What does it entail when a business is “100% employee owned”?


Do the employees get a stake in the company proportional to how many there are? Are profits shared amongst them equally?

In: Other

Yeah, the employees all get stock/stake/whatever in the company, and rather than wages, the profits are split between all the employees.

It means it’s not publicly traded, so there are no outside shareholders; the only shareholders are the company’s employees themselves. It gives employees the incentive to help the company be profitable as they are the company’s shareholders and they usually get a share of the profits proportional to the percentage of their share as dividends, like a year-end bonus. The percentage is rarely equal as the CEO of the company would have a larger share compared to the receptionist, for example.

I worked for a company that was “employee owned” and we were all given stock in the company and non-employees aren’t allowed to invest.

Shares are typically divided up in a combination of seniority, level/position, job type. So somebody who has been with the company for 10 years gets more than somebody in same position who has been there for 1 year. Somebody who is a VP gets more than a manager. Somebody who is a company attorney gets more than a call center rep. There might be an initial grant and then opportunities to earn more shares along the way, such as on particular anniversary dates, promotions, etc. Profit sharing would be proportional to number of shares owned.

Publicly traded companies are owned by people who do not work for the company; Meaning that anyone can buy a share of the company and potentially have a significant amount of influence over the company. These shareholders usually want to see their investments grow, so they influence the company to cut costs and/or expand their business. This often times results in conflicts of interests with employees, as they may see an increased workload and potentially lowered wages and benefits. IE: Walmart.

An employee owned business is not publicly traded, instead, each employee receives a stock option and technically becomes a shareholder. Although, these shares are usually very small and not worth much. These companies tend to have better wages and work conditions, but aren’t all that great as one may think. But, if you get a job at a quickly growing ’employee owned’ business, your shares could become very valuable overtime.