Major, Guy  ORCID: https://orcid.org/0000-0002-4193-6601 and Preminger, Jonathan ORCID: https://orcid.org/0000-0003-0731-5737
2025.
“Protected profit” and value sharing to boost non-interfering investment, employee ownership and democratic businesses.
Journal of Participation and Employee Ownership
10.1108/JPEO-12-2024-0033
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Abstract
Purpose: Employee ownership (EO) and profit sharing have numerous benefits. Employee Ownership Trusts (EOTs) are proliferating, but EO could grow faster by harnessing “non-interfering”, risk-sharing investment. Companies with common ownership (such as EOTs) are at risk, longer-term, from inadequate equity, which could lead to under-investment, slower growth or demutualisation. Other private businesses are also held back by substantial gaps in non-interfering, risk-sharing investment. Design/methodology/approach: Existing financial instruments do not meet these challenges. We design a viable alternative, balancing the needs of entrepreneurs, workers and investors. Findings: “Protected profit” sharing between workers and investors achieves this balance: guaranteed “base” pay is capped at a pre-agreed average level; profit-sharing pay and payments to loans, bonds or shares are all agreed fractions of “protected profit” (= revenue – non-pay costs – base pay costs). This aligns interests between workers, entrepreneurs and investors, and together with restricted voting rights, solves the principal-agent/risk-control problems, allowing reward-/risk-sharing equity investment. Practical implications: Sharing protected profit allows sustainable employee/trust (or entrepreneur) control, while increasing liquidity, reducing the risk of “degeneration” and expanding the range of firms that can transition sustainably to control for/by employees. It also enables private firms in general to attract capital, boosting productivity and growth. Social implications: Our mechanism removes the “need” for exorbitant executive pay (a driver of inequality), is compatible with Islamic finance and will catalyse business, thus civic, democratisation. Originality/value: “Protected profit” sharing prevents whoever controls a company from unilaterally raising wages at the expense of investors, while protecting and incentivising everyone in the firm.
| Item Type: | Article |
|---|---|
| Date Type: | Published Online |
| Status: | In Press |
| Schools: | Schools > Business (Including Economics) |
| Subjects: | H Social Sciences > H Social Sciences (General) H Social Sciences > HB Economic Theory |
| Publisher: | Emerald Publishing |
| ISSN: | 2514-7641 |
| Date of First Compliant Deposit: | 13 October 2025 |
| Date of Acceptance: | 9 September 2025 |
| Last Modified: | 05 Nov 2025 09:45 |
| URI: | https://orca.cardiff.ac.uk/id/eprint/181023 |
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