When Steward Ownership and Employee Ownership Meet: A Dialogue Between Two Traditions

As employee ownership trusts (EOTs) have grown in popularity in the US and abroad, the intersection and overlap between EOTs and steward ownership have become increasingly important. The post below presents a conversation between two EU-based figures, NCEO Fellow Graeme Nuttall and Maike Kauffmann of the Purpose Foundation, about the overlapping but distinct employee ownership and steward ownership models, and how it’s important to be clear when describing these separate but related initiatives.

Interest in a plurality of ownership models is growing across Europe and the US. In particular, steward ownership and employee ownership are gaining increased attention from entrepreneurs, policymakers, and civil society institutions. At the same time, the rapid diffusion of these models has generated confusion around terminology and substantive differences.

Both models have primarily developed as business succession solutions with similar aims but different priorities. Selling a business to its employees typically keeps a business independent, preserves its legacy, and maintains a company’s ethos. Steward ownership has the same aims but also prioritizes corporate purpose over shareholder value. Employee ownership’s focus is on ensuring that the business looks after the employees’ interests.

The following conversation between Graeme Nuttall, OBE, NCEO Fellow, author of the UK’s Nuttall Review of Employee Ownership, and a leading authority on employee ownership policy and practice, and Maike Kauffmann, co-lead of the Purpose Foundation, which has been central to the definition and growing international adoption of steward ownership, seeks to explore how these two models understand each other and how they might productively interact.

Rather than simply comparing models, this conversation brings the underlying logics of employee ownership and steward-ownership into dialogue.

Q: Why is this conversation important now?

Graeme Nuttall: We are at a moment when both employee ownership and steward ownership are in the news. In the UK, employee ownership has become mainstream over the past decade, supported by a clear definition and policy measures, and the UK’s success is inspiring new or renewed interest in employee ownership as a business succession solution in other countries. American retailer Patagonia’s highly publicized move to steward ownership was headline news.

With steward ownership gaining traction, it’s important that the overlap between employee ownership and steward ownership is properly understood and that structures are accurately described.

Maike Kauffmann: I agree; without shared conceptual clarity, we risk building parallel ecosystems that misunderstand each other or unintentionally mislabel what they are doing, and we miss out on leveraging the potential both models hold for each other. From the steward ownership perspective, we are seeing strong interest from founders who want to protect the mission, prevent extraction, and ensure long-term independence. And they also often consider employee ownership and need guidance as to where the models are similar and where they overlap. This is particularly relevant in times where “equity washing” and misrepresentation of an ownership structure as employee ownership or steward ownership becomes more common.

Q: Can you explain and define these two ownership models?

Graeme: The UK’s definition of employee ownership (taken from the Nuttall Review of Employee Ownership) requires all employees to have a significant and meaningful stake in their business. "Significant" usually refers to a percentage shareholding above 25%, and "meaningful" means the stake underpins genuine employee engagement. This definition has been adopted by other countries and for international employee ownership policy discussions, such as the Oxford Symposium on Employee Ownership.

It is important to emphasize that a business with employee ownership need not be employee-owned. UK employee ownership trusts (EOTs) all have majority stakes, and typically they hold 100% of a business, making all companies with EOTs employee-owned. This is the predominant UK model. But a company may have say, a 30% shareholding held by or on behalf of all its employees. It will have employee ownership, provided there’s genuine employee engagement. Its employees will have a significant shareholding, but it will not be employee-owned because they don’t have a majority stake.

There’s a split between direct and indirect ownership models of employee ownership. With direct models, employees have a beneficial interest in individually allocated shares, as with a worker cooperative, an employee stock ownership plan (ESOP), or other all-employee share plan. Indirect ownership models, such as the EOT, have no individual allocations of shares. Instead, shares are held collectively on behalf of all current and future employees.

Maike: Steward ownership starts from a different concern. Its primary question is not first and foremost the engagement of the employees but rather ensuring that the purpose of the business remains in focus and that the business and its stakeholders are not exploited to generate shareholder value. As Colin Mayer puts it, it’s about ensuring that companies “produce profitable solutions for the problems of people and the planet,” instead of “profiting from creating problems.”

