Building a Better Capitalism: How Employee Ownership Honours Legacy, Sovereignty, and the Future of Canadian Business
Capitalism being questioned is not necessarily new, but it’s on the rise. Increased inequality, concentrated wealth, eroding community roots, foreign buyouts, and a growing sense that the economy works for fewer and fewer people are concerns we face day-to-day. For Canadian business owners thinking about their next chapter, they are deeply personal issues.
When you have spent decades building something valuable, including a team, a culture, a reputation, and a place in your community, what a business owner decides to do next is a significant decision. Many owners may focus on the financial side of an exit. But the most thoughtful ones ask a harder question: what do I want this business to stand for after I'm gone?
Three ideas have never felt more relevant to that question:
- Legacy in the context of employee ownership: what it truly means to protect what you built.
- The flavour of capitalism we are actually choosing when we decide how to exit: who benefits, who owns what, and where the wealth that’s been generated goes (hint: it can stay with the employees and the community that helped build it).
- Sovereignty: in a moment when Canadians are thinking hard about economic independence, keeping decision-making power at home, and what it means to be genuinely patriotic in business, employee ownership has never made more sense.
The Problem with Corporate Capitalism
To understand why employee ownership matters at a systemic level, it helps to start with Louis Kelso, a merchant banker and economist who (mainly) created the modern US ESOP in the 1950s and '60s. Kelso was not anti-capitalist. He was deeply pro-capitalist. But he believed capitalism was failing to live up to its own ideals.
His fear was straightforward: if the economy continued on its current path, a small fraction of the population would end up owning the vast majority of productive assets. That concentration of wealth, he argued, would hollow out the middle class and ultimately undermine democracy itself. Unfortunately, he wasn't describing a distant dystopia because the trend was already underway.
Decades later, his concern looks prescient north of the border. In Canada today, the top 1% of families hold around a quarter of the nation's wealth. Globally, the gap between those who own capital and those who only sell their labour has widened steadily and significantly. The conventional response, like higher taxes or more redistribution, only treats the symptom and not the cause. Kelso's insight was different: the problem isn't that capitalism produces too much wealth, it's that ownership of productive assets is too narrow.
In effect, there are two versions of capitalism operating in the world today: Corporate Capitalism focuses on profit as the singular measure of success, concentrating returns among shareholders while workers remain on the outside; People's Capitalism, the animating idea behind employee ownership, puts equal weight on the word "private" and the word "ownership," insisting that both should be broadly shared.
A growing number of business leaders are arriving at the same conclusion. The rise of the Benefit Corporation (B Corp) Certification, and the terms, "purpose corporation” and “stakeholder capitalism”, all point in the same direction: the old model is running out of road. The question is: what replaces it—and who gets to decide?
Who Owns Canada's Businesses?
This has certainly taken on a new and sharper edge in Canada in the past couple of years.
Trade tensions, tariff pressures, and the volatility of our relationship with the United States have forced a long-overdue national conversation about economic sovereignty. Canadians have been reminded that supply chains, ownership structures, and investment decisions made elsewhere have major consequences here at home.
When a Canadian business is sold to a foreign buyer or absorbed into a large multinational, what follows is predictable: profits flow out, head office functions move, procurement decisions get centralized elsewhere, and community investment dries up. Its roots have been pulled up, its culture eroded.
This is not a hypothetical risk. It is the default outcome of the ownership transition now underway across the country. Canada is in the midst of one of the largest intergenerational transfers of business wealth in its history. As the baby boomer generation exits, trillions of dollars in small and medium-sized business assets will change hands. Without deliberate planning, a significant share of that wealth and the decision-making power that comes with it will migrate out of local and Canadian hands.
Employee ownership is one of the most direct and practical responses to that risk. When a business owner sells to their employees, the company stays Canadian. It stays locally owned and locally governed. The profits it generates recirculate in the community. The jobs it sustains remain stable. The values it was built on continue to guide how it operates.
