How intergenerational inequality threatens trust in democracy | Policy Options
By Jean-François Daoust, Liam O'Toole and Jacob Robbins-Kanter | This post originally appeared in Policy Options
The well-documented cost-of-living crisis plaguing young Canadians has triggered deep anxiety about their future – whether they can build stable careers, afford homes or one day raise families.
This is not only an economic problem. It’s a political one. As intergenerational inequality persists and deepens, Canada risks experiencing an even sharper decline in trust in its democratic institutions than what already exists.
To combat this, our political leaders must be willing to make difficult tradeoffs that rebalance priorities toward the young. That means rethinking tax incentives, addressing budget deficits that will fall on future generations and ensuring public spending supports those still trying to build their lives, not just those comfortably established – the group that is the focus of most politicians today.
The young face widespread problems
Home ownership, which has been a cornerstone of middle-class security for decades, is now one of the clearest markers of generational division. For most young Canadians, even saving for a down payment has become very challenging.
As existing homeowners’ properties have ballooned in value at the same time, the housing market has become a mechanism of (unequal) wealth transfer from the young to the old – reinforced by governments that are reluctant to confront politically powerful older homeowners.
The broader economic picture for younger Canadians also offers little hope. Wages have stagnated while costs have soared. Young Canadians are more educated than any previous generation, yet many work at precarious jobs with low pay, unstable hours and few benefits. Student debt and unaffordable child care make it harder to build savings or start families. Indeed, many people are reluctant to have the number of children they would like.
Previous beliefs that education and effort can lead to upward mobility no longer ring true. Instead, young Canadians face economic realities that demand more but give back less.
Politicians listen to older voters, not the young
This economic frustration runs hand-in-hand with political alienation. Older Canadians vote in greater percentages, contribute more to political campaigns and therefore wield disproportionate influence. Politicians cater to their interests and make sure to focus on the issues most important to older citizens.
Younger voters, facing economic instability and disillusionment, are increasingly disengaged from the political process, which only perpetuates their exclusion. This negative feedback loop erodes faith in democracy itself because young Canadians increasingly view politics as unresponsive to their needs.
The effects of this generational divide are already visible in Canada’s political landscape. Young Canadians vote at significantly lower rates than their older counterparts. In the 2021 federal election, only about 46 per cent of eligible voters aged 18 to 24 cast a ballot, compared with nearly 75 per cent of those 65 and older.
Surveys also show that younger Canadians express less confidence in elected officials, political parties and government institutions than any other age group. Many believe that no party truly represents their interests and that the political system is stacked in favour of homeowners and retirees.
It’s time to act
For younger generations, other forms of civic engagement, such as volunteering or signing petitions, may soon see further declines, according to a 2022 federal government report. This erosion of political participation is not apathy born of ignorance, but frustration born of exclusion. It’s a warning sign that Canada’s democracy is losing the trust of its future citizens.
Meanwhile, Canada faces a demographic reckoning. As Baby Boomers retire, health care and pension costs will balloon, to be financed by a smaller, economically strained population.
Younger Canadians, already struggling with stagnant incomes and rising costs, are delaying or forgoing having children altogether. This creates a vicious cycle: fewer workers to support an aging population and an ever-heavier fiscal burden. If left unaddressed, this imbalance threatens not just economic sustainability but trust in Canada’s political institutions.
If these trends persist, resentment among younger generations will likely deepen. Some will turn to political apathy. Others may seek more radical movements or figures that promise to upend a system they see as rigged against them. Once trust in the political system is lost, rebuilding it will be far more difficult than preventing its collapse.
To understand the extent of these challenges, we first need better data that illustrate younger generations’ political preferences and interests. These views should then be more effectively communicated to those in positions of political power – ideally resulting in improved representation. Some activists, notably the think tank Generation Squeeze, are already carrying out this work.
Canada needs a generational reset – one that puts fairness at the centre of political life. Building affordable housing and supporting young families are essential first steps.
The longer Canada ignores generational inequality, the greater the risk of political fragmentation and social anger. A healthy democracy depends on engaged citizens and political trust across generations. Today, this is running dangerously low among our younger people.
Smith School of Business launches new Employee Ownership Research Initiative
November 25, 2025, Kingston (ON) – With three in four Canadian owners set to exit their business within the next decade, Smith School of Business has launched a new research initiative focused on deepening Canada’s knowledge and understanding of a powerful succession model that can enhance outcomes for owners, employees and communities: Employee ownership.
