The form of globalisation that has prevailed – one that primarily serves the interests of financial and corporate elites – is, to a large extent, a political and legal artefact, not an inevitable outcome of an increasingly interconnected global economy. More specifically, it is primarily attributable to the commodified nature of the business enterprise, which is essentially a human organisation but legally treated as a commodity in our economies.
A prime example of the damaging effects of business commodification is the private equity industry. Private equity firms typically acquire businesses with growth potential (often through a leveraged buyout, a mechanism originally devised by Louis Kelso in the 1950s for worker buyouts), restructure them to maximise profitability, and then sell them for a profit. The short-term focus on quick gains is typically achieved by adopting unsustainable business and human resource practices: laying off workers, increasing the workload on remaining employees, shutting down R&D departments, and exacerbating negative externalities. Such policies often undermine the long-term stability of these businesses, many of which eventually face bankruptcy. Despite being ten times smaller than public markets ($10TN versus $100TN), private equity has been growing rapidly and is becoming a major driver of business ownership commodification.
In an age of increasing volatility and intensified international trade, the commodification of the basic unit of production – the firm – has emerged as a key factor contributing to the erosion of democratic sovereignty and societal wellbeing. When a business is owned by distant stakeholders rather than by local people, it often operates with little regard for the wellbeing of the community in which it is embedded, and is less accountable to public authorities.
Many governments are starting to recognise the potentially catastrophic impacts of globalised capital, and even the EU has begun developing solutions to preserve European ownership, for now focusing primarily on the tech sector. There is widespread agreement on the need for a bold economic development strategy aimed at realigning the interests of business with those of local communities. Less clear is what precisely needs to be done. We argue that an effective way to achieve this goal is by decommodifying business ownership through the democratisation of private companies.
Democratic forms of ownership, such as worker-owned businesses, worker co-operatives, and stakeholder co-operatives, decommodify ownership by linking it directly to those who participate in production. Not only are there strong moral arguments for such ownership types, grounded in abolitionist, democratic, and liberal traditions (as well argued in David Ellerman’s recent book Neo-Abolitionism: Abolishing Human Rentals in Favor of Workplace Democracy), but democratic ownership also serves as an antidote to the volatility and insecurity brought about by absentee ownership and globalisation more broadly.
Dozens of empirical and theoretical studies show that democratic enterprises are more socially and environmentally responsible, provide high-quality and stable jobs, reduce wealth and income inequality, and demonstrate above-average resilience and productivity. Importantly, when properly structured, these businesses anchor capital and jobs within their communities, ensuring that the value they create benefits national economies. Conventional ownership models, by contrast, cannot guarantee this in the long run, as their ownership can be freely traded and transferred, which means they are likely to end up in the hands of institutional and financial buyers with the deepest pockets.
A worker-owned economy could also be an effective strategy for revitalising peripheral economies, as it would help retain highly skilled and young workers who might be more incentivised to stay in local communities if they had a genuine stake in them. From a fiscal sustainability perspective, governments could count on steady tax revenues, as democratic ownership reduces the threat of relocations to less regulated, lower-tax contexts.
EOTs, ESOPs and the Art of the Possible
One major issue with democratic businesses is their perceived inability to scale up meaningfully. A common criticism from neoliberal advocates is that if democratic ownership forms were truly beneficial and viable, they would be ubiquitous and would eventually outcompete non-democratic capitalist firms.
However, recent trends in broad-based employee ownership, especially in the US and since 2014 in the UK, suggest that the bias against democratic ownership forms is unfounded. When the right institutional conditions are established, technical expertise is developed, and effective advocacy strategies are adopted, substantial scale-up of worker-anchored ownership models is achievable. Crucially, such scale-up is not likely to occur primarily through the creation of new worker-owned enterprises but rather through the conversion of existing, mature companies.
Closely-held businesses often undergo multiple ownership changes during their lifespan – for example, when founders exit, retire, or pass away. It is during these transitions that a window opens for a shift to employee ownership.
With family succession becoming increasingly less popular, company owners often find themselves forced to choose between less-than-ideal options for succession, few of which ensure business continuity and preserve the founder’s legacy, nor do they safeguard the wellbeing of employees and the local community. Worker ownership offers a solution: by selling their business to the employees and ensuring that ownership remains with the active workers, the founder can best ensure the company stays true to its values and continues to serve the local community. Government-provided financial incentives, such as tax breaks, can further encourage worker buyouts.
