Understanding Impact Business Models: Worker Ownership

Modified on Tue, 7 Oct at 8:41 AM

What is the intent of the Impact Business Model?

How do I assess my company’s eligibility for this Impact Business Model?

What are some examples of companies that have this impact?

My company may be eligible for this IBM. How do I open this IBM in the B Impact Assessment?

Which common types of ownership exist?

Does an employee trust (EOT) count as employee ownership?

Concepts in the B Impact Assessment

What is the intent of the Impact Business Model?

A worker-owned business model is an alternative structure that empowers workers and dignifies their labor by providing a significant ownership stake. This model promotes a more equitable distribution of wealth by awarding equity to the employees who help generate it, leading to greater job satisfaction, increased productivity, and a stronger sense of community. Beyond these benefits, worker-owned businesses often foster improved employee well-being, contribute to local economic development, and promote more sustainable and just labor practices.

The Worker-Owned Impact Business Model (IBM), found in the Workers Impact Area of the B Impact Assessment, captures the intentional actions of companies to distribute wealth generated from their business and decision-making rights by setting up formal worker governance structures. This IBM looks at the percentage of the company owned by employees and democratic governance of the company.

For companies on the zero-worker track that don’t have the Workers Impact Area, this impact business model is not available.

How do I assess my company’s eligibility for this Impact Business Model?

Companies with the following characteristics or practices may be able to capture their impact in the Worker-Owned IBM. Please review the definitions of important terms listed under ‘Concepts in the B Impact Assessment’ to ensure the company meets the specific requirements outlined below:

All employees are formally eligible to participate in the company ownership structure

Example: An employee joins a company, and the contract states the employee has the option to participate in the ownership structure [the ownership of the company at that moment in time].

100% of tenured employees participate in the company ownership plan

Example: Once the employee becomes tenured, after working for the company for one year as per B Labs' definition of tenure, the employee is included in the employee ownership plan, which should describe when and how the employee owns parts of the company.

40% of company ownership is allocated to non-executive employees, not including executives and founders. This equity can take different forms (e.g., direct ownership, cooperatives, Employee Ownership Schemes).

Example: The ownership structure [the ownership of the company at that moment in time] specifies that 40% of ownership is allocated to non-executive employees.

What are some examples of companies that have this impact?

The following practices are common examples captured in the Worker-Owned IBM. This is an illustrative, non-exhaustive list of types of impact that can be captured in this IBM:

A worker cooperative that is structured not just to give ownership to employees, but to be democratically governed.
An enterprise that gives all employees the right to buy stock in the company in certain intervals and at specific fixed prices, and 50% of the company's shares are owned by non-executive employees.
A company with an ESOP, or Employee Stock Ownership Plan that meets the requirements of the IBM.

My company may be eligible for this IBM. How do I open this IBM in the B Impact Assessment?

If you are considering opting into this IBM, you will have to answer specific questions about the impact of your business model that will determine which Impact Business Models you see in your BIA. These questions, called gating questions, ensure that you see the content that is most relevant to your company in your assessment.

To open the gating questions for the Worker-Owned IBM, navigate to the Workers Impact Area and search for the questions titled, “Workers Impact Business Model Introduction” which must have the following answer option selected.

If answer option 1 applies, the response “Yes” must be selected for the following questions: “Ownership Eligibility” and “Comprehensive Employee Ownership Plan” (not pictured) to open the Worker-Owned IBM. Any deviation from this will prevent the Worker-Owned IBM from becoming visible in your BIA.

My company may be eligible for this IBM. What supporting information do we need to provide?

Employee ownership plan and related policies.
A comprehensive list of non-executive company owners (can be anonymized), their role title, the amount and the type of shares owned by each, and the total number of company shares.
Sample of membership or ownership agreements.
Trust Deed of the company together with a list of all employees who benefit from the EOT
Documentation, such as an overview of the governance structure, illustrating how employees are enabled to participate in substantive decisions that impact the direction of the company. A company can provide proof that this governance structure operates as designed with meeting minutes, or other documentation of workers' input and decision-making coming to fruition.

Which common types of ownership exist?

Below, common types of ownership are listed, for each please ensure the requirements listed above are met to assess if the organization qualifies for the Worker-Owned IBM.

Stock Options or Stock Purchase Plans - Combined with traditional compensation like salaries and benefits, these options give employees the right to buy stock in the company at certain intervals and at certain fixed prices. Stock option plans are commonly used by companies from private start-ups to public companies, and many companies reserve some portion of ownership specifically for this purpose.

Employee Stock Ownership Plans (ESOPs) - Despite the generic sounding name, ESOPs are specific benefit programs that operate similar to a retirement plan that is “invested” in the company itself and generally includes participation from all employees. Employees receive the benefit of the plan upon leaving or retiring from the company, and the programs provide tax benefits to the company itself. Find details about Employee Ownership Trusts below. Different types of ESOPs exist such as Employee Stock Option Schemes, Employee Stock Purchase Plans, or Restricted Stock Units, amongst others. For the specific ESOP an organization offers, it is important to show how the requirements of the IBM are met to qualify.

Does an employee trust (EOT) count as employee ownership?

An Employee Ownership Trust is a common vehicle for ESOP which are eligible to the Worker-Owned IBM providing we can verify that 40% of shares are held by non-executive employees and have been vested. Of course, also the remaining two requirements of the IBM need to be met by providing eligibility to participation in the ownership structure to all employees and participation in the ownership plan to all tenured workers.

Concepts in the B Impact Assessment

Cooperative (Co-op) - Cooperatives are independent enterprises, promoted, owned, and democratically governed by a group of members who have freely joined together to address a specific need or problem, and, in some cases, contribute assets towards addressing that need or problem. Adapted from DFID, 2008.

ESOP - An Employee Stock Ownership Plan (ESOP) enables employees to own stock in the company that employs them. ESOPs are often used as a corporate finance strategy and can be used to align the interests of the employees with the interests of the shareholders. Please note that the term ESOP in the USA is a very clearly defined retirement plan, compatible with the Worker-Owned IBM.

Tenured Worker - An employee who has worked at least one year with the company or, if part-time, worked at least 1000 hours.