EO Explained: The Three Pillars Every Company Should Know
25 September 2025
In the first of a series of articles explaining Employee Ownership (EO) we introduce the concept of the 3 Pillars of EO – the Company Board, the Employees and the Trust as Shareholder.
Understanding this model is key to having a structure that works together, understanding where responsibility and authority lies, without confusion or conflict.
If applied well it is a powerful model that provides clarity aligning the interests of employees with the success of the company, and underpins the future sustainability for the benefit of all.
The Three Pillars of EO
The concept of EO is built on three fundamental pillars: The Company Board, The Trust Board, and The Employees. Each pillar plays a crucial role in ensuring the effective governance, success and sustainability of the company.
1. The Company Board
The Company Board is a critical pillar in the EO model. It is responsible for several key functions that ensure the company's smooth operation and strategic direction. These responsibilities include:
- Setting Strategy: The Company Board is tasked with defining the long-term goals and objectives of the company. This involves setting the strategy, and its components to ensure delivery. Without this element of leadership, the company may struggle to maintain a common sense of purpose, and not benefit form a direction of travel that all employees can understand, be part of and contribute to.
- Managing Risk: Identifying, assessing, and mitigating risks is a crucial function of the Company Board. This ensures that the company is prepared for potential challenges, can mitigate them and can navigate them effectively when they arise.
- Making Critical Decisions: The board is responsible for making significant decisions that impact the company's future. This includes decisions related to investments, mergers, acquisitions, and other major corporate actions aligned to the strategic goals that they have identified.
- Providing Day-to-Day Operational Oversight and Management: While the executive and operational teams handle daily operations, the Company Board provides oversight to ensure that these operations align with the company's strategic goals, comply with any regulatory requirements and fit together.
It should be noted that executive members of the Company Board will have wider responsibilities in relation to their functional role and its delivery. These are actions that are deliverable outside of their role as a board member that, whilst providing individuals’ with deeper insights and knowledge of their specialist topic, do not form a direct part of the boards remit.
2. The Trust Board
The Trust Board plays a vital role in overseeing the company's governance and ensuring that their interests as shareholders, as well as those of the beneficiaries of the trust, are protected. The key responsibilities of the Trust Board include:
- Oversight of the Company and Its Board: The Trust Board monitors the actions and decisions of the Company Board to ensure they are in the best interests of all stakeholders. This includes evaluating the board's effectiveness and holding it accountable, but crucially excludes decision making on behalf of, or direction to, the Company Board.
- Protecting Its Shareholder Interests and Trust Assets: The Trust Board acts as a guardian for the assets of the trust (the Company shares) on behalf of trust beneficiaries, ensuring that their rights and interests are safeguarded. This involves overseeing the distribution of profits and ensuring that the company's actions align with the trust deed and maintaining and protecting the value of the shares.
- Challenging the Future Direction: The Trust Board has the responsibility to question and challenge the strategic direction proposed by the Company Board. This ensures that the company's long-term plans are robust, well-considered and, crucially, delivered.
- Utilising Purpose and Values: The Trust Board should understand the purpose and values of the company as defined by the Company Board, and ensure that these remain core to decision making.
- Encouraging Employee Participation: The Trust Board should encourage the Company Board to understand and welcome employee participation to support their decision making, whilst simultaneously encouraging employees to contribute in a way that is meaningful and beneficial to the success of the business.
In an EO company the trust is a majority shareholder but not always the sole shareholder. Where there is a minority shareholder the alignment between majority and minority shareholders should be clarified in terms of responsibilities, authority, oversight, escalation and involvement.
3. The Employees
Employees are at the heart of the EO model. This pillar emphasizes the importance of employee participation and engagement in the company's success, and the legislative requirement for employees to have a ‘significant and meaningful’ stake in the business. The key aspects are:
- Terms of Employment: All employees act under their terms of employment. This means that their roles, responsibilities, and benefits are clearly defined and aligned with the company's goals and values.
- Beneficiaries under the Trust Deed: Employees are also beneficiaries under the terms of the Trust Deed. This means that they have a stake in the company's success, are entitled to share in the profits and benefits generated by the company made through the contribution that they make as a collective.
- Participation in Decision-Making: Employees are encouraged to provide insights to support decision-making processes. This involvement supports the business and its leadership, ensuring that employees' voices are heard and their contributions are valued. Crucially they are not the decision makers, instead contributing their knowledge through their perspectives in their role.
