Andy Farquharson: Hello, everybody, and welcome back to the alternative exit. So, our next guest is someone I met at the recent Oxford Symposium on Employee Ownership. And there he mentioned that his unusual EO setup would be worth exploring. So that's why we've got Sam Bowstred here. He's the chair and global mem chair of the Global Members Board at Scott Beta. So we're gonna learn a little bit more about Scott Beta later on. But I think importantly, Sam's the first person to hold that role full time. And and I think the big part of what makes this sort of makes this an episode is like he joined in 2020 twelve as a process operator on the shop floor, but and now like is in this role, this 800 person industrial democracy which that sort of generates over like 22 million pounds of business and has been in common ownership for a long time, since like 1951. So, thanks for joining us on the alternative exit.
Sam: pleasure to be here.
Andy Farquharson: Sam, mate, again, thank you so much for joining. it's great to be able to sort of continue these conversations that we had at the symposium. But I mean you did mention when you're outreach that look there is it is an unusual EO setup that you guys have there at Scott Beta. Can you just tell us a little bit about that?
Sam: Yeah, sure. So we we went employee owned in nineteen fifty-one and and that's relevant because the the EOT, the Employee Ownership Trust, didn't exist and wouldn't exist until all the way in into twenty fourteen. so we had a founder, deeply religious man, Ernest Barder, and he wanted to create a new way of doing business, a way of almost dissolving ownership. It wasn't about sharing ownership, but completely remove remove ownership. And there was no way of doing that. It just didn't exist. so we had to get quite creative in in how that was was done.
Andy Farquharson: Yeah.
Sam: so Ernest Ernest created something called the Scott Barter Commonwealth, and that is a registered charity, and that's the that's where all of the shares of the business are held in this charitable trust.
Andy Farquharson: Okay.
Sam: Beneath that is a regular business and we have a a company board and then alongside that, and and as the constitution has evolved over decades, we've created other other things, and and my board in there is is called the Global Members Board. But the unusual part is that it's a charitable trust at the top. and that why it's different is you don't have the the regular EOT structure. We've got charitable purposes that we must meet as well. So the charity commission in the UK keeps us honest, making sure that we're doing good things for the community as well.
Andy Farquharson: That's very good. And so in terms of like the the the employees ownership, I mean we've we've talked about on on this pod many times about what it means in an ESOP,
Sam: Yeah.
Andy Farquharson: what it like for the for the employees, what it means in an EOT, like that sort of present like what it means in the Slovenian model, like with an in the with the the in the Danish model with co-ops. What does it mean what does employee ownership mean within a charitable trust?
Sam: Yeah, good question. we what it what it means for employees here is it's almost your first step in understanding the different kind of structure. It's like well, we'll tell everyone you're employee owners, but when you learn it a little bit more, you realise you're not actually an owner. It's indirect ownership.
Andy Farquharson: Yeah.
Sam: and what that means. So some of the wording that was used early on was common trusteeship, stewardship, the but we use employee ownership as a as a kind of umbrella term. just to to get people to understand it. You're in a different business. Your ownership, you're entrusted to enter this business and as you leave, you leave it in a in a stronger position than than you left. So perhaps we'll get into this, but when when Ernest gifted the company away, it wasn't actually just an unconditional gift. It was entrusted to all colleagues who work there. so yeah that's the that's the kind of what we mean by ownership here is this we don't own the the shares, we own the responsibility.
Andy Farquharson: Okay. And when like the some of those different structures we talked about, like have that that indirect model. We've also sort of spoke to some people who have do have direct model, but some of them have like different methods of actually realizing that in mut of the ownership in monetary terms, like say in profit share with the EOT with the EOT or with that sort of retirement savings as it happens with sort of eSOPs. D is there any like sharing of profits or sharing of capital growth that people experience, like that employees experience as part of that charitable trust?
Sam: Yeah, absolutely. So what and this has remained consistent since 1951 is our
Andy Farquharson: Okay.
Sam: model of profit distribution is 60% of surplus
Andy Farquharson: Okay.
Sam: profits must remain in the business. And then up to 20% we can give away for charitable purposes. So you've got t up to twenty percent, it isn't always twenty percent, up to twenty percent will then go up to the Commonwealth and they'll distribute it for community causes. and whether that's in any of the locations we are around the world or any other you know, charities that that need help. so we do we do that is up to twenty percent. And then whatever we give to the charity, we give to ourselves as well. I should have explained that the other way. What it up to 20% can go to the employees, but whatever we give ourselves, we must match with the charity. So we give 20%, the colleagues get 20%, 10%, 10%. typically it's it started off around 10%, and as you know, we're in chemical manufacturing, the businesses lead, not lots of investment. It's been around five, between five and seven percent over the last few years.
Andy Farquharson: Yeah. Okay. all right. So I love that. that that matched whatever the employee workers get also needs to go to that charitable approach. And the fact that this model has been so consistent over so many years. it it I it's it's a great testament to the engineering that Ernest and the accountants and lawyers sort of came up with at the time. has there ever been in your time at the company, has there ever been a Temptation to to to meddle with that model at all?
Sam: D do you know the the 60 the 60 2020 has stayed pretty consistent all the way through? Where where
Andy Farquharson: Yeah.
Sam: it's changed, because
Andy Farquharson: Thank you.
Sam: you know we're we although we're trying to operate a different kind of business, we're not in a vacuum and we've had to think about how we attract talent. so what what do we do? Is there another bonus scheme that we can introduce so that people are rewarded at at different levels within the business. So that that's come in, that came in in the early two thousands, like a regular kind of company bonus scheme. but but what has always remained core was the what we do with the the surpluses at at the end of it. I I I'd be surprised. I mean nothing lasts forever, but I'd be surprised if if that one was was touched. That's one of the core principles.
Andy Farquharson: Yeah. mean you did talk about this being like obviously a different model, which it really clearly is with the charitable trusts. But I mean how do you you and talked about sort of needing to educate people on the way in, like this is the way that we sort of think about what ownership is. I mean, how do you get people to feel that ownership when they join?
