A generational shift in American entrepreneurship is quietly reshaping the landscape of small business succession. As the baby boomer cohort retires at a rate of roughly 10,000 individuals per day, a growing number of owners are opting to sell their companies to their employees rather than to private equity or external buyers. The trend, which has gained momentum over the past decade, has drawn comparisons to the employee ownership model more commonly associated with British firms such as John Lewis Partnership and Arup Group.
According to data from the National Center for Employee Ownership, the number of employee stock ownership plans (ESOPs) in the United States has risen steadily, with roughly 6,500 plans now covering 14 million workers. But the more diffuse model of worker cooperatives and trust-based ownership is also expanding. The Democracy at Work Institute reports that worker cooperatives in the US grew by 20 per cent between 2020 and 2023, a pace that outstrips the broader small business sector.
The appeal is pragmatic. For retiring owners, an employee sale often yields a competitive price while preserving the company’s culture and avoiding the disruption of a trade sale. For workers, it offers a direct stake in the firm’s performance and a voice in governance. Studies from Rutgers University and the University of Pennsylvania have found that employee-owned firms exhibit higher productivity, lower turnover, and greater resilience during economic downturns.
The British experience provides a cautionary counterpoint. The UK has long been regarded as a pioneer in employee ownership, with the John Lewis Partnership’s constitution enshrining worker representation since 1929. The sector has been bolstered by tax incentives introduced in 2014 and revised in 2022, which have led to a surge in conversions. The Employee Ownership Association estimates that over 1,200 UK firms are now majority employee-owned, up from just 300 a decade ago.
However, the model is not without its challenges. Employee-owned firms must navigate the tension between democratic governance and commercial efficiency. At John Lewis, the partnership has faced criticism for a perceived lack of strategic agility, and its profitability has lagged behind competitors in recent years. Similarly, US firms adopting the model must contend with complex regulatory frameworks and the need to instil a culture of ownership among workers who may be unaccustomed to such responsibilities.
Despite these hurdles, the convergence of US practice with UK precedent is notable. In both countries, the driver is demographic. The US Small Business Administration reports that 75 per cent of privately held businesses are owned by baby boomers, and only 30 per cent of these have a survivorship plan in place. Employee ownership offers a solution to what economists call the “silver tsunami” of business closures, which could otherwise destroy millions of jobs and erode local economies.
Policy makers are taking notice. The US Employee Ownership Act, introduced in 2023 but not yet passed, would expand tax incentives and provide technical assistance for conversions. In the UK, the government has commissioned a review of the sector with a view to further support. The OECD, in a 2022 report, highlighted employee ownership as a tool for inclusive growth, recommending that member states consider legislative frameworks to facilitate it.
The shift is not merely economic but also cultural. It represents a subtle rejection of the shareholder primacy that has dominated Anglo-American capitalism for decades. In its place, a stakeholder model is emerging: one that aligns the interests of capital and labour, distributes wealth more broadly, and fosters long-term thinking. Whether this experiment will scale remains an open question, but the early data suggests that for many small and medium enterprises, worker ownership is not an ideological gesture but a practical solution.
