Ownership has transferred. Now what? Governance after an EOT
Completion transfers the shares. It doesn't transfer the governance.
In new research, 65% of firms surveyed gave no governance training to the employee representatives sitting on their trust company board, and only 42% had engaged employees before the transition.
The research surveyed 26 UK firms that have adopted an EOT. It's a modest sample, so the findings are best read as an indicative snapshot.
The training gap
In 65% of the firms surveyed, employee representatives appointed as directors of the trust company board were given no governance training. Think about what that means in practice. A colleague from the shop floor or the office is asked to sit on the body that oversees the owners' interest, to read financial reports, challenge management and make decisions on behalf of their peers, often without any preparation. That's not fair on them, and it's not fair on the business.
Engagement came late
Only 42% of firms engaged employees before the transition. After completion, that jumped to 92%. It's encouraging that engagement picks up, but it also means that for most firms, employees were brought into the conversation after the big decision had been made.
The overall employee response was positive: 73% of firms reported a positive reaction, 23.1% neutral and only 3.8% negative. That neutral quarter suggests that the benefits of ownership aren't always felt straight away, and that some employees may not yet fully understand the model. Respondents were clear that people often need significant time to grasp what ownership means and what their role in it is.
The report states: too many EOTs remain "done to employees" rather than "done with employees".
Ownership transfer is not governance
The researchers draw a clear line between the two. Transferring ownership doesn't automatically create effective governance. Respondents pointed to the need for trustee training, clear financial discipline and accountability, experienced advisers, and capable senior leaders and independent trustees.
Questions worth asking
If you're a director, trustee or employee representative in an EO company, these are a good place to start:
- Have employee trustees received governance training before taking their seat on the trust board, and is it ongoing?
- Could an employee explain, in plain language, what ownership means for them?
- Does the trust board have the right mix of skills, including independent challenge?
- How does the employee voice reach the operating board, and how do we know it's working?
Good governance is what turns a change in ownership into ownership that people can feel and use. It's worth investing in early.
About the research:
This blog draws on Employee Ownership Trusts: Beyond Completion – Post-Transition Realities, Risks and Implications by Dr Israa Kishk (University of Northampton), Tracy Evans (EMW) and Adrian Pryce DL (Be. Partners Ltd / IoD National Sustainability Group). The findings are based on survey responses from 26 UK EOT firms.
