Employee Ownership for economic democracy in the private sector

Partnership
Initiative

Background

The Instituto Tecnológico y de Estudios Superiores de Occidente (Western Institute of Technology and Higher Studies- ITESO, Mexico) has a 65-year legacy of academic excellence, rooted in social commitment and the promotion of justice through research and active participation in society, promoting strategic partnerships with entities such as the Consejo Empresarial de Jalisco (Jalisco Business Council - CEMJAL, Mexico), which brought together multiple sectors through a grouping of small, medium and large enterprises operating in Jalisco.

The University of Aix-Marseille (France) and the ESSCA Business School (France) lent their extensive expertise in research on employee share ownership, cultivated in the dynamic business environment of France, which had significant rates of employee share ownership. The University of Ljubljana (Slovenia) joined as the third European academic entity, providing not only its research capabilities, but also its experience in transferring the European ESOP model to other countries.

The Pontíficia Universidad Católica del Perú - PUCP, a leading centre for economic and democratic studies, with notable research on employee share ownership schemes, had carried out key research in collaboration with the Partnership's academic entities.

The Institute for Economic Democracy - IED (Slovenia) developed the European ESOP model, a legal innovation that created a leveraged buyout mechanism that facilitated the acquisition of corporate shares by employees, using the profits of the operating company. IED was included as a collaborating entity to provide its technical and policy expertise.

This Partnership emerged from a shared commitment to address pressing challenges: inequality, poverty and stagnating economic growth. Their joint efforts included groundbreaking research such as "Sharing the ownership in Peru and Mexico: The case of a French MNE prompting the SDGs achievement", presented by the five academic entities of the Partnership in January 2023. CEMJAL's incorporation into the Partnership broadened its scope, leveraging networks of women business leaders in Mexico and enriching the knowledge base.

Entities and roles

Beneficiary entities

Instituto Tecnológico y de Estudios Superiores de Occidente

Mexico

Consejo Empresarial de Jalisco

Mexico

First provider entities

Pontificia Universidad Católica del Perú

Peru

Second provider entities

Université d'Aix-Marseille

France

ESSCA School of Management

France

University of Ljubljana

Slovenia

Collaborating entities

Institute for Economic Democracy - IED, Slovenia

Development challenges

Latin American countries share common backgrounds and obstacles for business, such as institutional weakness, family-led business structures, hierarchical capitalism, and developing financial markets. Research shows that employee share ownership can improve business performance, boost resilience in the face of crises, improve income, and reduce wealth inequality. This approach not only contributes to the achievement of the Sustainable Development Goals, but also advances social and economic justice.

Through this Triangular Cooperation Initiative, the Partnership member entities explored the potential of adopting employee share ownership schemes, with a view to achieving the 2030 Agenda. The Partnership sought to introduce a specialised model for Mexico (MexESOP), which would involve conceptual and legal structures based on the Peruvian, French and Slovenian experiences and knowledge, as well as the eurESOP model.

This Triangular Cooperation Initiative facilitated knowledge sharing among the Partnership entities to develop a model for employee share ownership plans, based on the experience of the Provider entities, and sought to promote economic democracy in the private sector through inclusion, equality and a horizontal approach.

Triangular approach

Mexico and Peru shared several challenges that required government action to achieve sustainable development, such as anti-corruption initiatives, reversing the informal economy and overcoming social inertia. By indirectly supporting inclusive ownership structures, the governments could catalyse social change. Peru's pioneering strategies, together with the French and Slovenian knowledge and expertise, helped develop a roadmap for joint research and policy recommendations, resulting in a policy framework to expand employee share ownership in Mexico.

ITESO, as an academic and social entity, sought to consolidate an economic strategy based on democracy and aiming to tackle the roots of inequality and poverty, also promoting the strategy among its stakeholders. CEMJAL, as a business organisation in Jalisco, centred its work on similar values and sought more innovative tools and capacity building for its small and medium-sized enterprises.

