At the end of June 2022, Napier became an employee-owned business. This means that – through a trust – everyone employed by us has ownership of the company. It’s not just token ownership: the employees now own a controlling 70% stake in the company. This blog post explains why I chose to give employees ownership of the company and what it means for everyone involved.
Why Employee Ownership?
My standard response is that I’m a bit of a hippie. I believe that it is a good thing for employees to have ownership of the business they work for, and there is extensive research showing that employee ownership results in a more committed, more productive and happier workforce. So it makes sense: the company gets better, and the employees get rewarded.
But it’s more than this. Employee ownership preserves Napier’s culture and values. Employee ownership means there is a great reason for our talented team to stay at Napier. And employee ownership is a good thing for society.
The UK Government is very supportive of employee ownership. So the bonuses paid by the Employee Ownership Trust are tax-free (up to a certain level). This makes it even more rewarding for the team.
For clients, employee ownership is highly beneficial. In addition to the benefits of better productivity when working on client projects, employee ownership means that the agency is not going to be acquired, something that always involves a huge amount of change. Although there are many good examples of successful acquisitions (we’ve made a few!), as the agency gets bigger these deals are often financially driven, rather than driven by the two businesses being a good fit.
What’s the Employee Ownership Trust all About?
It’s very common for employee ownership to be achieved through an Employee Ownership Trust (EOT). There are a couple of good reasons for this. Firstly there are tax incentives, such as the tax-free bonuses I mentioned earlier. The main reason for this approach, however, is that the employees don’t individually own shares, something that in the UK would mean they have tax liabilities or require complex, and limited, share schemes. An EOT means that the employees don’t need to pay the Government to own shares in their company.
There is a board that controls the trust. Helen and Hannah have been elected as employee representatives, and Dave as the directors’ representative. It’s a legal requirement that board must represent the interests of the employees (present and future), and that the management team must answer to the board.
It’s important to note that this is not “smoke and mirrors”. Ultimately the employees can remove directors from the board of the company: they have real power.
Although it’s getting much more popular, the most common way for an agency owner to exit is to sell the business. I didn’t want to do this.
The Future for Napier
I’m super-optimistic about the future. Having the ownership through an EOT gives the team more opportunity to influence company strategy and direction. It also ensures that the company will remain independent. Realistically, if you are outside the company, you might not see any immediate changes. But over time, the company will benefit from employee ownership in many different ways, leading to a stronger, more successful agency.
The change doesn’t mean I’m leaving. This would typically be the case if the agency was acquired, but with an EOT there is no pressure to replace the previous owner. I’m looking forward to continuing to lead the company, with the guidance of the trust board, for many years to come.
With employees owning 70% of the shares, we still retain the ability to incentivise senior management with their own shares. In fact the structure allows a much easer “management buyout” as, if a future management team wanted to have personal ownership, there are only 30% of the shares for the management team to acquire.
I’m sure there will be lots for all of us to learn on the employee ownership journey, and I’m looking forward to the next few years. With the team now able to provide even more input, and share in the success of the company, I’m convinced Napier is set for massive success in the next few years.
To mis-quote Kent Brockman from the Simpsons, I for one welcome my new employee overlords.
