Introduction to Employee Ownership Toolkit

The Introduction to Employee Ownership Toolkit is a collection of resources to provide an understanding of employee ownership to small businesses in Colorado. The goal of this toolkit is to increase the number of Colorado Employee Owned Companies.

A common belief of employee ownership is that a company must either have an employee stock ownership plan or be a cooperative. However, Colorado's definition of employee ownership is more broad.

The Colorado Employee Ownership Office educates the public about what employee ownership is and how it can be used as a tool for business growth and success. The office manages partnerships with employee-owned businesses, lawmakers, and service providers to support businesses in their employee ownership journey.

We also offer a monthly email newsletter, LinkedIn updates, and an employee ownership consultant to further your education of employee ownership and participation in our employee ownership community.

Overview

Type: Toolkit

For: Businesses and community partners

OEDIT division: Colorado Employee Ownership Office

Employee ownership is a business structure where a company’s employees profit from the company’s success. It can take many forms, ranging from simple grants of shares to highly structured plans. A few of the most common forms of employee ownership are profit-sharing, phantom stock, cooperatives, and employee stock ownership plans.

While employee ownership has become popular across the country, there is a lot of emphasis placed on employee stock ownership plans and cooperatives. Although these two structures are a great fit for many companies, we know they're not for everyone. We understand employee ownership in the context of a Colorado Employee Owned Company, any company offering an ownership stake to 20% or more of their employee base. Regardless of the structure, these companies get all of the benefits of employee ownership with a unique structure that serves them best. 

Based on your individual business, you will have very different needs and goals than any other business. So instead of focusing on only two structures, we want you to know about all of the employee ownership tools at your disposal. 

The National Center for Employee Ownership is the country's leading organization to educate and engage people around employee ownership. They offer countless resources to learn what employee ownership is, what the various structures are, how many businesses are employee-owned, and more. 

Read the NCEO guide        

There are many benefits to employee ownership and each company converts for different reasons. Much of the research available continues to focus on employee stock ownership plans and cooperatives. We continue to dedicate ourselves to providing more expansive information to encompass all Colorado Employee Owned Companies.

Higher quality of life

Employee-owned businesses promote a higher quality of living for the employee-owners including higher wages, less turnover, access to better benefits, and job security. By being employee-owners, workers have ownership over their work experience and depending on the structure, can be a key decision-maker in their own day-to-day work life. 

Guaranteed succession plan

A guaranteed succession plan is another major benefit and driving reason for business owners to convert. Considering who should own your business after you is an important question that every business owner should think about far in advance of time to retire. Employee ownership offers a ready, willing, and able buyer within the employees who contributed to the success and legacy of the business. Leaving a lifetime of hard work and dedication to the employees themselves can be a very rewarding and clear decision for many.

More engaged workforce

When employees become employee-owners, they are often more engaged and motivated to participate, contribute, and offer ideas. With a company culture of employee ownership, that structure creates a space where employees are not only invited to contribute, but they are inspired to do so because they will see the positive result firsthand. The stronger desire to generate ideas and actively participate in the company leads to stronger performance and a more successful company. 

Attract and retain top talent

Countless articles suggest that companies offering employee ownership to their workers are able to attract and retain a stronger workforce. In a study conducted by the General Social Survey, they found 72% of respondents want to work at an employee-owned company. Employee ownership offers a surefire way to attract talented employees due to the undeniable benefits of the structure. Employees are drawn to companies offering employee ownership for all of the same reasons that leadership chooses it.

Economic resilience

Employee ownership structures increase economic stability for companies and communities. In the last two recessions, companies with employee stock option plans proved to be more resilient to the pandemic and widespread financial hardship. 

Other economic benefits include keeping businesses and jobs in state, higher productivity, higher wages, and greater retirement accounts. 

Communities benefit from employee-owned companies because there is a stronger ability to retain a company, including its jobs, products, and services, rather than a new buyer who may move, sell, or close a business. Because the company is also more likely to stay in business through recession, it offers jobs and revenue to remain in the local economy. 

Below are a few examples of Colorado Employee Owned Company structures. These structures offer all of the benefits of employee ownership and access to the Colorado employee-owned network, but may be a more achievable structure for your business. 

If you have any questions after reviewing this information, we encourage you to reach out to our employee ownership consultant below so that they can talk you through what might fit you best. 

This graphic has been developed to summarize key features of each Colorado Employee Owned Company structure. This is not an official source of information and service providers, such as attorneys and accountants, should be consulted for the most accurate and specific information to your company. 

  Phantom Stock Profits Interest Stock Appreciation Right Stock Options Restricted Stock Employee Ownership Trust Cooperative Employee Stock Ownership Plan
Description Grants a synthetic or quasi-"share" of stock and then share in the future change in value or profit. A share of the company's profits or gain on a go forward basis. Share in the future value appreciation of the company. Grants a right to purchase stock at a specified price until maturity. Grants or sells discounted shares in the company that are subject to restrictions. Trust that provides financial benefits and governance rights to employees.  Involves one-member, one-vote, profit sharing based on patronage, and limited or no return on capital contributed. Establishes a trust fund for employees to hold the stock of the company. The participants are beneficiaries of the trust.
Ease Easiest Moderate Moderate Moderate Moderate Moderate Moderate Complex
Time 1 month 1 month 3 months 2 months 2 months 6 to 9 months 3 to 12 months (or longer) 6 to 9 months (or longer)
Valuation Yes No Yes Yes Yes Yes No, but helpful Yes
Cost $ $-$$ $$ $$ $$ $$$ $$$ $$$$

After reading through this toolkit, we encourage you to consider how employee ownership might fit your business. The benefits of a Colorado Employee Owned Company are undeniable and we are here to support you in your journey to conversion. Being Colorado employee-owned is an opportunity to join a growing network of employee-owned companies, regardless of which structure you choose. 

Employee Ownership Consultant

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