Sam: Yeah, I mean that that is an that's an ongoing challenge. What we what we did a couple of years ago was look at the the whole onboarding. And when you what we realized is when you start you get given this big folder and it tells you everything you need to know about the about Scott Barder, the Commonwealth. And it's too much because you know,
Andy Farquharson: Yeah.
Sam: the your first priorities is find out where the toilets and the coffee are and you know, who the who
Andy Farquharson: Yeah.
Sam: the colleagues are gonna be. So what we we changed that. So we we kind of had a a six month onboarding process where there'd be different check ins either with a local council, which is you know, like your your colleague representation and then you have your your members rep would come and see you and that's almost like your shareholder representation. And then you have lots of we created this e learning where you go through everyone loves e learning, right? You go through and find out all about the the company, why it's different. And what that would do is after six months, that would culminate in something called a a kind of a culture cafe where you'd have lots of people who are new to the business, but then some other people who get a refresher and you have more of a conversation about why it's different, how you've applied those principles, what you do in certain you know, difficult situations and and how you might apply them rather than here's a presentation and why it's different because you know we've found that none of that will go in. And you have to keep refreshing that. So we try and get people in every every couple of years to go through a refresher. Because if you if you're not in the governance, you know, it it can most of the time it can feel like a normal company because it becomes the the new normal. So it's it's how we try and keep it fresh.
Andy Farquharson: Okay. let's talk about some what are some other other ways in which you keep it fresh? 'cause I'm sure it's not just the refresher course that they go through.
Sam: No, so one of the thing we've introduced recently was something called the members report. And what we were trying to do there is create some like a like a shareholder report. so we introduced that. This is your report on your company. So in there will be information on on finances, but it's also how well the your the Commonwealth is doing, where that That extra money that could be going to you, but we choose to give to charity, what we're doing with that. So what more causes we're doing there, what's happening from a people perspective, what's happening from an environmental perspective. So try and keep it as not as this is your employee newsletter, but this is your almost your shareholder newsletter. And they probably look very similar, but we just try and modify the language so people feel that sense of ownership.
Andy Farquharson: Very cool. And I mean you you alluded to there's a coming, there's a couple of things you alluded to earlier. I mean, one was
Sam: Yeah.
Andy Farquharson: sort of a member reps, to you talked about sort of being engaged in the governance and the decision making. I mean, how does it I mean, yeah, I mean look let's let's start on the latter piece first. I mean, how is it that you bring governance? Like what what type of in in into their daily life? I mean, what type of decisions and how do people contribute as an owner's day to day?
Sam: Yeah. It's yeah, great question. So th there's different parts where based on where you are in the business.
Andy Farquharson: Mm-hmm.
Sam: So the big manufacturing sites, we're we've got places all over the world, you have something called a a local council and you can be elected onto those local councils. And in there is the normal stuff you would expect at that kind of employee representation level, having conversations about where the investment in the site is going and what colleagues need to know. They're also doing things like social activities and then they're they're asking questions about health and safety so then that normal kind of engagement there and and what it is is this partnership between management and colleague at a local level.
Andy Farquharson: Okay.
Sam: The next stage up is something called regional forums and this is places where if you're not on a s like a big manufacturing site how do you still engage with the the whole organisation. So we create this this kind of place where people from sales offices or warehouses around the group can get involved and share share their experiences and and they become places to signpost. And so if you've got a local issue you can say well okay well that needs to go back to local management or you need to talk to your regional leader or something like that. Or if it's a a shareholder thing it needs to come to the GMP or to the to the company board. from the regional forums, then you engage with the the GMB, the Global Members Board, which is my board. And in there, some of the matters that we'll be discussing will be mergers and acquisitions, we have to we have to approve those. If there was a closure of a site, we would have to approve that. If any big funding increase, if there was a you know an enormous loan that we needed to take, we'd have to approve that. We approve directors so we do that for a joint nomination committee. So any any director or guardian trustee, I'm throwing loads of words. We have to approve their appointments. appointments to the company board have to go through us as well. And that was the that was the idea for for democracy. And it was, you know, this is a maybe a podcast in itself, but the nineteen sixty three const no one had listened to it, but the nineteen sixty three constitution where that changed, there was a big debate around should the members have appointment rights over the directors. And that we it fell into the decision that yes, they should, because in a true democracy you're deciding not all of the day to day decisions, but you're deciding who is making those decisions and you have the right to appoint and remove them.
Andy Farquharson: Yeah. I love that. like th there's obviously a few layers there though. I mean you you're a big organization. It it's helpful to have those. But I mean, as you're sort of filtering down, as I said, like the the GMB having that ability to like provide those votes on directors. I mean, how does that flow down through the regional forum to the local council to the people on the workshop floor? those sort of decision like how do are you doing sort of comp is there things that everyone votes on collectively or is it Up to their representatives at each different level.
Sam: Yeah, so we'd have a representative democracy. Where everyone gets a vote would be at the AGM. and the AGM typically the you know, the normal stuff, appointment of auditors, you know, fairly fairly dull affair usually.
Andy Farquharson: How are they attended? Like do do many people of sort of the rank and file sort of come and attend those, or is it typically just the representative?
Sam: no it's pretty pretty good actually. I think we'd you know out of
Andy Farquharson: Okay.
Sam: we'd maybe get two fifty, three hundred people attend. you know, it it's it's online. and we we
Andy Farquharson: wow, that's awesome. Yeah.
Sam: you know we and that happened a lot over COVID obviously, but we we reintroduced the the in person AGM that we hold in our Commonwealth Centre, which is a you know, a big a big hall that we have in in Wollaston in the UK. so we try and get as many people there. as possible. We we when we did the constitution review in twenty twenty two, we had eighty percent of people voted in that, which was enormous for us, and ninety five percent of those who voted voted in favour of the changes. So the the when we when we want people to engage, you know, we we put a lot of effort in to make sure we get as many people understanding what they're voting for and then and then voting.