Housed in Smith’s Centre for Entrepreneurship Innovation & Social Impact (CEISI), the Employee Ownership Research Initiative (EORI) aims to shape a ‘Made in Canada’ approach to employee ownership by creating a multi-disciplinary network of academics, researchers, practitioners and businesses. Together, they will fill the gap in relevant data, expertise and business-oriented resources and solutions to support employee ownership activities in the country.
“Amid today’s geopolitical climate and concerns around economic sovereignty, employee ownership can play a crucial role in helping keep Canadian businesses locally owned and creating prosperity for more people,” says CEISI Director Elspeth Murray. “As we experience the so-called ‘Silver Tsunami’, transferring majority ownership to employees, including Canada’s new Employee Ownership Trust model, is a hot topic under consideration, but the process and options are not well understood, especially in a Canadian context.”
That’s about to change thanks to funding support from Jon Shell, a grad of Queen’s University, Chair of Social Capital Partners and board member at Employee Ownership Canada. A prominent advocate for employee ownership in Canada, he has committed $250,000 to assist EORI in conducting research into the impact of broad-based, majority employee-owned Canadian enterprises and government policies to support employee ownership in Canada.
“Employee ownership offers a powerful opportunity to broaden prosperity and strengthen communities,” says Shell. “By grounding the conversation in rigorous research, this initiative will help Canada build an evidence base for a more inclusive and sustainable economy.”
While employee ownership is well studied in the United States and the UK, EORI represents the first comprehensive research initiative of its kind in Canada dedicated to understanding the impact of employee ownership activities and the factors that drive the success of companies owned indirectly through a trust or through the purchase of shares over time.
The multi-year project will establish a national database of majority employee-owned businesses, conduct research and case studies, and share findings through open-access reports, workshops and public events. This work will contribute to a growing movement of companies, scholars, associations and advisors in the employee ownership space, and help shape employee ownership policies and best practices in Canada.
The EORI’s work will be guided by leading academics and industry experts in the field. PhD candidate Lorin Busaan and Associate Professor Simon Pek, both from the Peter B. Gustavson School of Business at the University of Victoria, are joining EORI as research fellows. Pek will also serve on the advisory board alongside Shell and Joseph Blasi, J. Robert Beyster Distinguished Professor and Director Emeritus of the Institute for the Study of Employee Ownership and Profit Sharing at the School of Management and Labor Relations at Rutgers University; Mike Fotheringham, CEO of Taproot Community Support Services; John Hoffmire, Founder of the Center on Business and Poverty, and Research Associate at the Centre for Mutual and Co-owned Business at the University of Oxford’s Kellogg College; and Melissa Hoover, Senior Fellow and Senior Director of the Institute for the Study of Employee Ownership and Profit Sharing at the School of Management and Labor Relations at Rutgers University, and Managing Director of Ownership Culture at Apis & Heritage Capital Partners.
“The research initiative is a big part of creating greater awareness and also the knowledge and know-how for Canadian owners, workers and communities to reap the benefits of employee ownership,” says Murray.
For more information, please visit Employee Ownership Research Initiative.
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Elbows up: Keeping Canadian companies in Canadian hands | Policy Options
By Danny Parys | Part of our Special Series: the Ownership Solution | This post originally appeared in Policy Options
During the Blue Jays’ historic and, subsequently, gut-wrenching run, apparel sales for the team soared across Canada as fans flocked to shell out cash to show their support. Maybe you were one of them.
Maybe you went one step further. Maybe the sole Canadian team’s domination of America’s pastime made you feel a little national pride and, before you headed out to get that new jersey, you pulled on your Roots sweatpants and stopped at Tim Hortons for a double-double on your way to the store.
Then, beside the Jays’ jersey (in this thought experiment there is still a No. 27 Guerrero Jr. in stock in your size) you saw that the CCM hockey stick you really wanted was on sale. Winter is coming, you thought to yourself, so you bought that too.
On your way home, you picked up a case of Labatt Blue, a bag of Miss Vickie’s jalapeno chips (objectively the best flavour) and kicked back to enjoy the game, feeling extra patriotic with all your favourite iconic Canadian brands. Elbows up, eh?
Though if you had done that, the only Canadian brand you would have been supporting in your perfect Canadian day would have been the Blue Jays, a franchise of U.S.-headquartered Major League Baseball.
Indeed, in recent years, many of Canada’s most famous companies and most iconic brands have quietly, but steadily, been purchased by foreign entities. Beyond just superficial wounds to our national pride, the outsourcing of corporate decision-making authority over Canadian companies has been a disaster for workers and consumers.
Policymakers should do more to keep Canadian companies in Canadian hands by, among other things, providing more support to expand financing opportunities and awareness of untraditional ownership models, and beefing up Canada’s net-benefit review requirements.