By working together, the Partnership entities shared experiences of employee share ownership in different contexts, with the aim of generating new knowledge by drawing from the perspectives of each cultural and legal environment. New knowledge was primarily generated through the experiences shared by participants in the Initiative's activities, including meetings and visits with key stakeholders (companies, experts, investors, policy makers, students and academics).

The Partnership relied on its first-hand experience collaborating with companies on employee share ownership to establish a specialised model for Mexico (MexESOP), involving a conceptual and legal structure. The model was outlined in a white paper describing the main structural features and presented at the Partnership events in Mexico and Peru. The events prompted moments of reflection to advance local policies and knowledge in the business sector on the advantages of employee share ownership schemes, making it possible to assess MexESOP based on the challenges encountered on the ground that were specific to the Mexican context.

Sectoral approach - Contribution to the 2030 Agenda

Primary SDG

Goal 8.1 Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 per cent gross domestic product growth per annum in the least developed countries

Goal 8.2 Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors

Goal 8.3 Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services

Goal 8.10 Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all

Secondary SDG

Goal 1.4 By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership and control over land and other forms of property, inheritance, natural resources, appropriate new technology and financial services, including microfinance

Goal 1.B Create sound policy frameworks at the national, regional and international levels, based on pro-poor and gender-sensitive development strategies, to support accelerated investment in poverty eradication actions

ADELANTE SDG

Goal 10.2 By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status

Goal 10.3 Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard

Goal 17.1 Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection

Goal 17.9 Enhance international support for implementing effective and targeted capacity-building in developing countries to support national plans to implement all the sustainable development goals, including through North-South, South-South and triangular cooperation

Goal 17.14 Enhance policy coherence for sustainable development

Goal 17.16 Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology and financial resources, to support the achievement of the sustainable development goals in all countries, in particular developing countries

Territorial approach

Intervention methodology

The work plan for this Initiative consisted of eight activities that fostered academic research, discussions with key actors and strategic study visits to the Partnership member entities.

It began with a study by the research teams of the Partnership's academic entities, carried out over eight months, which involved in-depth research and a comprehensive assessment of the state of economic democracy and employee share ownership in Jalisco, Mexico. The research involved a variety of methods, such as literature reviews, in-depth interviews, focus groups and survey analysis; the results of which were disseminated through specialised journals and university information channels.

A consultancy was also carried out to help develop the MexESOP roadmap, adapting it from the European ESOP model. The roadmap included exploring the possibility of a pilot project before the regulatory framework was approved, as well as a high-level policy proposal that outlined the main legislative elements required to regulate and incentivize employee share ownership schemes in Mexico.

At the same time, the Partnership member entities carried out three study visits to conduct top-level meetings with the academic, political and business sectors of both regions. They provided key opportunities to discuss and share the issues of employee share ownership and economic democracy, as well as to study related experiences.

The Partnership also organised three seminars that were open to the university community and stakeholders such as companies, entrepreneurs and civil society organisations, with a special focus on women entrepreneurs who had shown interest in employee share ownership. The seminars included a diagnostic survey to feed into the research team's study and two closing meetings to share the results and provide an opportunity for active feedback.

›› Download the report of the "Qualitative study"

Direct beneficiaries (individuals)

According to Rule 9 of the Guidelines for Applicants: all persons participating in the activities of the Initiative.

This Initiative benefited 511 people, from researchers and students affiliated with the Partnership's academic entities to approximately 60 business leaders, primarily women, who were invited to participate in the study and activities.

Significant impact on the university community is expected in the long term, as well as benefits for social projects and social economy and solidarity initiatives linked to ITESO. In addition, there is great potential to reach out to a wider range of business groups, where issues of economic democracy and workers' human rights can be advanced.

Budget

EU contribution: 160,104.35 €

Co-financing - Triangular Cooperation Partnership: 178,264.86 €

Total budget: 338,369.21 €

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