Andy Farquharson: Yeah, I love that. yeah, such a strong way to getting people involved and their yeah, their feet on the ground. And like I mean, you you've talked you talked at the symposium, you've alluded to it here as well about being a global organization, like having a global footprint and like and and and needing to adapt based off sort of local environments. But if you could just share a little bit more about the international nature of the business and then some of those elements of how you've brought this model of sort of democra like representative democracy at the workplace, like alive in different cultures.
Sam: Yeah, y you know, we we kind of I I get this question a lot about, you know, how it how it kind of a adapts or d do we adapt it in in different areas. And I haven't really seen it that much, or maybe I'm just sort of numb to it. It's different in you know, in in in France they're a bit tougher because, you know, they've got the union relationships and and how it works there, so we modify how the the local councils work. The same will be in in Canada as well, where there's there's some union involvement, South Africa also. Dubai I I guess the the way we could try and do it is that we have reps from each of those different locations then then come together and and then what I think remains consistent is the Scot Barder culture. And then that kind of you know you you can kind of transport that back into those local areas. I'll go and speak to colleagues around the group as well when I'll try and explain the differences between a local council and a GMB because naturally everyone just thinks, well I've got a problem, I'm gonna tell whoever listens. And that's normal, right? So we'll try and say the difference and try and sign those people in in the different areas. I think you have places like India and Dubai are really strong on things like the charitable work and they want to go out and and help people. There's maybe there's a cultural difference there. And then UK and France are much stronger on the democratic rights of of individuals and making sure people are looked after. So there's you get some some differences between the between the two. And maybe that's the cultural shift.
Andy Farquharson: Small yeah, and it seems like I mean small but important cultural shifts, but still like the just the the the process is of of of bringing people on board is still more about bringing on people more to the scop to the to the actual company culture and and and that
Sam: Yeah.
Andy Farquharson: element. Okay. Really cool. you you didn't mention there that relationships with unions. and I think some of that structure that you talked about there with local councils, regional forums reminds me a lot of Many sort of union structures. I mean, when you're speaking to these unions, do they see you as competitive for for them, like in in in in their role?
Sam: And so so I don't speak directly with them, but we do have some some union involvement. And politically I'm I'm sympathetic. I think unions are are a great thing, you know, is what we should have. But part of our the reason for structuring the way that we do was that we didn't need them anymore. And actually why the company was finally given away in fifty one was because there was a strike in the UK. And that was because
Andy Farquharson: Yeah.
Sam: Ernest said that we were going to do something different and he hadn't done it. So people went on strike. And there was there was a gentleman who was head of the the local union at the time called Bob Edwards. And he became one of our first ever trustees once the Commonwealth was created. So we've got a long history of involvement with the unions, but the idea was that you don't actually need them. So when I talk to local councils and I talk to people in these local areas, I I try and get them to see that yes, it's great that you have a union, but you don't get many bosses or owners of businesses who go on strike because you'd be poking yourself in the eye. So the the idea is that you should have the conversation and and you know, we we shouldn't fall on that as a last resort because then you're you're changing into that kind of transactional relationship that we were meant to dissolve decades and decades ago.
Andy Farquharson: Okay. Well that's a as a I I love that little window into that sort of founding story of the charitable trust too. So yeah, could could you just share a little bit more light on that? Like where where it sort of sounds like Ernest had promised a change, but it just hadn't been happening.
Sam: Yeah, so it w the Commonwealth was the third attempt at creating something. The the first time it was called the Scot Barter Fellowship, and that was in about nineteen forty-four. And that had failed because Ernest as a as a Quaker and a you know, objected to the to the war, you know, the Second World War. wanted more and more people to say, you know, this is wrong. We w you know, w and and sorry, I'm I'm kind of jumping around, but to this day in our constitution, we do not sell into manufacturing weapons of war. So we we have nothing to do with with any of that. That's one of our other kind of guiding principles or golden rules that we've we've kept in there. But in nineteen forty four that was particularly difficult because people had had lost people in in the war. You know, they they'd sent their, you know, their their children in in some cases to go and go and fight. So to get people to to say, no, we're we're not into this and we're doing things a little bit different was a was a harder sell. So it didn't that didn't take off the first time. The second time there was more of a management kind of group that just came together and they didn't feel like it was democratic enough. and didn't include as many people so that one didn't last very long either. So it was it was in in nineteen fifty one, as I say, that they'd tried three times or twice and still hadn't done it, that colleagues got fed up and said, No, you you said you're gonna do something differently and you haven't, so we're on strike. And and I think Ernest, although he did this incredible you know, gift, I think he was quite a volatile individual as well. It was kind of his
Andy Farquharson: Yeah.
Sam: way, yeah, or the highway. So I'm not sure how you know, if the founder was still around today, how how well things would things would be going. But, you know, you can't you absolutely can't knock him for the concept and and the gift that that was given. But I think he was probably quite a tough character back then.
Andy Farquharson: Absolutely. Absolutely. what what role do the workers have in defining like the the the the charitable causes that you guys will support?
Sam: Yeah, so we we have the charitable objects, we have two objects for the the Commonwealth. And the first one is about promotion of ethical principles in in industry. Part of what we're doing now is to try and grow employee ownership or, you know, conscious capitalism or stewardship all over the all over the world. the second one is around sustainability. and we mean by sustainability we mean environmental sustainability really. Now what the so we've got to achieve those two as as a high level. The way we do that is through a a number of different donations. So we we do that through volunteering. We have lots of volunteering days that we can we can use. We we can raise money ourselves and that's match funded. But the big ones we have are are ones where we vote at the AGM. So we'll get around six different charities that'll come and and present and we'll we'll vote on four out of the six that we're we're able to to support and they'll be around £25,000 each. so they're the kind of big donations we make, and then there's each of the different sites, they'll come together in smaller groups and they'll say, well, we want to support these local charities. And we we had a vote a few years ago and we said well we want to support the three different like head kind of umbrellas are we have to support the environment, poverty and education. So if if you're in one of those kind of buckets, you you you're likely to get some some money from us if you apply.