Declining quality, brand reputation
According to a 2018 Ipsos poll, a whopping 75 per cent of Canadians agreed that the government should do more to stop the sale of Canadian companies to foreign investors.
This should come as no surprise because, after a Canadian brand is purchased by a foreign entity, many consumers notice major declines in quality. Following the sale of Tim Hortons in 2014 to Restaurant Brands International, a firm owned in part by Brazil’s 3G Capital, consumers noticed a deterioration in product quality and the company suffered a steep fall in brand reputation.
Unsurprisingly, as decision-making authority over corporate strategy moves further away from the consumer, brands are less able to respond to the demands of their customers.
Put more bluntly, should anyone be surprised that Tim Hortons hasn’t been able to figure out what Canadians want on their coffee break since being acquired in part by a private equity firm founded by Brazilian investment bankers?
The quiet sale of many Canadian brands has also led to major frustrations for consumers looking to support Canadian-owned businesses.
Trump’s tariffs have caused an uptick in demand for Canadian brands and strengthened desire to support the local economy. However, after further investigation into a brand, many consumers note that behind advertising leaning heavily on Canadian identity and a complex network of corporate holding companies, lies a foreign entity as the true owner.
Workers lose out with distant ownership
Workers are also feeling the impacts as Canadian companies are sold to foreign investors because, as corporate leadership moves further away from the community, so too does accountability, exposing local workers to the demands of foreign executives.
In a recent example, British spirits company Diageo announced the closure of the Crown Royal bottling plant in Amherstburg, Ont., putting 200 jobs at risk and drawing fierce criticism from Premier Doug Ford. Though Canadians might have been outraged, Diageo interim CEO, U.K.-based Nik Jhangiani, didn’t have to look any of the employees in the eye on his way into the office the next day.
And though foreign control of Canadian companies has had damaging impacts on consumers and workers, there is no end in sight.
Instead, foreign buyouts of Canadian companies continue to be a major driver of merger and acquisition activity. In the 2025 second quarter, 25 per cent of mergers and acquisitions involving Canadian target companies were by foreign buyers.
While Premier Ford’s hat might say “Canada is not for sale,” it seems our companies sure are.
Boosting employee ownership
In an era where, for the first time, Canada faces serious economic threats from the United States, one could be forgiven for thinking that now is not the time to restrict investment or foreign access to our economy. But if it means ceding control from Canadian consumers and workers, perhaps Canadians should think twice.
Especially as Canada is facing a major business succession problem; 76 per cent of small and medium-sized business owners plan to exit their business in the next decade.
To ensure these businesses stay Canadian owned, policymakers should be looking at strengthening paths toward employee ownership. Particularly as tax incentives for business owners selling to employee ownership trusts (EOTs) are set to expire in 2026.
Beyond simple tax incentives for business owners, policymakers should look at providing more support to expand financing opportunities and awareness surrounding untraditional ownership models, like co-operatives and EOTs.
While co-operatives and EOTs have proven to be successful in protecting jobs, driving productivity and building wealth for local employees, a chronic lack of awareness holds these models back, preventing more inclusive ownership of Canada’s economy.
For larger companies, the review threshold at which most acquisitions by foreign investors are scrutinized should be lowered, ensuring more foreign takeovers are reviewed before a deal is signed.
What’s in it for us?
The net-benefit-to-Canada criteria should also be broadened to ensure more consideration is placed on local employment and benefits to local consumers.
More stringent regulation should be placed on private equity firms, particularly as their presence expands across the Canadian economy, often by leveraging aggressive tactics to buy up Canadian businesses, such as saddling companies with debt or by consolidating fragmented industries.
Too many iconic Canadian companies have already been sold to foreign investors and Canadians are worse off because of it. More needs to be done to keep Canadian companies just that – Canadian.
Reflections on Budget 2025: Economic growth alone won’t save us
We have taken some time to reflect on last week’s budget.
It is a hopeful budget, with commitments to get big things done. Canada faces real challenges, but we are a big, rich, powerful country. We are the world’s ninth largest economy, respected around the world, with deep commitments to diversity, democracy and the rule of law. Even though Canada faces enormous threats, we should be hopeful.
There are many specific initiatives in the Budget that will deliver real benefits to working Canadians at this time. Strategically, we really like the Budget’s focus on industrial strategy, some tentative steps on making more capital available to a wider diversity of Canadians and commitments to loosen the grip that our oligopolistic sectors have over our economy, which undermines our productivity and make life less affordable for Canadians.