When buying Canadian, supporting Canadian businesses, and thinking about what economic patriotism actually looks like in practice, choosing to sell to your employees is one of the most tangible expressions of those values available to a business owner. It is not a symbolic gesture. It is a structural decision that keeps Canadian businesses in Canadian hands.
What Legacy Really Means for a Business Owner
When thinking about exit, it is natural to think about money—the valuation, the deal structure, the financial security of retirement. These things matter, and a well-structured employee ownership program can absolutely deliver on them.
But legacy is part of an exit and it runs deeper than the transaction.
The owners who are drawn to employee ownership tend to understand something that others overlook: the people in their business have not just worked for them, they have helped build what the business has become. The culture, the reputation, the client relationships, the institutional knowledge, the spirit of the place—this was all created together. A sale that ignores that reality, that treats the business purely as a financial asset to be optimized and transferred, misses something essential.
I recall a construction client once said to me something like, why should I have all this wealth that I won’t even be able to spend in my lifetime when it’s the team that has helped build it?
There is also the harder truth about what most exits actually produce. A sale to a third party, particularly a private equity buyer or a foreign acquirer, typically means significant changes to culture, management, and priorities. The things the founder cared most about are often the first things to go. Employees who have given years of loyalty find themselves working for strangers with different goals. The community relationships the owner cultivated get deprioritized. The name on the door may stay the same, but the business the owner built does not.
Employee ownership is a different kind of exit. It is, at its core, an act of stewardship. It gives the owner a structured, financially sound path to exit. The owner passes the business to the people who know it best, who are most invested in its success, and who are best positioned to carry it forward. The culture, values, and community presence all survive. And the employees who showed up every day and made it what it is get to share in the wealth they helped create.
That is what legacy looks like when it is taken seriously.
At the systemic level, every employee ownership conversion is a small but meaningful act of economic rebalancing. It takes one business owned by one person or group distributing that ownership more broadly to the people who do the work. Multiply that across hundreds or thousands of businesses and you begin to see Kelso's vision taking shape: capitalism in which ownership of productive assets is genuinely widespread, the wealth generated by businesses flows to the communities that generate it, and the middle class is not slowly hollowed out but actively rebuilt.
Add the sovereignty dimension, and the picture becomes even more compelling. Each employee ownership transition is also a vote for keeping Canadian businesses Canadian, a structural commitment to local ownership, local decision-making, and local reinvestment that no amount of "buy Canadian" marketing can replicate.
The Opportunity for Canadian Business Owners Right Now
The moment to act is now, and not just because of the macro trends.
Canada's federal government made permanent meaningful tax incentives for employee ownership transitions in the Employee Ownership Trust (EOT) structure that allows qualifying owners to claim up to $10 million in capital gains on the sale tax free. These incentives recognize what advocates have long argued: that employee ownership produces better outcomes for workers, communities, and the broader economy, and deserves policy support.
But the deeper reason to act is not the tax treatment. It is the recognition that the decision of how to exit a business is one of the most consequential choices an owner will ever make—not just for themselves, but for everyone whose livelihood, community, and future is connected to what they built.
Since the decision is not financially driven, there are many structures of employee ownership to explore. An EOT may work for you, or a direct share ownership program may be the way to go.
The question is not just: what is my business worth? It is: what do I want it to stand for? Who do I want to own it? What kind of economy am I choosing to support with this decision? And what story do I want to be able to tell about the chapter I wrote?
Employee ownership will not solve every problem. But it is one of the most direct, proven, and immediately available tools for aligning the way we do business with the values we say we hold.
If legacy, employee wellbeing, Canadian ownership, and a fairer economy matter to you, this conversation is worth having.
We invite you to reach out and explore whether employee ownership is the right fit for your business and your vision of what comes next.
The four structures we assist our clients with are:
- EOT (Employee Ownership Trust)
- Employee Share Purchase (direct share plan, including MBOs)
- Stock Option
- Synthetic Equity
The right path is going to depend on the goals you want to achieve. Some owners find that a hybrid of more than one structure is the best fit.
