The economy is today facing an important crossroads leading to two strategically different paths - one of financial ownership leading to the dominance of short-term interests that will dictate the fate of Slovenian companies, the other of local ownership putting the welfare of workers and local communities at the forefront.
According to a University of Ljubljana survey[1] as many as 4,000 Slovenian companies, employing nearly 150,000 workers, will change ownership over the next ten years. This means that tens of billions of euros of capital will be redistributed, bringing the biggest redistribution of wealth since the denationalisation of the 1990s.
At a time when we are facing a generational transfer of business ownership, it is mainly the existing owners who will choose the path. The strategic question is which path should be taken by the state, local communities and civil society.
Less than a year ago, Alpina's new owner, the Czech financial fund Franco, announced the transfer of production to Bosnia.[2]. In pursuit of higher returns on investment, mass redundancies have followed, which will have a major impact on workers and the community in Žire. Alpina and some other 'Slovenian' companies are examples of the path of financial ownership.[3]
Alpina's headquarters are in the Gorenjska region, in the small local municipality of Žiri, where a significant number of people rely on employment in local companies to survive. In the same valley is the printing company Etiketa, which has different priorities to Alpina - it aims for sustainable business, long-term development, job preservation and workers' welfare. The key difference between Alpina and Etiketa? Etiketa is an employee-owned company and represents a path of local ownership.
Thousands of companies, both small and large, will face this crossroads in the coming years. The biggest transfer of assets in the history of the independent Republic of Slovenia is upon us. What will this mean for owners, for businesses, for employees, for local communities? The new reality of the Slovenian economy is the question of the future of ownership and the direction of ownership priorities. The massive choice of one path or the other will have starkly contrasting social and economic consequences that will significantly shape our future.
Two different visions for the future
At the time of the takeover, Alpina's new owners emphasised the aim of developing and growing the company to continue to provide excellent products and services. The company is profitable for its owners, but that is only one side of the coin. In the name of additional profits for the financial owners in the Czech Republic, 83 workers will soon be saying goodbye, while only 23 will receive new contracts to work in other departments of the company.[4] Although the decision is "rational" in financial terms, the local community will pay the price - redundancies, social and psychological distress, a reduction in the purchasing power of the local population, a decline in municipal revenues and a reduction in career opportunities for young people lead to instability and the decline of the whole community. The price of financial ownership is a social price for which the financial owners are not held accountable. The burden is passed on to the community and the public purse.
On the other side is Etiketa, a company that has been pursuing the interests of the local community for more than 60 years, and anchored its mission almost 20 years ago with the transition to employee ownership. This form of ownership provides stability, which is particularly important for employees in times of economic crisis. Etiketa provides its employees with regular and competitive salaries, annual Christmas bonuses and annual dividends. The concern for the welfare of employees is reflected in the many little things that make a big difference - in addition to the statutory lunch break, employees have two additional ten-minute breaks, air-conditioned working spaces, their own canteen with adaptations for vegetarians and employees with health restrictions, as well as training and sporting activities. And of course, most importantly - as owners, employees have a voice and the opportunity to participate in the decisions that guide the company's activities. As Etiketa's CEO, Primož Kokalj, summarises:
"Our aim has always been to create a work environment where people feel valued and safe."[5]
Although Alpina and Etiketa are located in the same place, today they are only connected by a short flight distance. Alpina operates on a model of financial ownership, where the aim is to maximise profits for the owners, often at the expense of workers' welfare. By contrast, Etiketa is a company that has built on decades of local ownership, providing stable and friendly jobs and actively contributing to the development of the local community.
Etiketa is not the only example of such corporate governance in Slovenia. Similar values are shared by other companies such as Domel, M-Sora, Inea, Dewesoft, Metrel, RBT Technologies, Alples and many others, which prove that it is possible to set up an ownership strategy that reduces the human cost of economic crises, while expanding the space of trust, solidarity and democratic accountability.
What is employee ownership?
Etiketa represents a model of local ownership sustained by employee ownership. Employee ownership is a way of organising a company where each generation of workers holds the right to make decisions, and all employees share in the profits and successes of the company.
