Ownership Responsibility

EO ownership includes a responsibility for the longer term, not just near term benefits.

Long-term company sustainability and success should be a responsibility of all employees, but different drivers, views and experience can result in a mismatch across individuals within an organisation.

Business founders have a vested interest in both the short and longer term. Employee ownership however is a more diffuse paradigm: the immediate effects of operational decisions are felt by all, but the benefits of long-term investment in innovation, growth, and succession may only be  by future employees.

The unintended consequence can be that horizons are foreshortened, and fairness, sustainability, and responsibility over the longer-term need to be actively preserved:

• business owners have a natural incentive to balance short and long-term priorities, because they feel directly the cost of under-investment or lack of vision downstream – right up to their eventual exit;
• but the people in an employee-owned business, at any level, are invested differently and short-term benefits are real but those that will only be seen by future beneficiaries are abstract.

In practice, this can create tensions between short- and long-termism, requiring a strong culture and systems to maintain balance.

While responsibility for the future can be placed on to the leadership, many factors can distract them from longer-term thinking — including their experience, vision, diversity of thought, personal motivations, attitude to risk, or simply the demands of operational delivery and survival.

Employees  may have a newfound voice, but they are expected to consider both their individual and collective legacy when exercising it, looking beyond a natural focus on near-term benefits.

And while the role of the trustee is inherently intergenerational through its specific duty to consider current and future beneficiaries, that in itself may not mitigate the inevitable personal conflicts or relative strategic inexperience that can exist within a typical trustee board.

Hence, responsibility sits with all, but that makes accountability harder to establish.

When a founder sells to an employee ownership trust, they may hand over control to an individual or leadership team, but responsibility for the long-term future and tomorrow’s beneficiaries disperses to a group of individuals with very different individual perspectives.  

The questions that will almost certainly weigh on an independent trustee’s mind as they look from the outside in, are who is ultimately picking up that responsibility? and how is it being incorporated into decision-making and company actions?

This article was written by Simon Carter, one of IDTs most experienced independent trustees, drawing on his EO and wider business experience.