- Alignment with Company Purpose and Values: The involvement of employees in the EO model ensures that their actions and decisions are aligned with the company's purpose and values. This alignment fosters a sense of ownership and commitment among employees, driving the company's long-term success and sustainability.
Having a forum for employee voice may be beneficial, especially in larger organisations, but is not a requirement of the legislation and, if not implemented well, can become a distraction or negative influence on the business. Meaningful employee contribution is invaluable for leadership decisions and setting the future direction, creating the avenue for this input that aligns to the needs of the business is bespoke to each company and may evolve over time.
The Three Pillars in Action
For the 3 pillars to work in concert, there must be clear and common understanding of the roles, responsibilities and authority of each. Conflict between any two, or all three, of the groups can detract from the purpose of the company, often creating a downwards spiral that drives internal conflict to the detriment of all.
Creating understanding of each works well through workshops and facilitated discussions. Asking questions and setting scenarios for consideration. Ensuring that participants understand both the theoretical concepts, as well as their practical application in their company.
There is often benefit from having combined workshops between groups. Company Board and Trust Board workshops are particularly beneficial both early on in EO, but also as refreshers later on in the company’s evolution. This ensures that any potential conflict or misunderstanding between these two forums is aired and resolved to enable each to be effective in their role.
If there is an employee forum or representative group, having its members workshop all three roles can be beneficial in their understanding and creating ways for their contributions to move beyond social, wellbeing and benefits (tea and toilets) into business beneficial contributions.
Conclusion
The three pillars of EO—The Company Board, The Trust Board, and The Employees—are essential components that ensure the success and sustainability of the company. By understanding, embracing and communicating these pillars, companies can create a more inclusive and engaged workforce, ultimately driving long-term success.
IDT can facilitate workshops of the 3 pillars for EO companies. If you are interested in finding out more contact us at info@directorsandtrustees.co.uk
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Employee ownership can represent a transformative opportunity for businesses to align the interests of their workforce and leadership, fostering shared commitment and long-term stability. By prioritizing the principles of collaboration and mutual investment, companies can unlock tangible benefits that extend far beyond the financial. To generate full benefit from EO there needs to be clarity of purpose and future direction, as well as an understanding across all employees of both the potential benefits as well as the expectation of their contribution. Here we identify a few of the advantages of EO. Driving Engagement and Commitment One of the standout advantages of employee ownership is the way it empowers employees. When they hold a meaningful stake in the company, their day-to-day work directly contributes to its success, creating a stronger sense of accountability and purpose. This commitment often translates into higher engagement levels, as employees feel personally invested in achieving goals and driving innovation. Key to delivering against this is explaining where and how each individual, and their role can, and does, make a difference. Building Resilience for Economic Challenges Employee-owned companies are uniquely positioned to navigate economic uncertainties. The shared ownership model fosters a collective spirit that can strengthen a business’s ability to adapt and endure. Resilience is built not just through financial stability, but through the unity and determination of a workforce working toward common objectives. This resilience will not mean that tough decisions will not have to be made, but it should mean that such decisions are made from a wider perspective than pure financials. As such, these businesses are more likely to weather external impacts without resorting to lay-offs or shrinkage. Attracting Talent and Retaining Expertise In competitive industries, the promise of employee ownership can serve as a compelling incentive for recruitment and retention. Offering equity or ownership stakes sets businesses apart, providing a tangible demonstration of their commitment to employee welfare and growth. For those seeking long-term career opportunities, employee ownership usually translates into offering in role development and investment in people, making it an attractive proposition. Strategies for Effective Implementation To make the most of employee ownership, businesses must focus on several key strategies: Embedding a Collaborative Culture : Encouraging open dialogue and transparent communications reinforces the principles of ownership, driving both engagement and innovation. Educating Employees : Ongoing education and training ensure employees are equipped to make meaningful contributions to the company’s performance, and commit to a long-term commitment to stay. Strategic Goal Alignment : Clearly defined goals that align with business goals can help employees and leadership work harmoniously toward shared objectives. Monitoring Performance : Using metrics to track the impact of employee ownership ensures businesses can refine their approach over time, identifying further opportunities and maximizing benefits for all. A Model for Sustainable Success Leveraging employee ownership is not just about reshaping company structures - it’s about fostering a new mindset, one that prioritizes collaboration, resilience, and shared prosperity. By embracing this model, businesses can position themselves as leaders in sustainable growth, innovation, and employee empowerment. If you would like to benefit from the combined experience and knowledge of IDT and its members, consider appointing one of our trustees as your independent trustee. Whatever stage of EO you are at, whether you are a large or small organisation, are seeking your first, or a new or additional, independent trustee, we are sure we have somebody who could work with you for the benefit of your EO business. If you would like to know more, or would like to schedule a confidential, no strings, chat about your independent trustee requirements, please email info@directorsandtrustees.co.uk