However, we are concerned by the lack of a strategic approach to democratizing the economy and providing more working people and young people a path to wealth, ownership and economic security. While the Budget responds to the wish list that corporate Canada has articulated for several years, there are no guarantees that they will indeed step up to invest – or that those investments will produce growth that benefits working people.
We also note that no sacrifices are being asked of those who can most afford to make them, and very little is being done for the most vulnerable. The era of continental integration and globalization is over. Given the enormity of this geopolitical rupture, and the real suffering that many Canadians and communities are experiencing, more sacrifices could have been required of those of us who can afford to make them.
What we like
A sovereign industrial strategy that helps Canadians benefit from growth
At Social Capital Partners, we have argued that Canada needs more diverse forms of ownership, including public and community ownership of our key resources and assets, so that we have more sovereign control over our future and so that a wider diversity of Canadians can benefit from growth. The government is taking some steps in this direction.
The Budget is clear that the federal government must play a leadership role in industrial strategy and market-shaping activities. There is a recognition that we cannot simply expect capital to flow in productive ways that magically produce good results for Canada or for working people. The creation of new Crowns and agencies to break through regulatory hurdles and ordinary ineffective bureaucratic processes to get infrastructure and resource projects built, and to embed more Canadian ownership in our investments, are important.
In particular, Build Canada Homes, the Major Projects Office and the new defense procurement agency and related initiatives are all welcome. Increased military spending, led by a new defense procurement agency, and expanded partnerships away from the U.S. and towards democratic allies, are also important. Rebuilding our sovereign industrial capacity is a strategic imperative.
There is also a commitment to what appears to be a sovereign fund around critical minerals, which would be a positive step. Canadians should benefit from our own natural resources and steps to make equity investments are positive. We hope that these are first steps towards a more ambitious strategy and that the government can learn from its critical minerals strategy to quickly roll out additional sovereign funds, particularly around manufacturing, food and tech.
In sum, we are pleased to see steps towards an industrial strategy that includes the creation of sovereign funds and a focus on key national imperatives. Along with the Canada Growth Fund and the work undertaken by Canada Development Investment Corporation (CDEV), Canada may at last break free from its deep belief that “capital knows best.” The world’s most successful and resilient democratic capitalist societies understand that governments must shape markets and incent capital in ways that produce broad economic benefits for working people. We may at last be catching up.
Getting capital to the people and places where it will do the most good for Canadians
At Social Capital Partners, we have highlighted that there are many gaps in our private and public financing infrastructure. Capital is simply not getting to enough people, places, businesses and organizations in ways that will create a dynamic, diverse and resilient economy. The government has taken some positive steps.
There is an overall recognition that we need to use our public financing institutions more strategically. The expanded role and budget for the Canada Infrastructure Bank, which delivers public value at low cost, is welcome. Likewise, the commitment to the Business Development Bank of Canada (BDC) to launch a new Venture and Growth fund could be useful, but will require a clearer commitment to concessionary capital – that is, lending at more favourable terms than market rates in order to support other policy goals.
These efforts complement clear commitments around getting more capital to those who have faced barriers to accessing capital in the past. In particular, a variety of commitments to Black and Indigenous businesses, entrepreneurs and communities will deliver returns in terms of growth and inclusion. BDC’s recently announced search fund to finance women to purchase existing businesses is welcome and innovative. The Buy Canada strategy is welcome if it is focused on getting more capital to Canadian-owned businesses, including small and medium enterprises.
In sum, it is good that the government is exploring how it can use its balance sheet to get lower-cost capital to more people in ways that benefit more communities. But overall, these are tentative and underwhelming steps and we hope that, as the government gets more comfortable with concessionary financing, it will use its powers more urgently and ambitiously.
Introducing more competition to help entrepreneurs and consumers
At Social Capital Partners, we have long argued that Canada needs more competition, which should produce more innovation, productivity and growth. More competition will also create more pathways for Canadian entrepreneurs to enter and disrupt markets, and bring down prices for Canadians.
The Budget takes tangible steps towards open banking and confronting the oligopolistic banking sector. The Budget commits to legislative changes that will make it easier for federal credit unions to scale and for provincial credit unions to grow. There are commitments to review bank and Interac fees (but we have heard those before). These should help Canadian consumers and businesses. The commitment to non-compete clauses in federally regulated sectors is also good for workers and a more competitive economy.
In sum, there are many references to a more robust competition agenda and some tangible steps, but there is much more that needs to be done. In particular, it would be good to empower the Competition Bureau to confront the serial acquisitions and business roll-ups going on in communities across the country that optimize for short-term profits and, in turn, make life less affordable, suppress wages and enrich the wealthiest.