In practice, this means that in steward ownership, power and money are separated to ensure purpose orientation and self-determination of a company: Control lies with people closely connected to the company: stewards, not absentee ownership. Power over the company cannot be speculated with, and it cannot be financially exploited for the personal interests of shareholders. Rather, long-term value creation is the aim.

Steward ownership is legally implemented with different structures (foundation ownership, trust ownership, golden-share structures), which can make it confusing, particularly as sometimes there are overlaps with legal structures used in employee ownership.

Q: Where do you see your models genuinely meeting in practice? Where do they overlap?

Maike: They meet where steward ownership structures explicitly embed employees into their purpose and governance in an employee ownership-style way. There are companies that combine steward ownership and (indirect) employee ownership—companies that, for example, use an employee trust that holds control over the company for the benefit of employees while ensuring that employee benefits remain balanced with the long-term independence and purpose orientation of the business. For example, the John Lewis Partnership does so through its focus in the constitution on long-term financial independence, the upholding of a wide commercial base, and responsible entrepreneurship. So, while I know that John Lewis Partnership describes itself as an employee-owned business first, it also resonates a lot with the steward ownership model and even presented it as such at the Steward-Ownership Conference 2023.

There are also a few examples where the control over the steward-owned company—the voting rights—lies directly or indirectly with the employees but where they don’t have any economic rights as members of the company. And there are many steward-owned companies where only people actively involved in the company can hold voting rights at all, but the entire workforce is not engaged.

Employee ownership models that are clearly distinct from steward ownership are those where the employees can extract value from the company, benefit financially without limits, and sell the company for personal financial gain. In such cases, the fundamental shift introduced by steward ownership—not viewing the company as a transferable commodity but as a mission-anchored organization that is stewarded into the future—is not in place.

Also, employee ownership models where the employees hold direct shares with voting rights that can be sold to third parties or inherited would not fall under the steward ownership definition, where it needs to be ensured that only people connected to the company hold voting rights.

Graeme: As Maike outlined above, there are steward-owned companies that are “employee-controlled.” It is the employees who control the stewardship vehicle. This is not to say employees are the primary stakeholders or beneficiaries. Here, the term that can be used is "employee-led organizations." The UK had a successful initiative to create employee-led public service mutuals, social enterprises which typically took the legal form of a community interest company with each employee as a member.

More generally speaking, I believe that if a steward-owned company has employees to help achieve its objectives, it must have significant employee engagement. This doesn’t mean employee control, which is present in only some steward-owned companies. It also doesn’t have to mean bonuses or other profit-sharing. It just means that it provides employees with good work, including collective and individual employee voice.

But, and this is where I see a real opportunity, there is also an overlap where steward ownership can provide a new distinct model of employee ownership; models where the purpose clause explicitly refers to employees’ interests and employee engagement and, where appropriate, profit-sharing. Employees’ interests do not have to have primacy but can be balanced with those of other stakeholders.

This has to be explicit. It cannot be implied. This can be equivalent to the “over 25%” stake in the UK’s definition of employee ownership. If employees are structurally embedded in the purpose in this way, then steward ownership is not just compatible with employee ownership. In substance, it delivers employee ownership through a different institutional route. This is an exciting proposition. It’s often said there are three main employee ownership models: the worker cooperative, the EOT, and direct share ownership models such as the US ESOP. I see steward ownership as providing a fourth main option. It won’t create an employee-owned company because the employees’ interests can’t have primacy, but with the right purpose clause, they’ll have a significant and meaningful collective stake.

Maike: This is where the two models are genuinely in dialogue. From the steward ownership perspective, it is entirely possible, and in many cases desirable, to embed strong commitments to employees, engagement, and good work into the purpose.