Andy Farquharson: Okay. Very cool. So mate, what's you've obviously been in the business for a long time. I guess what's the what's sort of can can you sort of share any examples of
Sam: So
Andy Farquharson: where you've seen the ownership culture change the behaviour? Like from what or or sort of yeah, demonstrate something that you'd see that's that's gotta be that's gonna be unique to us because of sort of how our business is structured rather than and where you'd see people acting differently perhaps if it was under A single line.
Sam: I think that's a good question. and I haven't been asked that one before, so I haven't got a stock answer for you. I
Andy Farquharson: Well, it's also tough because you've been in the business for so long too. So without sort of having that outside perspective coming in, sometimes it's tough to to to to see the the real difference of of those sort of behaviours.
Sam: D I don't know if this is a particularly an ownership thing or or if it's or if it's just a a a culture thing, but it feels like if you've if you've got a good idea and you you really want to make it happen, you can make it happen here. I we we had
Andy Farquharson: Yeah.
Sam: something called the the one percent initiative a few years ago and it was one percent of salary cost for each of the different sites and you can you can take that and as as long as it met one of the guiding principles. you could have some money to go and make it work. And this was when I was still a a process operator. I didn't really understand it all as as well as I do now. And I thought, well, we'll just ask for a gym. you know, I I liked working out. and I thought they're gonna say no. But I had to just prove the case and once health and safety said, you need to be careful, I thought, well, I'm definitely having it now and I was maybe really determined to make it happen. And we got one and we got a a gym for for the colleagues in in the in the plant. So th there was that this role that I'm in now, it it felt like we needed it and you put the case forward and you know, could it could be justified and we made it happen. So y we've been going for a very long time, but we're not we're not against change. we can we can keep evolving as long as you've got a good idea, people will support you.
Andy Farquharson: Awesome. Well, I think one thing we've learned from ideas, well, when we're speaking to many other companies, we know ideas, lots of people have them. And some
Sam: Yeah.
Andy Farquharson: of those ideas aren't actually aligned with what's sort of great for the business or great for the people. I mean, the story sort of you hear a lot is just now, well, look, can we have a bigger car park so we can all come in here and drive straight up to the office door, or can we get a new tea room? Well, how do you educate the team on what is a good investment to help them?
Sam: You know, I don't think we do that. And the reason the reason I paused.
Andy Farquharson: But I mean, when you were doing the gym, I mean, how did they teach how did they teach you to like build together a good business case?
Sam: I don't know, I think I think they it was just asking questions. It it wasn't, you know, there wasn't a no. It was he think about this, think about that.
Andy Farquharson: Yeah.
Sam: How can make sure this is covered off and I guess coached through. but no, I think that's I I guess I'm running away now thinking, how can we do that better? How can we, you know, bring that maybe in the next members report, you know, think about this when building building a case. No, that's Yeah. I think maybe just through osmosis, I guess, from being here that you've been able to do it, but maybe we could we could formalise that to help more people who, you know, learn it learn in a different way. No. Well thank you.
Andy Farquharson: Yeah. Yeah, really cool. Okay. Well look glad. but I said the coaching is the incredibly strong way to to help people through that process. now Sam, before as we're sort of coming to the end, before we go, I like to ask everyone sort of three questions in just a fast round. Like where I'll just yeah, there's three questions, you offer a quick response. How does that sound?
Sam: Great.
Andy Farquharson: Perfect. Right. Who is the leader that you most admire in employee ownership?
Sam: Wow.
Andy Farquharson: Yeah.
Sam: I I've met so many incredible people. Yeah, I was on the on the EOA board briefly and everyone around that table w was great. The the person who jumped into my head immediately was John Hoffmeyer. incredible, incredible person. Just able to make things happen and so kind and so gentle with it. So yeah, John is John's my number one.
Andy Farquharson: Yeah, I agree. he's definitely up there for me as well. secondly, what what is your favorite resource on employee ownership?
Sam: I think this book I have on my desk, which is based on the 1963 version of our constitution, probably no one else has got it in the world, but it's a book by Fred Blum, Work and Community, The Scott Barder Commonwealth and the Quest for a New Social Order. It is incredible. and I returned to it frequently to to try and understand what at least what Ernest's version of employee ownership was.
Andy Farquharson: Okay, really cool. Is that publicly available for people?
Sam: Go it maybe in maybe in a museum. I should check. We've got a couple of versions
Andy Farquharson: Ha ha ha.
Sam: versions here. I'll see if I'll see if we can still get it. but yeah, it it's fantastic.
Andy Farquharson: Yeah, that that's cool. Okay. So like th the the last question is more about sort of helping business owners who are currently sort of in the process of thinking about a transition. I mean what what what would you say to them if they're thinking about a transition to an employee ownership model?
Sam: I think set setting out the the principles that you want to want to remain,
Andy Farquharson: Okay.
Sam: but with also the flexibility that that kind of change change is inevitable. so we've had guiding principles that have sat in place, some haven't have been unchanged since since the fifties and some that we've we've developed there. So it you know, you you kind of give it to your your employees because you want to keep it the same and and on a on a that they help build it with you. But you've also got to say that at some point you're going to walk away and it and it's going to, you know, create a new, you know, a phase two or phase three beyond that. So ha have have the things that are really important to you there and make sure it's clear to everyone why they're important, but accept that some of that's going to change.
Andy Farquharson: Yeah. Well I think Ernest created a great example of that, with those with those principles which have been holding true over the last sort of last seventy years. So yeah, that's
Sam: Yeah.
Andy Farquharson: that's phenomenal. Sam, thank you so much for joining us. I mean, if people wanted to go and learn more about like about you, about Scott Bader, w where can they go?