Notable for their absence
Legislative and policy changes to support a sovereign Canadian business transition strategy
Trillions of dollars in baby boomers’ business assets are going to change hands in the coming years. These assets could transition to young Canadian entrepreneurs, not-for-profits, social enterprises and Employee Ownership Trusts (EOTs) through targeted programs and concessionary capital offered by BDC or another agency. This is a generational opportunity that could shape our economy and democracy for the next half century. It is one of the best things we could do to democratize the economy and prevent control of Canadian assets from drifting into the hands of American private equity funds.
New community financing infrastructure
Although there were some moves towards getting more capital into the hands of Canadian entrepreneurs, a strategy to finance smaller businesses, social enterprises, not-for-profits, co-ops, care providers and community organizations was absent. The community finance and social finance sector – and the networks of people, businesses and organizations that rely on them – have developed low-cost, scalable projects that require investment. All of the arguments used by the government in favour of catalyzing big pools of capital to invest in big projects apply equally well to mobilizing capital in favour of local, community projects. Canada needs new mechanisms and facilities to deliver concessionary capital and loan guarantees and these are essential to economic resilience, well-being and sovereignty. This gap in the Budget reflects a wider reality that the government has no strategy to support, engage or mobilize the not-for-profit sector.
Intergenerational equity
The Budget has little to say about the real concerns of younger Canadians. While there are some bits and pieces around summer jobs programs, this budget has no coherent or substantial approach to creating a more hopeful future for young Canadians. This is a reflection of a broader absence of focus on human capital and investments in education. And the housing measures are underwhelming, including the refusal to confront the asset inflation caused by wealthy investors in residential real estate. The Budget offers little other than vague hopes that jobs will be created sometime in the future due to private-sector investment. At SCP, we believe it is time to free up revenue for more investment in young people. We can find those resources easily by eliminating the age tax credit, eliminating the boost to Old Age Security (OAS) at age 75 and starting the claw-back of OAS at lower levels.
Renewal of the tax incentive on Employee Ownership Trusts
Making it easier for business owners to sell to their employees, and eliminating the financial hit they would otherwise take in doing so, is one of the most important things we can do to democratize the economy and access to wealth for many Canadian workers. The government has taken significant steps over the past two years to make the employee ownership movement a reality. The government is now threatening this progress by not making permanent its soon-to-expire tax incentive. Business transitions take time to plan and the tax uncertainty that the government is creating by sunsetting the incentive after December 2026 – before the model has even had a realistic chance to take off in Canada – will lead to more businesses being sold to American private equity or competitors. The government still has time to rectify this issue, but time is running out.
Incenting or requiring philanthropic and pension fund capital to invest more in local Canadian impact
There are some signals in the Budget that the government understands that big pools of Canadian capital should be investing more to advance community well-being and local impact. But this is mostly framed as increasing investments in infrastructure like airports, not local businesses and community infrastructure. If Canadian pools of capital continue to invest so little in domestic businesses, the government – and beneficiaries – will need to stop asking nicely.
A digital sovereignty and democratic resilience plan
Big American tech firms are undermining Canadian democracy, poisoning our information ecosystem, hurting our young people and cannibalizing Canadian businesses. The Canadian government continues to support them, patronize them and subsidize them in various ways. Meanwhile, the global authoritarian right is running a pretty standard playbook to undermine democracies around the world, including Canada. More resources and tools need to be mobilized today to protect us from these active threats. The Budget says “AI” a lot but offers few specifics on what the government will do to combat these threats to equality, democracy and our humanity.
What next?
We understand that this Budget is primarily focused on responding to corporate Canada’s long-standing complaints that the investment climate in Canada is not good and that the regulatory environment makes it too difficult to build things. We will soon see whether this Budget catalyzes the private sector to invest in Canada’s future and whether those investments produce sustained economic growth.
But we were disappointed that there was so little about how to ensure whatever growth does occur delivers widespread benefits to Canadians, workers and young people. Canada is experiencing the end of the economic and geopolitical security orders on which we have relied and in which we have thrived.
We believe we need even more ambition and creativity in our responses to this rupture. Unleashing private-sector capital investment in big projects will not be enough. We need new playbooks, deployed more aggressively, with the goal of mobilizing all of society, not just large private-sector players.
There are specific initiatives that will help working people and the most vulnerable – the National School Food Program and automatic tax filing, for example. But these do not speak to the structural elements of the economy, which increasingly see benefits from economic growth flowing upwards towards fewer interests.
