A Democratic Turn

An important way forward is to facilitate the creation of more democratic employee-owned firms in Canada. Indeed, this idea has momentum: federal legislation took effect last year that creates employee ownership trusts (EOTs) as a promising new vehicle to achieve this aim.

In a democratic employee-owned firm, employees collectively own a majority of the company, have meaningful rights to help shape decisions, and profits are shared broadly and equitably. Democratic employee-owned firms include a range of possible company structures including worker cooperatives and EOTs.

Employee-owned firms exist in Canada, although there are a relatively small number of them. They are most common in Quebec but there are examples in other parts of Canada. Friesens, which operates in Manitoba, is one of Canada’s leading book printers. They are employee-owned and democratic. Shift Delivery is a worker cooperative and bike-powered delivery firm serving Vancouver. PCL Construction and Chandos Construction are 100 percent employee-owned.

And democratic employee ownership is popular across the political spectrum. A recent US survey found that a majority of Republicans, Democrats, and Independents support the concept of employee ownership and would prefer working for a firm owned by employees. Experimental research in the United States confirmed these findings and found they hold even when participants are presented with counterarguments against democratic workplaces.

Canada’s federal and provincial leaders should adopt policies to help make our economy more democratic.

British Columbia premier David Eby has called the current economic crisis a “human-caused disaster.” It is that. But it is also an opportunity. There is a new willingness among Canadians to think and act collectively and collaboratively to make our economy more resilient. There are many reasons why democratic employee-owned firms will help them do just that.

Employee-Owned Firms for the Win

Democratic employee-owned firms are more grounded in their communities. Employee-owners who have homes, families, and friends to consider are unlikely to vote to move their businesses out of their communities in response to tariffs or other economic shocks. Nor are they going to run around the globe looking for the cheapest labor force.

Democratic employee-owned firms also have a track record of weathering economic adversity and facing it with creativity. They are less likely to fail during a recession and more likely to maintain employment and wages for their workers, which also means they can help maintain macroeconomic stability for the wider economy.

Research shows that democratic employee-owned firms can be just as or more competitive and profitable than conventional businesses. And they are more likely to distribute wealth more equitably, reducing inequality both within firms and across society. Wealth, of course, makes it easier for people to weather economic adversity.

Additionally, when adopting labor-saving AI technologies — another potential threat to Canada’s workers — employee-owners are positioned to share in the firm’s profits and benefit from efficiencies. When jobs and incomes are protected through employee ownership, AI systems have the potential to make work safer, easier, and more productive. When workers are not in the driver’s seat, however, there’s more danger that AI systems could put people out of jobs and deepen economic inequality.

The Canadian government should act quickly to support and incubate democratic employee-owned firms. How can they do that? There are many actionable policies available that have been tried and tested around the world.

In 2024, Canada’s federal government passed legislation to support EOTs. EOTs hold the shares of a firm in trust for the benefit of the firm’s employees. EOTs make it easier for business owners to sell their firms to their employees, with the purchase price paid out of the firm’s profits over several years, meaning there is no out-of-pocket cost to employees. Grantbook, a company that advises philanthropic foundations, became the first Canadian company to convert to an EOT in January 2025.

The federal government has instituted a partial tax exemption on capital gains realized through the sales of conventional firms to EOTs, which is in place through 2026. This policy creates an incentive for business owners to pursue this option when planning their succession. As a next step, this exemption should be made permanent and extended to worker cooperatives. These tax breaks may be justified by the larger social and economic benefits associated with employee-ownership.

Democratizing the Economy

There are numerous other ways that governments can support and promote the democratization of our economy. For example, they can provide seed grants to establish regional employee ownership centers, a successful approach found in other jurisdictions.

Canada could create a public investment bank with a mandate to cultivate democratic employee-owned firms and provide incentives for conventional banks to lend to these firms. Governments should also ensure that democratic employee-owned firms are eligible for — and prioritized in — existing public investment funds and business support programs. When businesses are being sold or shuttered, workers could be afforded a right of first refusal to purchase them.

Additional tax incentives for democratic employee ownership are also worth considering, such as setting lower corporate income tax rates for these firms and providing personal income tax deductions for workers who put their savings toward creating new worker cooperatives.

Canada is facing an unprecedented threat from an unpredictable and hostile US administration and the county needs to do something new and different, fast. The Canadian economy will always be affected by global economic trends and external shocks. But Canadians can protect themselves better than they have done in the past. A new Canadian economy with more — or many — democratic workplaces would be a more equitable, empowered, and resilient economy. Now is the time to make it happen.