Sam: j the the website is is the best place. if you if you wanna learn anything more beyond what we've got on our website then I'd be happy to to speak with anyone if they wanted to to reach out through email or LinkedIn, you know, that kinda kinda stuff.
Andy Farquharson: Okay, awesome. Well look I'll have I'll have your the the link to your LinkedIn in the show notes. but then thank you so much for joining us on the alternative exit.
Sam: No, thank you. It's been a pleasure.
Andy Farquharson: Okay. Cheers.
Sam: pleasure to be here.
Andy Farquharson: Sam, mate, again, thank you so much for joining. it's great to be able to sort of continue these conversations that we had at the symposium. But I mean you did mention when you're outreach that look there is it is an unusual EO setup that you guys have there at Scott Beta. Can you just tell us a little bit about that?
Sam: Yeah, sure. So we we went employee owned in nineteen fifty-one and and that's relevant because the the EOT, the Employee Ownership Trust, didn't exist and wouldn't exist until all the way in into twenty fourteen. so we had a founder, deeply religious man, Ernest Barder, and he wanted to create a new way of doing business, a way of almost dissolving ownership. It wasn't about sharing ownership, but completely remove remove ownership. And there was no way of doing that. It just didn't exist. so we had to get quite creative in in how that was was done.
Andy Farquharson: Yeah.
Sam: so Ernest Ernest created something called the Scott Barter Commonwealth, and that is a registered charity, and that's the that's where all of the shares of the business are held in this charitable trust.
Andy Farquharson: Okay.
Sam: Beneath that is a regular business and we have a a company board and then alongside that, and and as the constitution has evolved over decades, we've created other other things, and and my board in there is is called the Global Members Board. But the unusual part is that it's a charitable trust at the top. and that why it's different is you don't have the the regular EOT structure. We've got charitable purposes that we must meet as well. So the charity commission in the UK keeps us honest, making sure that we're doing good things for the community as well.
Andy Farquharson: That's very good. And so in terms of like the the the employees ownership, I mean we've we've talked about on on this pod many times about what it means in an ESOP,
Sam: Yeah.
Andy Farquharson: what it like for the for the employees, what it means in an EOT, like that sort of present like what it means in the Slovenian model, like with an in the with the the in the Danish model with co-ops. What does it mean what does employee ownership mean within a charitable trust?
Sam: Yeah, good question. we what it what it means for employees here is it's almost your first step in understanding the different kind of structure. It's like well, we'll tell everyone you're employee owners, but when you learn it a little bit more, you realise you're not actually an owner. It's indirect ownership.
Andy Farquharson: Yeah.
Sam: and what that means. So some of the wording that was used early on was common trusteeship, stewardship, the but we use employee ownership as a as a kind of umbrella term. just to to get people to understand it. You're in a different business. Your ownership, you're entrusted to enter this business and as you leave, you leave it in a in a stronger position than than you left. So perhaps we'll get into this, but when when Ernest gifted the company away, it wasn't actually just an unconditional gift. It was entrusted to all colleagues who work there. so yeah that's the that's the kind of what we mean by ownership here is this we don't own the the shares, we own the responsibility.
Andy Farquharson: Okay. And when like the some of those different structures we talked about, like have that that indirect model. We've also sort of spoke to some people who have do have direct model, but some of them have like different methods of actually realizing that in mut of the ownership in monetary terms, like say in profit share with the EOT with the EOT or with that sort of retirement savings as it happens with sort of eSOPs. D is there any like sharing of profits or sharing of capital growth that people experience, like that employees experience as part of that charitable trust?
Sam: Yeah, absolutely. So what and this has remained consistent since 1951 is our
Andy Farquharson: Okay.
Sam: model of profit distribution is 60% of surplus
Andy Farquharson: Okay.
Sam: profits must remain in the business. And then up to 20% we can give away for charitable purposes. So you've got t up to twenty percent, it isn't always twenty percent, up to twenty percent will then go up to the Commonwealth and they'll distribute it for community causes. and whether that's in any of the locations we are around the world or any other you know, charities that that need help. so we do we do that is up to twenty percent. And then whatever we give to the charity, we give to ourselves as well. I should have explained that the other way. What it up to 20% can go to the employees, but whatever we give ourselves, we must match with the charity. So we give 20%, the colleagues get 20%, 10%, 10%. typically it's it started off around 10%, and as you know, we're in chemical manufacturing, the businesses lead, not lots of investment. It's been around five, between five and seven percent over the last few years.
Andy Farquharson: Yeah. Okay. all right. So I love that. that that matched whatever the employee workers get also needs to go to that charitable approach. And the fact that this model has been so consistent over so many years. it it I it's it's a great testament to the engineering that Ernest and the accountants and lawyers sort of came up with at the time. has there ever been in your time at the company, has there ever been a Temptation to to to meddle with that model at all?
Sam: D do you know the the 60 the 60 2020 has stayed pretty consistent all the way through? Where where
Andy Farquharson: Yeah.
Sam: it's changed, because
Andy Farquharson: Thank you.
Sam: you know we're we although we're trying to operate a different kind of business, we're not in a vacuum and we've had to think about how we attract talent. so what what do we do? Is there another bonus scheme that we can introduce so that people are rewarded at at different levels within the business. So that that's come in, that came in in the early two thousands, like a regular kind of company bonus scheme. but but what has always remained core was the what we do with the the surpluses at at the end of it. I I I'd be surprised. I mean nothing lasts forever, but I'd be surprised if if that one was was touched. That's one of the core principles.
Andy Farquharson: Yeah. mean you did talk about this being like obviously a different model, which it really clearly is with the charitable trusts. But I mean how do you you and talked about sort of needing to educate people on the way in, like this is the way that we sort of think about what ownership is. I mean, how do you get people to feel that ownership when they join?
Sam: Yeah, I mean that that is an that's an ongoing challenge. What we what we did a couple of years ago was look at the the whole onboarding. And when you what we realized is when you start you get given this big folder and it tells you everything you need to know about the about Scott Barder, the Commonwealth. And it's too much because you know,
Andy Farquharson: Yeah.
