The Trouble with Employee Owners

I'm always a little conflicted when I hear someone say that their company is great because, "We're employee-owned!" It's always struck me as a strange thing, having employee owners. Ouro5Creative Commons License Rex Housour via Compfight

The Leader Principle

Nazi Germany gave us the Leader Principle. It stated, in part, that everyone had a leader, and that ultimate authority rested with the ultimate leader, Hitler himself.

This failed in no small part because as Germany's military began to lose at conflict after conflict and the tide of the war turned against them, the military began to realize that The Leader's own authority derived not from someone else, but from his military conquests. When those faded, so too did his authority.

By contrast, the American military has a similar structure in which every soldier knows who his immediate superior is, and who his is, so on up the chain of command until you reach the Commander-in-Chief, the President of the United States himself. The difference is that the President's authority derives from the Constitution, which is the ultimate law of the land.


Within corporate structures, employees generally report to their managers, who in turn report to their leads, and so on up the food chain until you reach C-level executives. These report to the Board of Directors, who report to the shareholders who are the owners of the company.

But what happens when the employees at the bottom of the organization chart are also the shareholders? Aren't they then in control of the senior-most executives who are charting the path of the company? Doesn't that cause a circular sort of situation?

As long as the ownership is mostly of a participatory variety, where the main function is to own stock and watch the stock appreciate as the company performs well, then there's no problem.

But if the employees want to have their voices heard.... Ah, well, that's a different story.

If those employee's shares are dilute, if they represent a minor portion of the shares of the company, then the majority shareholders may be used to being the sole voice of ownership. It may be difficult for them to figure out how to share the podium with the rest of the "owners".

There may also be an identity conflict, because these owners may well be lower-ranking employees with less time in the company to go with their fewer shares, and their input may be discounted accordingly.

In the worst case, the majority owners may simply refuse to listen, leaving the minority shareholders to wonder why they have shares at all. The phrase "employee-owned" may become a sad joke around the company as the team realizes that "ownership" has nothing to do with input or participation.

A Better Way

But who said that "ownership" had anything to do with stock certificates anyway? Why should some external valuation of some 8x10 piece of paper have anything to do with how valuable I think my piece of the pie is? Why should I have to worry about whether the gal at the desk next to me has more shares than I do and therefore will get more say than I do?

Ownership is about:

  • Being heard, and
  • Participating in the rewards of the business's success

A well-run, well-led, authentic, ethical business doesn't need to issue stock and options in order to have those things! They are woven into its DNA. The company may well be owned by one founder, but that doesn't have to mean that the team doesn't own their results, their success, their ideas.

So I say forget about stock. Forget about employee ownership. It's all a distraction from the real issue anyway. Make sure your team members have a say in what goes on inside your operation. Make sure their voices are heard, not just that they feel heard. Tweet this 

Share the rewards when the company is doing well, and especially when their ideas are responsible. There is no better way to ensure they'll keep bringing you their fantastic ideas. And those ideas will be the jet fuel that will propel your business past those companies still quibbling about their shares of stock.