Through personal knowledge, the author, Tony Marks , considers how his perspective as an entrepreneur and vendor of a business sold into employee ownership, shapes his perspective and his contribution as an independent trustee. What is your professional background, and how does it inform your approach as a trustee? I have 30 years of Board experience, working for organisations as large as BT PLC and as small as the two start-ups which I grew and subsequently sold - the most recent sale being to an Employee Ownership Trust. I have a commercial background with sales and marketing experience, as well as subject matter expertise in project management, including authoring and co-authoring books in this field. Academically I have an MBA, am Chartered Manager (CMgr) and a Fellow of both the Chartered Management Institute (FCMI) and The Association for Project Management (FAPM). This practical and theoretical knowledge and understanding supports my contributions to the trust boards on which I am appointed, as well as my interactions with the leadership teams in these EO companies. Apart from understanding what it takes to start and build companies with multi-million-pound revenues, I have been through the EO journey successfully as a Vendor - obtaining the full market value of the company I and my co-founders created, whilst propelling the company into an exciting new phase of high growth that benefits all the employees now and in the future. Through this journey I gained an unrivalled understanding of the art of balancing the needs of vendors and the needs of employees. This can and needs to be a win-win equation, ensuring that the vendors get paid for the value they have created, whilst ensuring the long-term sustainability of the business and security of employment for the employees. Where do you add most value to a trust board? The Independent Trustee has a unique role in balancing the needs of the Vendors until they have been fully paid and ensuring the long-term sustainability of the business and employee engagement in the business they now own. This can and should be mutually beneficial. This role needs the experience of someone who has been on the full journey , understands the issues that can arise, and promotes the constructive and inclusive approach needed to complete the journey successfully. My background and experience in governance roles, within businesses, EO Trusts and Academia, brings a unique insight to any EOT. Understanding the difference between governance and management responsibilities is key to guiding new Trustees in their role. By helping develop a positive and constructive spirit between vendors, management and employees working collaboratively , I bring a tangible additional value to any EOT as an Independent Trustee. My experience with several EOTs, alongside my membership of IDT, also ensures that the statutory responsibilities of the EOT and adherence to the Trust Deed and other relevant legal documents are maintained. How do you view Employee Ownership? Employee Ownership isn’t for everyone. I believe in ‘ Good EO ’ – doing it for the right reasons and for the benefit of all parties. This philosophy is fundamental to what I believe makes EO work successfully. Put simply, employees who feel like they co-own the business they work in are more engaged in delivering within their business and making it great. This leads to improved efficiencies, greater commitment and an inclusive team-based approach to problem solving. Of course, management is still running the business but sharing the challenges and business strategy and linking this to individual and team contributions make an incredible difference to business performance. Engaged employee owners will see gradually improving benefits, beyond the tax-free bonus permitted by HMRC, when the business is performing well. Vendors who believe in Good EO can unleash the full potential of the employee-owners by engaging them in the business mission. This can lead to early re-payment, improved terms and conditions and a stronger business into the future. EO is a unique environment where everyone can, and should, win. The IDT Difference IDT supports independent trustees to recognise, value, use and share their own unique personal experience and expertise in delivering in their role for clients. Our in-house EO Toolkit supports our trustees by providing practical tools, materials and knowledge to enable them to be an invaluable partner on the trust boards to which they are appointed whilst ensuring that they have the EO knowledge needed to deliver in the role. Our in-house trustee networking, centered around monthly knowledge sharing, enables our trustees to share their knowledge and challenges with each other to gain from the collective expertise available by being part of our network. Tony is one of our vendors working as independent trustees through IDT, all bringing their unique perspective, experience, knowledge and personality to their appointments, as well as an ability to share their knowledge in an advisory and consultative manner. To find out more about the breadth of this knowledge, as well as that of our other independent trustees, read our article introducing our trustees: : https://www.independentdirectorsandtrustees.co.uk/who-are-our-trustees The Author Tony Marks is a project management expert, author of books on the topic and an experienced board member. He transitioned his own business to employee ownership in 2018 and is about to step down as a Founder Trustee. He works with IDT clients as their independent trustee across England and Scotland.