Sam: the your first priorities is find out where the toilets and the coffee are and you know, who the who
Andy Farquharson: Yeah.
Sam: the colleagues are gonna be. So what we we changed that. So we we kind of had a a six month onboarding process where there'd be different check ins either with a local council, which is you know, like your your colleague representation and then you have your your members rep would come and see you and that's almost like your shareholder representation. And then you have lots of we created this e learning where you go through everyone loves e learning, right? You go through and find out all about the the company, why it's different. And what that would do is after six months, that would culminate in something called a a kind of a culture cafe where you'd have lots of people who are new to the business, but then some other people who get a refresher and you have more of a conversation about why it's different, how you've applied those principles, what you do in certain you know, difficult situations and and how you might apply them rather than here's a presentation and why it's different because you know we've found that none of that will go in. And you have to keep refreshing that. So we try and get people in every every couple of years to go through a refresher. Because if you if you're not in the governance, you know, it it can most of the time it can feel like a normal company because it becomes the the new normal. So it's it's how we try and keep it fresh.
Andy Farquharson: Okay. let's talk about some what are some other other ways in which you keep it fresh? 'cause I'm sure it's not just the refresher course that they go through.
Sam: No, so one of the thing we've introduced recently was something called the members report. And what we were trying to do there is create some like a like a shareholder report. so we introduced that. This is your report on your company. So in there will be information on on finances, but it's also how well the your the Commonwealth is doing, where that That extra money that could be going to you, but we choose to give to charity, what we're doing with that. So what more causes we're doing there, what's happening from a people perspective, what's happening from an environmental perspective. So try and keep it as not as this is your employee newsletter, but this is your almost your shareholder newsletter. And they probably look very similar, but we just try and modify the language so people feel that sense of ownership.
Andy Farquharson: Very cool. And I mean you you alluded to there's a coming, there's a couple of things you alluded to earlier. I mean, one was
Sam: Yeah.
Andy Farquharson: sort of a member reps, to you talked about sort of being engaged in the governance and the decision making. I mean, how does it I mean, yeah, I mean look let's let's start on the latter piece first. I mean, how is it that you bring governance? Like what what type of in in into their daily life? I mean, what type of decisions and how do people contribute as an owner's day to day?
Sam: Yeah. It's yeah, great question. So th there's different parts where based on where you are in the business.
Andy Farquharson: Mm-hmm.
Sam: So the big manufacturing sites, we're we've got places all over the world, you have something called a a local council and you can be elected onto those local councils. And in there is the normal stuff you would expect at that kind of employee representation level, having conversations about where the investment in the site is going and what colleagues need to know. They're also doing things like social activities and then they're they're asking questions about health and safety so then that normal kind of engagement there and and what it is is this partnership between management and colleague at a local level.
Andy Farquharson: Okay.
Sam: The next stage up is something called regional forums and this is places where if you're not on a s like a big manufacturing site how do you still engage with the the whole organisation. So we create this this kind of place where people from sales offices or warehouses around the group can get involved and share share their experiences and and they become places to signpost. And so if you've got a local issue you can say well okay well that needs to go back to local management or you need to talk to your regional leader or something like that. Or if it's a a shareholder thing it needs to come to the GMP or to the to the company board. from the regional forums, then you engage with the the GMB, the Global Members Board, which is my board. And in there, some of the matters that we'll be discussing will be mergers and acquisitions, we have to we have to approve those. If there was a closure of a site, we would have to approve that. If any big funding increase, if there was a you know an enormous loan that we needed to take, we'd have to approve that. We approve directors so we do that for a joint nomination committee. So any any director or guardian trustee, I'm throwing loads of words. We have to approve their appointments. appointments to the company board have to go through us as well. And that was the that was the idea for for democracy. And it was, you know, this is a maybe a podcast in itself, but the nineteen sixty three const no one had listened to it, but the nineteen sixty three constitution where that changed, there was a big debate around should the members have appointment rights over the directors. And that we it fell into the decision that yes, they should, because in a true democracy you're deciding not all of the day to day decisions, but you're deciding who is making those decisions and you have the right to appoint and remove them.
Andy Farquharson: Yeah. I love that. like th there's obviously a few layers there though. I mean you you're a big organization. It it's helpful to have those. But I mean, as you're sort of filtering down, as I said, like the the GMB having that ability to like provide those votes on directors. I mean, how does that flow down through the regional forum to the local council to the people on the workshop floor? those sort of decision like how do are you doing sort of comp is there things that everyone votes on collectively or is it Up to their representatives at each different level.
Sam: Yeah, so we'd have a representative democracy. Where everyone gets a vote would be at the AGM. and the AGM typically the you know, the normal stuff, appointment of auditors, you know, fairly fairly dull affair usually.
Andy Farquharson: How are they attended? Like do do many people of sort of the rank and file sort of come and attend those, or is it typically just the representative?
Sam: no it's pretty pretty good actually. I think we'd you know out of
Andy Farquharson: Okay.
Sam: we'd maybe get two fifty, three hundred people attend. you know, it it's it's online. and we we
Andy Farquharson: wow, that's awesome. Yeah.
Sam: you know we and that happened a lot over COVID obviously, but we we reintroduced the the in person AGM that we hold in our Commonwealth Centre, which is a you know, a big a big hall that we have in in Wollaston in the UK. so we try and get as many people there. as possible. We we when we did the constitution review in twenty twenty two, we had eighty percent of people voted in that, which was enormous for us, and ninety five percent of those who voted voted in favour of the changes. So the the when we when we want people to engage, you know, we we put a lot of effort in to make sure we get as many people understanding what they're voting for and then and then voting.
Andy Farquharson: Yeah, I love that. yeah, such a strong way to getting people involved and their yeah, their feet on the ground. And like I mean, you you've talked you talked at the symposium, you've alluded to it here as well about being a global organization, like having a global footprint and like and and and needing to adapt based off sort of local environments. But if you could just share a little bit more about the international nature of the business and then some of those elements of how you've brought this model of sort of democra like representative democracy at the workplace, like alive in different cultures.
