Employee co-ownership in a company – a model worth choosing

What is employee co-ownership and why is it becoming important?

Employee co-ownership means that workers acquire an ownership stake in the company they are employed by. There are two forms of employee ownership:

• direct (individual): employees become direct owners of shares or stakes;
• indirect (collective): ownership of shares or stakes is managed collectively through an intermediate legal entity (special purpose vehicle); abroad, usually through a fund, and in Slovenia through a worker ownership cooperative.

Employee co-ownership models are already widespread abroad, as they bring benefits to employees, employers and the wider society. This model is particularly important for Slovenia, as it also offers effective solutions to the problem of succession in companies. The next decade promises to be the second largest transfer of company ownership after privatization in the 1990s. You can read the article "Explanatory guide to the Slovenian model of indirect employee ownership" here .

Benefits of employee co-ownership

Employee ownership brings benefits at three key levels: for employees, companies, and society at large.

For employees:

• greater commitment and loyalty to the company, and thus higher employee productivity;
• encourages participation in decision-making, builds an inclusive ownership culture, and employees identify more with the company's values;
• staff turnover is reduced, employment stability is increased and often higher salaries are also possible;
• improves career opportunities and reduces talent drain.

For companies (business and economic effects):

• effective resolution of succession in companies;
• companies are more resilient in crises and lay off fewer people;
• contributing to greater economic stability and lower unemployment;
• achieving better business results and higher productivity;
• more investment in research and development;
• creating more new jobs.

For the company:

• reduces social inequality, conflict between capital and labor, as ownership and created value are shared among employees;
• strengthens the company's connection with the local environment, as profits are reinvested in the community;
• contributes to the development of local infrastructure and quality of life;
• promotes sustainable and environmentally responsible behavior.

Examples of good practices in Slovenia

Although the law adopted in Slovenia is only establishing a systemic framework, we already have quite a few companies that have successfully introduced models that include employees in ownership. These include companies such as:

Dewesoft – a high-tech company from Trbovlje, which introduced a rather new and innovative reward and co-ownership system for the Slovenian region more than a decade ago, thus reducing the differences between the views and expectations of owners and employees. They allow employees to invest the variable part of their salary (from business performance awards) twice a year in company ownership. Today, out of more than 200 employees in Slovenia, more than half are also co-owners of Dewesoft. The effectiveness of the co-ownership system has been particularly evident during times of crisis, such as the "corona crisis". While most of the industry recorded a 10% drop, Dewesoft recorded a 15% growth. This indicates that the co-ownership system contributed to the company's better resilience and success in difficult times.

Domel – the co-ownership model of the company from Železniki is based on the gradual purchase of shares of the company by employees, which began in the process of ownership transformation after Slovenia gained independence. Today, employees have a significant ownership stake in the company, which they manage mainly through internal ownership schemes and funds. Such a structure promotes long-term stability, greater employee loyalty and a focus on sustainable development of the company, instead of short-term profits.

M Sora – it all started shortly after World War II, when they founded a cooperative and expanded their operations. After gaining independence, they began to accept employees, not just farmers, as cooperative members. Two decades ago, they transformed into a joint-stock company with internal ownership. Since 2006, the largest owner has still been the Agricultural and Forestry Cooperative M Sora. The remaining 80 percent of ownership is in the hands of employees, former employees, and farmers. One of the most important conditions for becoming an M Sora owner is to become a cooperative member. Today, they have more than 200 employees in Slovenia. 141 cooperative members are also owners of the company.

All of these models are often highlighted as examples of good practice, as they connect the interests of employees and the company, strengthen organizational culture and contribute to above-average innovation and competitiveness in international markets. At the same time, they prove that employee participation models are not just a theoretical concept, but can represent a distinct competitive advantage for a company.

Employee co-ownership is no longer just an alternative model, but is becoming a strategic tool for the long-term stability of companies. The adoption of the Employees' Cooperatives Act (ZLZD) represents an important step towards systemic regulation of this area and opens up new possibilities for entrepreneurs who are considering sustainable development or the transfer of ownership. For companies, this means an opportunity to strengthen internal culture, greater resilience to market changes and more sustainable growth. For employees, it is an opportunity to become active co-creators and co-owners of the company's future.

The Koroška (MPIK) Online Business Incubator, which operates within the framework of RRA Koroška, is happy to provide help and support. We invite you to contact us for easier realization of your entrepreneurial ideas and assistance in the development of your company. The first step is to complete the MPIK application, which is at this link: https://tinyurl.com/ycxd4z4m .