This more democratic form of ownership fosters a sense of belonging, builds motivation and increases productivity, because everyone in Etiquette has a stake in the success and stability of the company. Broad employee ownership also means that the interests of the company are aligned with those of the local community, as these workers are also usually the citizens who interact on a daily basis with the stakeholders indirectly affected by the company's business. This leads to a greater concern for the environment and an emphasis on funding local sports, cultural and community programmes. Employee ownership is not only a good business model, it is also an extremely socially responsible form of ownership.
The largest number of employee-owned businesses can be found in the US, with a total of 14 million workers, but also in Europe - almost two thousand new employee-owned businesses have been created in the UK in the few years since the ESOP legislation was adopted, and tens of thousands of cooperatives have been successfully operating for decades in Italy, Spain and France.
The ESOP model, which is also coming to Slovenia with the announced legislation, allows employees to buy shares on their own behalf without having to invest their own savings or take on personal debt. An ESOP buy-out is financed by the expected profits of the company, which pay the owner or repay a bank loan. This form of ownership transfer is primarily intended to address ownership succession, but is also used by those entrepreneurs who want to build more loyalty and motivation among their employees.
When faced with the generational challenge of succession, the cases of Etiketa and Alpina have much to teach us, but of course they are not isolated. According to preliminary data from a University of Ljubljana survey, they will be joined by several thousand Slovenian companies. The owners' decision on the path to be taken will have important consequences for Slovenian society and the economy.
Leveraging ESOPs is a central government strategy for sustainable economic development in many countries around the world. Although it is currently only supported by legislation in the US, UK and Canada, supportive laws are also being announced in Slovenia, Denmark, and Ireland, and many other countries will undoubtedly join the initiative.
The Slovenian ESOP law could be a precedent-setting piece of legislation in the EU area, which in the light of the succession challenge would create the conditions for a shift towards a fairer, more efficient and sustainable economy. The law, which is being drafted by the Ministry for a Solidarity Future with technical support from our Institute, will seek to encourage as many owners and workers as possible to choose the path of local ownership - employee ownership - through tax breaks.
Our work
The Institute for Economic Democracy works to create democratic working conditions that ensure a fairer distribution of wealth and build a sustainable, resilient and highly competitive economy. By introducing best practices in employee co-ownership, we aim to strengthen the economy, promote sustainable development and support ownership models that primarily reward work and ideas. At the Knowledge Centre, we design advocacy campaigns, research good practice and develop policy proposals to make it easier for companies to make the transition to employee co-ownership. The Institute also excels in practical work. We help companies on the path to a new ownership future, provide strength in financial and organisational planning, support the process with cutting-edge legal expertise and provide training for all stakeholders involved in the process of corporate transformation.
We are proud to help build stories of local ownership. To this end, we are also working with Etiquette, where we are working with management, employees and retired owners to transition to a sustainable model of employee ownership - the sloESOP model. We started the project in December, when we held workshops for over 150 employees, and through surveys, among other things, we found that there is support among nearly 90% employees to maintain internal ownership. This is a wonderful signal and support for the project from the stakeholders who will benefit the most from it. It is also not surprising - in Inea, the largest 100% employee-owned company in Slovenia, all employees who have been with the company for at least one year are involved in ownership through the ESOP model. It is clear that workers are more than willing to take ownership!
The choice between the path of financial ownership and the path of local ownership must not be a purely financial one. It is a decision that decides the future of the economy, communities and thousands of workers in Slovenia. We agree with the recent Draghi report that economic development will be key to the future of the European Union, but the question is how much of the European economy will still be looking after European communities in ten years' time. We say that the right path is one that pursues, above all, the well-being of people and the environment. That is the path of employee ownership.
If you are interested in learning more about the employee co-ownership model and the services we provide, please visit our sloESOP pages. If you are a business owner preparing for a transfer of ownership, a manager considering long-term solutions, or an employee who wants a more participative working environment, we invite you to contact us.
[1] Preliminary results of the University of Ljubljana survey
[2] https://www.delo.si/gospodarstvo/novice/alpina-ima-novega-lastnika-in-direktorja
[3] https://www.dnevnik.si/novice/posel/odpuscanje-in-ukinjanje-razvoja-modne-obutve-v-alpini-2685261/
[4] https://www.rtvslo.si/gospodarstvo/presezni-delavci-alpine-dobivajo-odpovedi/725436
[5] https://svet24.si/clanek/novice/slovenija/6740b3455e420/primoz-kokalj-etiketa