Could increased employee ownership restore confidence in Canada’s economy? | The Hub

There was a time when WestJet was more than just a scrappy alternative to Air Canada.

Flight attendants cracked jokes over the intercom. Pilots helped tidy the cabins, saving the company time and money.

Former CEO Gregg Saretsky credited that spirit to what he called a culture that “lives and breathes employee engagement.”

At its peak, nearly nine in 10 so-called “WestJetters” owned shares through the company’s employee share purchase plan, and profit-sharing was woven into its DNA. The Calgary-based airline leaned into the idea in its ads, proudly declaring that those in teal uniforms weren’t just ordinary “employees.”

As companies consolidate under ever larger pools of private capital, there’s growing unease around who’s actually benefiting from corporate growth.

It’s no coincidence, then, that voices across the political spectrum are now revisiting models of employee ownership as a potential antidote to widening wealth inequality, fading community ties, and a growing distrust in capitalism itself.

Human dignity and community connection

Few have made this argument as vigorously as former Alberta premier Jason Kenney.

In recent weeks, he has called employee ownership an “elegant policy remedy” to what he describes as a crisis of confidence in the modern economy.

“We need to face up to this problem,” Kenney told The Hub.

“There is a caricature of a big, anonymous and distant pool of capital—like private equity firms and pension funds—that buys up often smaller, medium-sized businesses, many of them originally family enterprises, and then just stripping their assets, laying people off, moving jobs overseas.”

That hollowing out of local industries, he says, is the stuff that breeds cynicism and resentment.

“We have a rise of populism of both the Right and the Left,” Kenney said. “They are both responding to the totally legitimate frustration—the hollowing out of those communities. The consequences of that is very often social breakdown, family breakdown, addictions, mental health problems, etc. We’re not just talking about maximizing GDP growth—it’s about human dignity.”

Kenney sees employee ownership as one way to rebuild that sense of dignity and connection.

Good for the economy, bottom line

Policy experts like Jon Shell of Social Capital Partners and G. Kent Fellows at the University of Calgary’s School of Public Policy make a similar argument, albeit in less political terms.

They see employee ownership as sound economics.

“Employee-owned companies outperform private equity-owned companies in the U.S. by a bunch of different metrics,” Shell said. “When we look at productivity, growth, wages—all those things are better at employee-owned companies.”

Fellows has a more personal take.

“You want companies to be more productive, and what people hear is—you want me to work harder,” the economics professor said.

Worse yet, some workers’ minds go straight to layoffs.

“If your company becomes more productive, but your market isn’t increasing, that means they need less labour to do what they’re doing,” Fellows said.

“That’s not necessarily a bad thing from an economics perspective… But if something’s good for the economy and it’s not good for me, why do I care, right?”

That, he argues, is where employee ownership can realign individuals with corporate interests. By giving workers an actual stake in the company, productivity gains start to benefit workers in material ways, not just for their bosses.

Succession planning

Over the coming decade, a huge number of Canadian small and mid-sized businesses will change hands as Baby Boomer owners retire. The Canadian Federation of Independent Business pegs the total at roughly $1.5 trillion worth of assets.

That presents a once-in-a-generation opportunity to transition some of those firms into employee hands.

Many Canadians are familiar with worker co-operatives or employee share-purchase plans, where staff buy company equity directly. But a newer model, known as an Employee Ownership Trust (EOT), is quietly reshaping that idea abroad and, to a lesser extent, here at home.

Rather than employees purchasing individual shares, an EOT sets up a trust to hold the company collectively on behalf of all its workers. The original owners can sell their business to the trust at fair market value, often reducing capital gains taxes, while ensuring the company remains Canadian-controlled and employee-driven.

Employees don’t have to put up their own money. The trust pays for the business over time using company profits, and the workers earn their share through regular dividends, and/or a payout when they retire or move on.

The result is a gradual, debt-financed transfer of ownership that protects jobs, maintains company leadership, and lets employees share in the profits and governance of the enterprise—without the need for outside investors or major structural upheaval.