At the same time, steward ownership does not require that step. Many steward-owned companies are deeply values-driven employers without defining themselves as providing employee ownership or listing the employees as beneficiaries. Instead, they might focus on a purpose that serves their customers, society, or the planet. That is why I emphasize that steward ownership and employee ownership are best understood as overlapping but distinct models. Some steward-owned enterprises will clearly sit in the overlap. Others will not.

But I absolutely agree and want to emphasize that every steward-owned company serves employees implicitly. We see in data that steward-owned companies have higher employee satisfaction and employee retention rates; there is also a likelihood of higher wages. By freeing the company from the shareholder value paradigm and establishing a multi-stakeholder perspective, employees know that they are truly working for the purpose of the company.

Graeme: Yes, employee ownership and steward ownership are distinct models. But there’s so much overlap. Owners are motivated to sell to an EOT because it can keep a business independent for the long term, as with steward ownership. Many have a wider corporate purpose as part of the ethos of the business. For those who want to prioritize a wider corporate purpose, steward ownership can include employee ownership through a suitable clause in the objects of the organization, mentioning employee engagement and looking after employees’ interests.

Frankly, in my opinion, all wider-purpose entities should include employee ownership as part of their purpose if they have employees or other workers. If a purpose clause for a business didn't include employees as stakeholders or part of the purpose clause in some way when the business had employees, then that would undermine stewardship claims to self-determination, fairness, and so on. It would be odd not to mention them, unless they are such a minority part of the main purpose or are inessential to achieving the main purpose.

Maike: In steward ownership, this explicit inclusion of employees’ interests in their purpose is not always the case, even though they are, of course, relevant stakeholders and a fundamental part of achieving the purpose of the company. Nevertheless, the ultimate accountability of the stewards is set to the company’s purpose, and that can mean that other stakeholder claims than employees are prioritized. For me, this is a clear mark of differentiation between the two models.

I think we both agree that which model then suits which company best is up to the entrepreneurs: which problem they are trying to solve, which model fits their vision best.

Q: Why does naming and terminology matter so much?

Graeme: From a policy and ecosystem perspective, accurate naming and clear distinctions between employee ownership, employee-owned, employee-led as such and steward ownership are essential. It was only when the UK adopted employee ownership as a distinct policy area, separate from executive share plans and other financially driven employee participation, that “EO” took off. For example, it’s unhelpful simply to say a company has a “purpose trust” or a “discretionary trust.” Where a trust exists solely to benefit employees and provide long-term employee ownership, it should be described as an employee ownership trust. Where a structure exists to serve broader corporate or societal purposes, it’s best described as a stewardship trust or equivalent, even where employees benefit significantly.

Maike: I agree that clear terminology helps founders, employees, advisors, investors, and policymakers understand what a structure does. It protects the integrity of both movements and supports informed structural choices.

On the naming of purpose trusts, I agree that all employee-focused trusts should ideally be specified as such. The usage of “Perpetual Purpose Trusts” in the US for steward-ownership models representing the focus on the purpose of the company has become quite famous through the case of Patagonia. However, I think that it’s important to not only talk about the legal solutions and forms used but rather the wider model: steward ownership, employee ownership, or other models.

Closing reflections

Maike: What is encouraging is that both traditions are pushing in the same broad direction, away from the dominant, unquestioned company and ownership logics. Overlapping but distinct, the employee ownership and steward ownership models are not competitive but rather offer options for every entrepreneur to choose for themselves.

Graeme: Yes. Every organization needs an ownership model that works best for it. The worlds of steward ownership and employee ownership overlap. Each has its own powerful narrative that benefits a business, its employees, its communities, and, to a greater or lesser extent, other stakeholders, and at scale, economies. It’s important to be clear when describing these separate but related initiatives. There are differences, and through clarity of language these differences are better understood and appreciated.

The dialogue between steward ownership and employee ownership is a sign of a maturing field and a growing opportunity to design ownership models that are both economically inclusive and mission-driven. The challenge is to allow that dialogue to deepen without collapsing important distinctions. These are exciting times for adding variety to how businesses are owned and governed.