Sam: Yeah, y you know, we we kind of I I get this question a lot about, you know, how it how it kind of a adapts or d do we adapt it in in different areas. And I haven't really seen it that much, or maybe I'm just sort of numb to it. It's different in you know, in in in France they're a bit tougher because, you know, they've got the union relationships and and how it works there, so we modify how the the local councils work. The same will be in in Canada as well, where there's there's some union involvement, South Africa also. Dubai I I guess the the way we could try and do it is that we have reps from each of those different locations then then come together and and then what I think remains consistent is the Scot Barder culture. And then that kind of you know you you can kind of transport that back into those local areas. I'll go and speak to colleagues around the group as well when I'll try and explain the differences between a local council and a GMB because naturally everyone just thinks, well I've got a problem, I'm gonna tell whoever listens. And that's normal, right? So we'll try and say the difference and try and sign those people in in the different areas. I think you have places like India and Dubai are really strong on things like the charitable work and they want to go out and and help people. There's maybe there's a cultural difference there. And then UK and France are much stronger on the democratic rights of of individuals and making sure people are looked after. So there's you get some some differences between the between the two. And maybe that's the cultural shift.
Andy Farquharson: Small yeah, and it seems like I mean small but important cultural shifts, but still like the just the the the process is of of of bringing people on board is still more about bringing on people more to the scop to the to the actual company culture and and and that
Sam: Yeah.
Andy Farquharson: element. Okay. Really cool. you you didn't mention there that relationships with unions. and I think some of that structure that you talked about there with local councils, regional forums reminds me a lot of Many sort of union structures. I mean, when you're speaking to these unions, do they see you as competitive for for them, like in in in in their role?
Sam: And so so I don't speak directly with them, but we do have some some union involvement. And politically I'm I'm sympathetic. I think unions are are a great thing, you know, is what we should have. But part of our the reason for structuring the way that we do was that we didn't need them anymore. And actually why the company was finally given away in fifty one was because there was a strike in the UK. And that was because
Andy Farquharson: Yeah.
Sam: Ernest said that we were going to do something different and he hadn't done it. So people went on strike. And there was there was a gentleman who was head of the the local union at the time called Bob Edwards. And he became one of our first ever trustees once the Commonwealth was created. So we've got a long history of involvement with the unions, but the idea was that you don't actually need them. So when I talk to local councils and I talk to people in these local areas, I I try and get them to see that yes, it's great that you have a union, but you don't get many bosses or owners of businesses who go on strike because you'd be poking yourself in the eye. So the the idea is that you should have the conversation and and you know, we we shouldn't fall on that as a last resort because then you're you're changing into that kind of transactional relationship that we were meant to dissolve decades and decades ago.
Andy Farquharson: Okay. Well that's a as a I I love that little window into that sort of founding story of the charitable trust too. So yeah, could could you just share a little bit more light on that? Like where where it sort of sounds like Ernest had promised a change, but it just hadn't been happening.
Sam: Yeah, so it w the Commonwealth was the third attempt at creating something. The the first time it was called the Scot Barter Fellowship, and that was in about nineteen forty-four. And that had failed because Ernest as a as a Quaker and a you know, objected to the to the war, you know, the Second World War. wanted more and more people to say, you know, this is wrong. We w you know, w and and sorry, I'm I'm kind of jumping around, but to this day in our constitution, we do not sell into manufacturing weapons of war. So we we have nothing to do with with any of that. That's one of our other kind of guiding principles or golden rules that we've we've kept in there. But in nineteen forty four that was particularly difficult because people had had lost people in in the war. You know, they they'd sent their, you know, their their children in in some cases to go and go and fight. So to get people to to say, no, we're we're not into this and we're doing things a little bit different was a was a harder sell. So it didn't that didn't take off the first time. The second time there was more of a management kind of group that just came together and they didn't feel like it was democratic enough. and didn't include as many people so that one didn't last very long either. So it was it was in in nineteen fifty one, as I say, that they'd tried three times or twice and still hadn't done it, that colleagues got fed up and said, No, you you said you're gonna do something differently and you haven't, so we're on strike. And and I think Ernest, although he did this incredible you know, gift, I think he was quite a volatile individual as well. It was kind of his
Andy Farquharson: Yeah.
Sam: way, yeah, or the highway. So I'm not sure how you know, if the founder was still around today, how how well things would things would be going. But, you know, you can't you absolutely can't knock him for the concept and and the gift that that was given. But I think he was probably quite a tough character back then.
Andy Farquharson: Absolutely. Absolutely. what what role do the workers have in defining like the the the the charitable causes that you guys will support?
Sam: Yeah, so we we have the charitable objects, we have two objects for the the Commonwealth. And the first one is about promotion of ethical principles in in industry. Part of what we're doing now is to try and grow employee ownership or, you know, conscious capitalism or stewardship all over the all over the world. the second one is around sustainability. and we mean by sustainability we mean environmental sustainability really. Now what the so we've got to achieve those two as as a high level. The way we do that is through a a number of different donations. So we we do that through volunteering. We have lots of volunteering days that we can we can use. We we can raise money ourselves and that's match funded. But the big ones we have are are ones where we vote at the AGM. So we'll get around six different charities that'll come and and present and we'll we'll vote on four out of the six that we're we're able to to support and they'll be around £25,000 each. so they're the kind of big donations we make, and then there's each of the different sites, they'll come together in smaller groups and they'll say, well, we want to support these local charities. And we we had a vote a few years ago and we said well we want to support the three different like head kind of umbrellas are we have to support the environment, poverty and education. So if if you're in one of those kind of buckets, you you you're likely to get some some money from us if you apply.