The Budget talks about “sovereignty” and “control over our future,” but its prime directive is ‘growth.’ If we are to bend the curve on the current trajectory of both capitalism and democracy, we need economic growth that does not perpetuate grotesque economic inequality or make life less affordable for working Canadians.
There are tools available to the government to prevent these outcomes if they choose to use them. We hope they will soon start to deploy them in a more sustained, intentional way.
Budget 2025 did not extend the $10M capital-gains exemption for sales through EOTs
Statement from Employee Ownership Canada
Budget 2025 and the Future of Employee Ownership Trusts in Canada
We share the disappointment felt across Canada’s business and advisory community that Budget 2025 did not make the $10 million capital gains exemption for sales through Employee Ownership Trusts (EOTs) a permanent feature of Canada’s tax system. The current incentive, passed only in 2024 with an expiry set for December 2026, means that the business community has not had adequate time to act.
This decision creates uncertainty for many business owners and advisors preparing for ownership transitions that often take more than a year to complete. The exemption was designed to make it easier for business owners to sell through an EOT, keeping jobs, ownership, and prosperity rooted in local communities. Without it, some owners may delay or reconsider transition plans, slowing the broader shift toward employee ownership.
Even so, there is reason for optimism. The August 2025 legislative updates, continued cross- party support, and strong engagement from business owners, employees, and advisors all point to growing recognition of the value EOTs bring to Canada’s economy.
We remain committed to working with government and partners across the ecosystem to make the capital gains exemption permanent, ensuring employee ownership trusts remain a viable, long-term option for Canadian businesses.
Employee ownership is more than a policy. It is a pathway to shared prosperity, inclusive growth, and resilient local economies. We’ve seen how this model can preserve legacies, empower employees as co-owners, and strengthen communities. In the United Kingdom, where EOTs have been supported through permanent tax incentives, a business is sold to an EOT every day.
As we look ahead, we call on our members, partners, and champions to continue advocating, educating, and building awareness to demonstrate why expanding employee ownership is not just good for business, but essential for Canada’s economic future.
To become an EOC member or learn more about the benefits of Employee Ownership Trusts for Canada’s economy, visit www.employee-ownership.ca.
FAQs on Budget 2025 and the future of Employee Ownership Trusts (EOTs) in Canada
Frequently Asked Questions answered by Employee Ownership Canada
What did the government say about EOTs in Budget 2025?
Budget 2025 had no new news about the expiry of the EOT tax exemption. However, the Budget confirmed that it intends to move forward with the draft legislation it tabled in August which clarifies who qualifies for the tax incentive. Employee Ownership Canada was active over the summer in advocating for these clarifying amendments, and they resolve many of the concerns we heard about from the advisory community.
Did the budget change Employee Ownership Trust (EOT) rules?
No. The core EOT framework remains in effect, and business owners can continue to use this structure for succession planning.
What happens to the $10 million capital gains exemption?
The exemption is still in effect until December 31, 2026 as originally legislated. Budget 2025 did not extend the exemption or make it permanent, which means that the clock continues to run on the current timeline. Employee Ownership Canada will continue to work with government toward making this incentive permanent, so more business owners can confidently plan EOT transitions.
Can business owners still proceed with an EOT?
Yes. The EOT framework remains in place, and the August 2025 updates are improvements that make EOTs a more practical and adoptable option for succession planning. Our advocacy has already led to positive progress, and we’ll keep working to make these measures even more beneficial, by encouraging a permanent tax exemption.
Why does the capital gains exemption matter?
The exemption reduces or eliminates capital gains tax for owners who sell their business through an EOT, making EOT transitions more financially attractive and accessible. The exemption helps offset the fact that, under most EOT structures, owners provide seller financing and receive payment over several years. In this way, the exemption compensates business owners for waiting to receive their full payout.
Is there still a possibility that the exemption could be extended or become permanent?
Yes. Cross-party support, strong community momentum, proven EOT success in the UK, and alignment with economic development goals mean permanence remains very possible. EOC is continuing advocacy and education efforts and actively engaging government decision-makers to secure the exemption before it expires.
What can business owners and advisors do now?
- Accelerate EOT transition planning to meet the December 2026 expiry deadline.
- Explore phased or hybrid transitions that make use of the current EOT framework.
- Stay informed through EOC’s upcoming webinars, newsletters, and updated resources.
- Support our advocacy efforts by sharing your experiences and helping demonstrate the positive impact of employee ownership on Canada’s economy.
What will Employee Ownership Canada do next?
