By Sarah Deas

Recently I was invited by the Provincial Council of Gipuzkoa to share Scotland’s success in promoting employee ownership as a succession solution with business leaders in their region. This was quite an honour given this region of the Basque Country is home to Mondragon, the world’s largest worker co-operative.

Sarah Deas Basque Country

So, why is the Basque Country interested in learning from Scotland? The answer lies in the fact that Gipuzkoa is facing similar economic issues to other developed world regions; ‘babyboom’ business owners are looking to retire – it is anticipated that a third of owners will be seeking exit solutions in the next 10-15 years.  There’s a desire to find solutions that will ensure the businesses’ continuity, maintain decision centres in the region, retain talent within organisations and motivate/reward workers.

Building upon a history of worker participation through worker co-operatives, the region is keen to promote a model that both addresses these challenges and aligns with their culture and values. Employee ownership offers that solution.

As keynote speaker at an event in San Sebastian, the capital city, I presented the economic development rationale for Scotland promoting employee ownership as a succession solution (very much mirroring that of Gipuzkoa) and shared success stories, including Aquascot and Page\Park.

The audience then heard from three local businesses that had chosen employee ownership as a succession solution; Exide (150 employee engineering business); Industrias Ormola (40 employee manufacturer of plastic, aluminium, and brass moulds for foundries); and Tarte Coop (28 employee provider of heating and air-conditioning systems).

I was struck by the similarity of each of their stories to those of Scottish businesses that have transitioned to the model. There was a strong ethos underlying each owner’s decision… a desire to see it continue in its current form, to sustain local employment and to do the best by those who had made the business a success. Also, recognition that employee ownership would drive performance and position the business well for a bright future.

A lively discussion session followed, covering many aspects of the model.  In wrapping up a question was asked as to the panel’s thoughts on the most difficult aspect of a transition. This stimulated a discussion on the difference between ownership and management. Whilst it was acknowledged that the culture in an employee-owned business will be more transparent and participative, the panel stressed the importance of clearly defining roles and responsibilities.  A valuable learning point.

The Provincial Council of Gipuzkoa has devolved tax raising powers which it uses to incentivise take-up of the employee ownership model. Whilst there are differences in approach, there was real interest to learn from the UK’s 2014 legislation that enables vendors selling a majority stake to an employee ownership trust to gain exemptions from capital gains tax and for bonuses paid out by the trust to be exempt from income tax.

Whilst the Gipuzkoa Province is seeking to actively promote the model, it already has a well-established employee ownership sector: 245* businesses employing 3,253 people (equating to 37% and 49% of employee owned companies and employees in the Basque Country respectively). So, I really did feel honoured to share Scotland’s aspiration and early success in building a strong employee ownership sector.  We have much to learn from my hosts and I look forward to continuing to share experiences.

*figures exclude co-operatives