Will Building Employee Ownership Strengthen Canada’s Entrepreneurial Base?

‘Stunning’ Employee Ownership Possibilities
POS Bio-Sciences, a Saskatchewan innovation commercialization firm, has joined the ranks of employee-owned companies in Canada. "Stunning" is how CEO and president Dale Kelly describes the potential outcropping of business ingenuity through employee ownership.

Will Building Employee Ownership Strengthen Canada’s Entrepreneurial Base?

Unfolding stories of employee-owned companies in Saskatchewan and Manitoba point to possibilities

It was a frigid, early Saturday morning in January, 2013, when POS Bio-Sciences first gathered its staff to explore the possibility of becoming employee owned. Despite the timing and weather, more than 80 per cent of the Saskatchewan company’s 100-plus staff showed up. For CEO and president Dale Kelly, that was a strong indicator of where the conversation would lead.

At the time, POS Bio-Sciences needed a new owner and knew of Saskatchewan’s Labour-Sponsored Venture Capital Corporations Act (LSVCC), which allows employees to buy into their employer and in so doing receive a tax credit. Dale had also recently been inspired by the success of another Saskatchewan-based, employee-owned company, West Wind Aviation.

 
  A POS Bio-Sciences lab.

Today, POS Bio-Sciences is owned by directors, employees, friends and family. Employees own about 40 per cent of the shares. The LSVCC is a company to itself, POS Team Equity Corp., which then buys shares in POS Bio-Sciences.

“It’s structurally very simple. Employees (and others, in this case) have a company and their company invests in (POS Bio-Sciences),” Dale says. A key stipulation under the legislation is that investors in POS Team Equity Corp. cannot buy shares in any other company. Financial statements are shared openly with those who own shares. POS Team Equity Corp. is not yet represented on the POS Bio-Sciences board; however, it is expected that could soon change.

One almost immediate change since POS became employee owned has been increased employee engagement.

“The rigour around decision making has changed in that, regardless of whether we’re buying a new piece of equipment or a hall light is left on, everybody in the building will be asking, ‘Well, do we really want to do that? Is that something we really need to do today?’ They’re looking for reasons,” Dale says.

“Previously, nobody would have cared what we did or how we did it. Now there is genuine interest.”

The first dividend cheques have yet to be written — which is when Dale expects the “real a-ha” to come in terms of seeing the payback on the transaction. But he would like to believe the improvements the company has already experienced in the past year — including significantly increased revenues and decreased costs — have been generated largely by this new development.

Employee ownership has direct implications for building a wider base of capitalism, it’s been proposed. Dale agrees.

“If you can broaden your base of entrepreneurial spirit and you can get people totally engaged in being a business, what it’s like to be a business, the ingenuity that will flow out of that, the ability to commercialize innovations, it will be stunning,” Dale says.

It's for this reason, he’s convinced employee ownership should be strongly encouraged.

While POS is the new kid on the block when it comes to employee-owned companies in Canada, Friesens Corporation based in Altona, Manitoba has the distinction of being one of the more senior members.

Friesens Corporation has a team of about 425 staff. The success it has experienced over the last 40 years can be largely linked to its employee-ownership model, president and CEO Curwin Friesen says.


So what’s been its experience with fostering an entrepreneurial spirit?

It was more than 40 years ago that the book manufacturing and packaging company first introduced a model to share profits with employees.

A family-held company at the time, Friesens Corporation was seeking to align the goals and objectives of the owners with that of staff members. The belief was that owners engaged at every level of the firm would strengthen the company. The intent was to also share wealth creation.

 
  Working the shipping dock at Friesens Corporation.

In the beginning, staff members who wanted to become employee owners had to buy shares from current shareholders — the company’s original owners at first — at an agreed-upon price. Over time, staff members could buy from each other or from a small trust that was established to assist in the transfer of shares. It was in this context, that the entrepreneurial spirit seems to have been most alive as the link between one’s payment for shares and the company’s well-being was very clear-cut.

Five years ago, the company agreed to form an employee-ownership model that closely resembles that of the U.S. employee stock ownership plan (ESOP) — a trust that holds all of the shares on behalf of the employees, who are the beneficiaries. The key benefits of the new framework include reducing risk for the individual staff member while distributing profits more evenly to a larger percentage of staff members.  

Curwin Friesen is the current president and CEO of Friesens Corporation.

While the new framework reduces individual risk and broadens the distribution of profits, there is a power in the direct ownership model that isn’t quite as strong in the new structure — which is essentially an indirect ownership model, Curwin says. This means there must be more intentionality around encouraging employee owners to “think like owners.”

“We talk to staff about what employee ownership means at Friesens. We don’t want to lose our link to the values of entrepreneurialism, hard work and risk versus reward. But it is a little more difficult to keep a focus on those values under the ESOP model than the direct ownership model,” Curwin says.

That said, Friesens Corporation, today a company of about 425 employees, has experienced significant growth over the last 40 years. That success can be linked in large part to the company’s employee-ownership models — both the direct and indirect.

 
  The book bindery lab at Friesens Corporation.

“The company has done well over the last many decades and that has put a lot of dollars in pockets of front-line employees,” Curwin says.

So will building employee ownership in Canada strengthen its entrepreneurial base?

Given the cases of both POS and Friesens Corporation, the promise certainly seems to be there. But there’s more to be explored, especially in terms of how.

Some of this is likely to be part of the discussion at Canada’s first Employee Ownership Conference, slated for June 2015. The conference aims to further increase awareness of ESOPs and shared ownership programs.

Click here to read a related blog on the conference.

You can comment on this story below, or e-mail michelle(at)axiomnews.com

Comments

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I think that an example of family business can be a good sign of long and well organized company. That is why such decision I can consider to be right. People who own shares will obviously be interested in growth and development of their company, so such changes can make many good result for the company. People will pay much attention to how they work and what solution the directors and managers take. People can even choose whether to take payday loan Canada or make some long-term obligations. I think that many other countries will soon use the good innovation of this company.

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