We’ll continue to advocate, educate, and promote employee ownership across the country and are actively working on a renewed website, regular newsletters, member programming, speaking opportunities, and webinar training. Our focus remains clear: building awareness of the economic and social benefits of employee ownership and securing the long-term policies needed for it to thrive.
Click here to read Employee Ownership Canada’s statement on the 2025 Budget.
Codetermination and upskilling in the age of AI
By Danny Parys
Recently, 11,000 workers at Global Consulting firm Accenture lost their job. The reason? According to CEO Julie Sweet, they didn’t have a viable path to reskill on artificial intelligence.
How she determined that all 11,000 weren’t fit for retraining remains a mystery. Did anyone ask them? Did anyone ask the 20,000 UPS workers who lost their job to AI if they had the requisite capacity to be upskilled? What about the 5,900 now former Cisco employees displaced by automation? Will anyone ask the next tranche of soon-to-be former employees if they’re ready to embrace new technologies before they get locked out of their company emails?
If recent history is any indicator, I doubt it.
So much uncertainty surrounding AI and its impact on jobs has many Canadian workers asking themselves, “who’s next?”
As they should. Because as Canadian productivity stalls, and with 60% of Canadian workers in roles at risk of AI driven job transformations, business leaders, and even the Prime Minister, are champing at the bit to automate workforces.
With so many livelihoods at stake, it’s clear that the Canadian economy needs to make bold changes, not just to ensure that the productivity gains of AI and automation are realized, but that workers are consulted first.
Getting the balance right will be tricky, and to do so, mandated codetermination must be the first step.
Though a relatively innovative concept in Canada, codetermination, the term used to denote worker representation on corporate Boards of Directors, has long been codified in law in many European countries.
In a nutshell, codetermination models ensure that workers take an active role in corporate governance and have a say in major company decisions.
In Germany, where codetermination laws are among the strongest and most studied, law mandates that workers make up at least 50% of board directors for all companies with over 2000 employees, and at least 33% of all directors for firms with 500 or more employees.
While skeptics of the model often fear that too many workers in the boardroom will prevent businesses from being as agile responding to market changes, discourage innovation and prioritize unsustainable salary increases, the reality of co-determination shows quite the opposite.
Instead, Germany has become famous for its high skilled economy, and has become a leader in automating their production systems. Efficiency has become a German stereotype, and data from firms with a shared governance structure suggests that they invest more into their production systems, and outsource less, while having a neutral effect on wage growth.
Though data surrounding AI rollouts remain scarce, initial studies suggest co-determination models promote more worker consultation prior to technological implementation. In these instances, employees are consulted before new technologies are implemented, and in some cases management is obligated to provide a digital implementation road map, allowing workers and management to discuss, and negotiate, the impacts that technology will have on employment and productivity before it is implemented.
The result of a more consultative strategy when it comes to technology and automation implementation in the workplace means that German firms with co-determinative governance models are less susceptible to layoffs, and value worker stability, while having no negative impact on business growth or investment.
As the early impacts of AI begin to displace workers, making countless job skills obsolete, workers are starting to worry if they have the right skills for today’s economy. Retraining and upskilling employees will become a priority.
With codetermination, and more workers involved in corporate governance, businesses will be more likely to develop reskilling plans internally and more likely to redeploy talent in other parts of their organization, as opposed to exiting employees at the first sign of productivity gains from AI.
The alternative, if Canada persists with the status quo of corporate governance, means we must get used to mass layoffs, high unemployment and the fruits of new technologies going to a select few: Those deemed “viable for AI upskilling.” Whatever that means.
Could increased employee ownership restore confidence in Canada’s economy? | The Hub
By Falice Chin | Republished with permission from 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.”
“Because they view themselves as owners of the business, they continue to be highly productive,” Saretsky said back in 2016.
Critics might argue that a lot has changed after Onex Corporation bought WestJet in 2019 and took it private.
Long gone are the in-flight dad jokes, but the company has also undergone a series of restructuring changes that speak to a deeper shift in priorities. They include outsourcing jobs, streamlining operations, and introducing policies like a new age cap for senior pilots.
Each step fits the logic of greater profitability, but union representatives argue it has come at the expense of job security and loyalty—undermining the airline’s once-proud reputation for Western hospitality.
Call it efficiency or erosion, but the pattern is hard to miss.
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.
Elbows up: A practical program for Canadian sovereignty | Report
Canada can’t become a sovereign country by doing the same old things, explains a new compendium of essays co-sponsored by the CCPA, the Centre for Future Work, and several national civil society organizations.
Elbows Up: A Practical Program for Canadian Sovereignty is a response to corporate rallying cries responding to Donald Trump with a familiar playbook: deregulation, austerity, tax cuts and fossil fuel expansion.