Successful employee ownership (EO) succession requires balancing continuity with careful planning and preparation. The process should maintain business stability while gradually transitioning responsibilities. A clearly defined and communicated purpose, set of values, and ownership model can guide the organization through the change, ensuring alignment and clarity for both founders and new leaders. Here we introduce some key themes, emerging developments and related actions to help navigate this process: Key Themes 1. The Importance of a Common Purpose: Define a guiding framework for the business: Purpose: The overarching reason for the company’s existence. Values: Core principles that drive decisions and behaviours. Ownership Model: How employee ownership functions in the organization. Document the company’s purpose, aspirations, and history to maintain continuity and preserve the legacy of founders. Video recordings can be a practical way to capture this. 2. Maintaining Continuity: The succession process should aim to feel like “business as usual.” A rolling 5-year plan provides structure and flexibility to adapt as needed. Customer relationships and operational stability must be prioritized during transitions to ensure minimal disruption. 3. Gradual Transition with a Long-Term Break: A transitional phase that incorporates a long-term break of a few months allows founders to step back while remaining available to provide support. During this period: Some employees may step up without he Founders influence being in place; Some employees may opt out of leadership roles, as not all staff may want or be suited for leadership. Founders can still be available if needed but, crucially, should not step in unless requested; Founders can start to practically envisage, and plan for, their future after they leave, building their personal enthusiasm for their own future outside the business. 4. Thorough Succession Planning: Begin planning well before the transition, identifying gaps in roles such as sales, innovation, HR, admin, and regulatory tasks. Recruitment and development should focus on filling these gaps and preparing the next generation of leaders. The long-term break is an opportunity to test and refine the decision-making process and ensure new leaders are supported. 5. Founders’ Role Post-Succession: Founders must prepare for life outside the business by identifying new pursuits or roles to transition into. The transition is smoother when founders have a clear path forward, reducing the temptation to interfere in day-to-day operations. 6. Avoid Incentive Misalignment: Avoid introducing new incentive plans that could complicate the succession process or undermine the purpose-driven ethos of EO; If implementing leadership incentives, ensure they are aligned to clear deliverables, are flexible enough to incorporate new appointees, and don’t include those who are not in a leadership or significant role; Ensure any historical favouritism is left behind on transition. 7. Preserving Culture and Legacy: Record the history and stories of the company and its founders to maintain a sense of heritage and identity; Identify the core values that define the company; Don’t set it all in stone, elements of this need to be able to flex and change as the business evolves. Emerging Developments 1. Balancing Leadership Expectations: Succession plans must account for varying levels of interest and capability among employees, acknowledging that not all will aspire to leadership. 2. Founder Involvement as Advisors: Founders can remain involved in non-operational capacities, such as chairing the trading board, whilst empowering the new leadership to run the business. 3. Pragmatic Planning: Succession plans should address practical gaps, such as regulatory compliance or administrative tasks, which founders may have managed in an ad hoc manner. 4. Gap Filling: Be prepared to fill gaps if employees loyal to the Founder choose to move on at the same time and take this as an opportunity to review and refresh the skills needed in the future business. 5. Vision Alignment: Ensure that all employees are aligned with the company’s Common Purpose helps smooth the transition and fosters a shared sense of contribution and alignment to the future business. EO succession is a logistical, cultural and personal transition. A clear Common Purpose, detailed planning, and phased implementation ensures continuity and stability. Founders must embrace a supportive but hands-off role, empowering new leaders while preserving their legacy. By prioritizing clarity, alignment, and gradual handover, businesses can navigate the complexities of succession with minimal disruption and long-term success. Amongst our independent trustees we have founders who have successfully transitioned their businesses to employee ownership and now share their experiences through their activities as independent trustees. If you would like to benefit from the combined experience and knowledge of IDT and its members, through the appointment of an IDT independent trustee or if you would like to know more, please email info@directorsandtrustees.co.uk