Andy Farquharson: Okay. Very cool. So mate, what's you've obviously been in the business for a long time. I guess what's the what's sort of can can you sort of share any examples of
Sam: So
Andy Farquharson: where you've seen the ownership culture change the behaviour? Like from what or or sort of yeah, demonstrate something that you'd see that's that's gotta be that's gonna be unique to us because of sort of how our business is structured rather than and where you'd see people acting differently perhaps if it was under A single line.
Sam: I think that's a good question. and I haven't been asked that one before, so I haven't got a stock answer for you. I
Andy Farquharson: Well, it's also tough because you've been in the business for so long too. So without sort of having that outside perspective coming in, sometimes it's tough to to to to see the the real difference of of those sort of behaviours.
Sam: D I don't know if this is a particularly an ownership thing or or if it's or if it's just a a a culture thing, but it feels like if you've if you've got a good idea and you you really want to make it happen, you can make it happen here. I we we had
Andy Farquharson: Yeah.
Sam: something called the the one percent initiative a few years ago and it was one percent of salary cost for each of the different sites and you can you can take that and as as long as it met one of the guiding principles. you could have some money to go and make it work. And this was when I was still a a process operator. I didn't really understand it all as as well as I do now. And I thought, well, we'll just ask for a gym. you know, I I liked working out. and I thought they're gonna say no. But I had to just prove the case and once health and safety said, you need to be careful, I thought, well, I'm definitely having it now and I was maybe really determined to make it happen. And we got one and we got a a gym for for the colleagues in in the in the plant. So th there was that this role that I'm in now, it it felt like we needed it and you put the case forward and you know, could it could be justified and we made it happen. So y we've been going for a very long time, but we're not we're not against change. we can we can keep evolving as long as you've got a good idea, people will support you.
Andy Farquharson: Awesome. Well, I think one thing we've learned from ideas, well, when we're speaking to many other companies, we know ideas, lots of people have them. And some
Sam: Yeah.
Andy Farquharson: of those ideas aren't actually aligned with what's sort of great for the business or great for the people. I mean, the story sort of you hear a lot is just now, well, look, can we have a bigger car park so we can all come in here and drive straight up to the office door, or can we get a new tea room? Well, how do you educate the team on what is a good investment to help them?
Sam: You know, I don't think we do that. And the reason the reason I paused.
Andy Farquharson: But I mean, when you were doing the gym, I mean, how did they teach how did they teach you to like build together a good business case?
Sam: I don't know, I think I think they it was just asking questions. It it wasn't, you know, there wasn't a no. It was he think about this, think about that.
Andy Farquharson: Yeah.
Sam: How can make sure this is covered off and I guess coached through. but no, I think that's I I guess I'm running away now thinking, how can we do that better? How can we, you know, bring that maybe in the next members report, you know, think about this when building building a case. No, that's Yeah. I think maybe just through osmosis, I guess, from being here that you've been able to do it, but maybe we could we could formalise that to help more people who, you know, learn it learn in a different way. No. Well thank you.
Andy Farquharson: Yeah. Yeah, really cool. Okay. Well look glad. but I said the coaching is the incredibly strong way to to help people through that process. now Sam, before as we're sort of coming to the end, before we go, I like to ask everyone sort of three questions in just a fast round. Like where I'll just yeah, there's three questions, you offer a quick response. How does that sound?
Sam: Great.
Andy Farquharson: Perfect. Right. Who is the leader that you most admire in employee ownership?
Sam: Wow.
Andy Farquharson: Yeah.
Sam: I I've met so many incredible people. Yeah, I was on the on the EOA board briefly and everyone around that table w was great. The the person who jumped into my head immediately was John Hoffmeyer. incredible, incredible person. Just able to make things happen and so kind and so gentle with it. So yeah, John is John's my number one.
Andy Farquharson: Yeah, I agree. he's definitely up there for me as well. secondly, what what is your favorite resource on employee ownership?
Sam: I think this book I have on my desk, which is based on the 1963 version of our constitution, probably no one else has got it in the world, but it's a book by Fred Blum, Work and Community, The Scott Barder Commonwealth and the Quest for a New Social Order. It is incredible. and I returned to it frequently to to try and understand what at least what Ernest's version of employee ownership was.
Andy Farquharson: Okay, really cool. Is that publicly available for people?
Sam: Go it maybe in maybe in a museum. I should check. We've got a couple of versions
Andy Farquharson: Ha ha ha.
Sam: versions here. I'll see if I'll see if we can still get it. but yeah, it it's fantastic.
Andy Farquharson: Yeah, that that's cool. Okay. So like th the the last question is more about sort of helping business owners who are currently sort of in the process of thinking about a transition. I mean what what what would you say to them if they're thinking about a transition to an employee ownership model?
Sam: I think set setting out the the principles that you want to want to remain,
Andy Farquharson: Okay.
Sam: but with also the flexibility that that kind of change change is inevitable. so we've had guiding principles that have sat in place, some haven't have been unchanged since since the fifties and some that we've we've developed there. So it you know, you you kind of give it to your your employees because you want to keep it the same and and on a on a that they help build it with you. But you've also got to say that at some point you're going to walk away and it and it's going to, you know, create a new, you know, a phase two or phase three beyond that. So ha have have the things that are really important to you there and make sure it's clear to everyone why they're important, but accept that some of that's going to change.
Andy Farquharson: Yeah. Well I think Ernest created a great example of that, with those with those principles which have been holding true over the last sort of last seventy years. So yeah, that's
Sam: Yeah.
Andy Farquharson: that's phenomenal. Sam, thank you so much for joining us. I mean, if people wanted to go and learn more about like about you, about Scott Bader, w where can they go?
Sam: j the the website is is the best place. if you if you wanna learn anything more beyond what we've got on our website then I'd be happy to to speak with anyone if they wanted to to reach out through email or LinkedIn, you know, that kinda kinda stuff.
Andy Farquharson: Okay, awesome. Well look I'll have I'll have your the the link to your LinkedIn in the show notes. but then thank you so much for joining us on the alternative exit.
Sam: No, thank you. It's been a pleasure.
Andy Farquharson: Okay. Cheers.