The collection includes contributions from 20 progressive economists and policy experts, including SCP CEO Matthew Mendelsohn and others who participated in the Elbows Up Economic Summit held in September 2025 in Ottawa.
Pipelines and algorithms aren’t going to save us | The Hill Times
By Matthew Mendelsohn | This post first appeared in The Hill Times
If you came down from Mars and followed Canadian news this past year, you would think our economic well-being was contingent on natural resources, energy, and infrastructure development. And that, in the future, we will need to complement that foundation with a focus on tech, innovation, and artificial intelligence.
This strategy misses too much, and will leave Canadians more vulnerable to the Trump administration’s ongoing threats to inflict pain on Canadians and our economy.
Obviously, successfully executing on private- and public-sector investment strategies on big natural resource and infrastructure projects, and deploying AI in ways that don’t threaten democracy or exacerbate inequality, will be crucial to Canada’s long-term prosperity.
But if you walk into almost any community across the country, the economic hum isn’t coming from a mine or an AI lab. It comes from the cafés, dental offices, repair shops, health-care practitioners, educators, small manufacturers, and coaches of all kinds. Local businesses and non-profits sustain daily life and economic well-being. They are important sources of economic activity. But, thus far, the federal government’s economic priorities have not focused on these activities.
It is not surprising.
The extraction, export, and processing of natural resources have been important to Canada’s economy for hundreds of years. Our export-oriented resource sector and primary industries will remain important to our future, and powerful corporate interests have loudly expressed their dissatisfaction with federal policy on climate and development over the past decade.
And Canadian tech entrepreneurs—also influential with the federal government—are right that Canada has not been strategic about tech-led economic growth and that we’ve allowed our intellectual property to be sold off. Canada does have many advantages in AI that we should exploit in order to build great tech companies.
But these two priorities are clearly not going to be enough. Really smart investment strategies on natural resources and AI alone will not get us through this moment of geopolitical rupture.
Most Canadian jobs are not directly impacted by tariffs and most of our businesses aren’t export-oriented. Small and medium-sized enterprises (SMEs) contribute just over half of Canada’s GDP and employ 64 per cent of our people. Smaller businesses, locally owned enterprises, not-for-profits, and social enterprises employ and reinvest locally, act as important local economic infrastructure and provide services that are crucial for well-being. They are automatic stabilizers in the face of tariff threats that are outside our control.
Yes, there is a need to mobilize large pools of capital to invest more in big national projects and in new sectors. But there are also capital and investment gaps for smaller, locally owned businesses and not-for-profits.
Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OFSI), has begun to highlight some of these financing gaps. According to OSFI, Canadian banks are in a position to extend nearly $1-trillion in additional loans to SMEs while staying above their capital minimums. This financing is not reaching many small- to medium-sized enterprises that need it, in part because OSFI’s existing risk-weighting rules make those loans less attractive.
The Competition Bureau has also recently launched a consultation on the state of financing of SMEs, with a particular focus on access to loans, highlighting the growing concern that smaller businesses do not have access to affordable financing and that our existing commercial banks may be part of the problem. Social enterprises, not-for-profits, and co-ops have long highlighted that their financing needs are overlooked by mainstream institutions.
Pension funds and philanthropic foundations have also been called out for failing to invest sufficient Canadian capital into local communities. With trillions of dollars of assets under management, the Department of Finance suggests that even a small reallocation towards domestic investment would produce enormous net-new economic activity in Canadian communities, with little new risk.
And perhaps, most importantly, regardless of what the banks and pension funds do, the federal government needs to step up to support community and social finance infrastructure.
Canada’s social finance leaders have already highlighted the kinds of activities that could be funded. They include recapitalizing the Social Finance Fund, creating loan guarantee facilities for local enterprises and not-for-profits, and making it easier for employees, new entrepreneurs, and communities to purchase businesses from retiring owners and keep them local.
These choices do not require the federal government to spend new funds. They require policy change and, in some instances, more creative uses of the federal balance sheet to finance local economic activities.
The federal government is undertaking some steps to align with this vision: the $10-billion in loan guarantees to Indigenous communities to enable equity in natural resource and other major projects, and the partnership between First Nations Bank and the Business Development Bank of Canada to facilitate the acquisition of existing businesses by Indigenous communities are two recent examples. But the federal government must do more to make low-cost capital available.
As the federal government focuses on big, new projects and sectors that are attracting huge pools of global investment, we have to also address the financing needs of local businesses and not-for-profits. We can build a more resilient economy by also investing in the sectors that dominate people’s daily lives.