The UK provides a prime example of how this can be achieved. In 2014, the Employee Ownership Trust (EOT) model was introduced through that year’s Finance Act, inspired by the US’s similar ESOP model (an Employee Stock Ownership Plan), which has been supported through legislation since 1974. The EOT is a model of indirect worker ownership, in which a special-purpose vehicle holds ownership in the employees’ name. Here is roughly how it works. When a company owner decides to sell its company to the employees, they transfer ownership of the company to the EOT. However, the employees are not automatically granted ownership rights. First, they must repay the seller, which is done by using the company’s available cash flow. The owner – or a financial institution – lends money to the EOT, which purchases shares through leverage, that is, by promising that the future available cash flow of the operating company will be used to finance the repayment of the acquisition debt. Through the EOT, workers eventually gain ownership rights.
The combination of leveraged buyout and indirect ownership (the workers ‘own’ the company through a separate legal entity) makes the process of selling straightforward and smooth. Workers don’t have to use their personal savings or assets to carry out the buyout, while the owners have the certainty that the workers will only become full-fledged owners once they repay the due amount. The indirect system also ensures ownership remains tied to active employment, as individual workers cannot sell shares during employment, nor retain ownership upon exit. Everyone in the company benefits from financial and governance rights.
A major contributor to the success of the UK’s EOT model (and the US’s ESOP model) has been tax breaks for stakeholders involved in employee buyouts. In the UK, the 2014 Finance Act introduced a capital gains tax exemption for those selling their businesses to an EOT. Initially, the impact of this measure was limited due to a general capital gains tax exemption on all transactions. When this general exemption was lifted in 2020, EOT growth surged, with over 1,000 EOTs created in just three years. According to a poll conducted by the legal consultancy firm Evelyn Partners, worker ownership is now the second most popular company succession solution, trailing only private equity sales but ahead of family succession. In the US, tax breaks for loans financing ESOP buyouts, and tax deductions for the cash flow used to finance buyouts, have been instrumental in the model’s success. Today, around 14.7 million workers co-own ESOP firms in the US, representing approximately 10% of the private workforce.
These are extraordinary numbers which show that with the adequate structures and policies in place, alternative, less extractive, and short-term oriented types of ownership can grow to occupy a significant portion of our economies.
Putting Democracy Into Leveraged Workers’ Buyouts
The broad-based worker ownership practice described above is impressive, yet it perpetuates certain undemocratic institutional practices common to conventional capitalist firms.
The governance structure of the EOT is not inherently democratic. In an EOT, employees are often passive beneficiaries, receiving distributed profits without having a meaningful say in strategic decisions such as the use of surpluses, employment, business planning, or market positioning. Nor do they hold delegation rights over managerial authority. While the EOT model has been highly impressive in terms of the scale it has achieved, it fails to grant employees the democratic right to self-determination, leaving the significant potential of participatory governance unrealised.
However, the EOT framework for implementing worker buyouts and maintaining worker ownership (which also forms the basis of ESOPs in the US) is highly adaptable. There is nothing preventing the incorporation of a democratic governance structure into the EOT model. How can we be sure of this? Because there are already pilot cases and government initiatives promoting a more democratic vision of employee ownership. The Canadian government, for instance, legislated the Canadian EOT in 2024, creating space for a more democratic structure (albeit without entirely shutting down non-democratic options), while governments in Slovenia and Denmark are introducing models that leverage the core EOT mechanism, incentivising democratic governance through tax benefits for participatory structures.
The European ESOP, conceptualised by David Ellerman, Tej Gonza, and Gregor Berkopec from the Institute for Economic Democracy in Slovenia, is being introduced through pilot projects and legislative initiatives under the “Slovenian ESOP” brand. The Slovenian ESOP uses a worker co-operative as the ownership vehicle, rather than a trust, while preserving the key elements that have enabled the EOT model to scale. This model has already been adopted by four companies and is expected to receive legislative backing from the Slovenian government in the coming months. Similarly, the Danish government is exploring the possibility of introducing a comparable model, with developments already underway. The French umbrella organisation for worker co-operatives, Les Scop, has also been closely observing the ESOP model for worker buyouts as a source of inspiration.
In the UK, the immense potential of the British EOT model, the US ESOP model, and particularly their modern derivatives for building democratic worker ownership, often goes unnoticed. The British co-operative movement, which has already been seeking synergies with the employee ownership movement, seems to overlook the significant opportunity it has to expand by using an adapted EOT-like structure to facilitate co-operative conversions in mature companies, as demonstrated by the Slovenian ESOP model.
As the saying goes, the best time to start was yesterday, the second best is today. Labour, in tandem with the Co-operative Party, won the election on a platform of a more secure Britain. Its government now has the chance to deliver on this promise by broadening the application of the mechanisms underlying the EOT model to promote the scale-up of truly democratic businesses. Besides being relatively straightforward to implement, this policy would bridge ideological divides, uniting progressive ambitions to create fairer work relationships with traditionalist visions of empowering local communities. Let’s seize this opportunity, work towards the decommodification of business ownership, and build more resilient, thriving local communities with a genuine stake in their future.
