dennis Tobin	Partner, Blaney McMurtry LLP
Ilse Treurnicht	Managing Partner, TwinRiver Capital
Ene Underwood	CEO, Habitat for Humanity GTA
Eric Wetlaufer	Managing Partner, Twin River Capital
Lindsay Wilson	Managing Director, Danilee Capital
Bill Young	Chairman, Social Captial Partners

SOURCE Canadian Employee Ownership Coalition