“It’s a succession option,” Shell said. “One of the primary reasons why politicians love these is a sovereignty argument, right? So if a Canadian company were to sell to an employee ownership trust, that company remains Canadian and owned by Canadians.”

The United Kingdom and the United States are already experimenting at scale.

In the U.K., EOTs have been in place for more than a decade, offering generous tax incentives for owners who sell their firms to their workers.

Since the model was introduced in 2014, the number of employee-owned businesses there has grown from fewer than 200 to well over 1,000, including Aardman Animations and Shaw Healthcare.

The U.S. has an even longer history.

Since the 1970s, federal legislation has supported employee stock ownership plans (ESOPs)—the American cousin of EOT. Today, more than 6,500 U.S. companies are majority employee-owned, representing more than 14 million workers. Among them is Publix Super Markets, a grocery chain with the same scale and footprint as Loblaws in Canada.

Canada, by contrast, is still in its infancy.

EOT adoption takes time

In 2024, the federal government introduced EOTs as a new way for business owners to sell their companies to employees as a group a year later, with a temporary capital gains exemption allowing sellers to avoid tax on up to $10 million in gains from such a sale.

To date, only three companies in Canada have taken the plunge under this new framework, according to Tiara Letourneau, CEO of Rewrite Capital, an advisory firm specializing in EOT transactions.

“These transactions take at least 12 months,” she said, adding that around 80 companies have approached her firm to explore the option.

Grantbook, a Toronto-based tech consultancy serving the philanthropic sector, became the first company in Canada to convert into an EOT under the new legislation.

The other two are both based in Western Canada—Brightspot Climate and Taproot Community Support Services. The latter, which is headquartered in Maple Ridge, B.C., now boasts the largest EOT in the country with 750 employees across three provinces.

“There are more in the pipeline, but the thing about these being private company transactions is you don’t see them until they cross the finish line and make the announcement,” Letourneau said.

Advocates agree the promise is there, but so are the barriers.

The legal process is relatively new, few accountants or lawyers actually know how to set one up, and the federal tax break that makes it worthwhile is set to expire in 2026.

Kenney, now a senior advisor at Bennett Jones—another firm advising on the EOT movement—calls the sunset clause “unfortunate.”

“And it’s only a capital gains tax exemption for a maximum of $10 million. So larger-scale businesses are not interested in this,” he said. “The incentive is not large enough.”

Letourneau, who also chairs Employee Ownership Canada, a trade association that predates the EOT framework and advocates for all forms of employee ownership, is now lobbying Ottawa to expand the tax break and make it permanent.

“They need to give more time for Canadian companies who want to do this,” she stressed.

Not a panacea

Even with better incentives, experts caution that employee ownership will never become the dominant model of acquisitions.

In the U.K., where employee ownership trusts enjoy zero capital gains tax, only about 10 percent of eligible businesses choose that route when their founders retire. The rest still sell to private buyers, often for speed, simplicity, or price.

“It’s generally going to be for those who are community-oriented, who have been with the company a long time, who care deeply about the community and its employees,” Shell observed.

Critics warn that the model can easily be romanticized and treated as a moral cure for the excesses of capitalism.

“There’s no getting around that we have wealth inequality as a starting point,” Fellows said. “So unless you’re contemplating a scheme where you would be giving away chunks of a company for free, which I don’t think anyone is, there’s no getting around that.”

He adds that ownership, while empowering, also ties up workers’ wealth in a single entity.

“Imagine that you’re working for one of these businesses that are employee-owned and the business goes under,” Fellows said. “So you’ve lost your job, and now you’ve also lost your savings vehicle—not great. So there are downsides.”

It may never become the most mainstream way of doing business. And any major change to our tax code or regulations demands scrutiny.

But after a period of what many call “greedflation”—when prices rose, profits swelled, but paycheques lost their power—it’s no wonder people are looking for a fairer way to share prosperity.

What’s appealing about employee ownership is its moderation.

It doesn’t ask us to blow up the system. If anything, it’s an attempt to preserve what’s best about it by keeping companies rooted in communities and in Canadian hands.