Income inequality in OECD countries is at its highest level for the past half century. The average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago. So how can governments and businesses reduce the wealth gap when many people struggle with day to day living expenses? A universal basic income or increased taxes on the ultra rich are debated solutions but what about helping ordinary people create a passive income, in addition to their wage? Inspired by French economist Thomas Piketty, Dutch entrepreneur Quintus Willemse believes that capital distribution can be more equal if employees co-own the company in which they work. Quintus Willemse told Innovation Origins about his new ideas and the start-up Share Council.
What is The Share Council ?
The Share Council is a blockchain enabled platform which makes it easier for an owner to share equity in his company with employees. We have built all the legal structures and contracts relevant for any form of co-ownership and any size of company. Our focus is on the SME market given 90% of workers in the Netherlands work for SMEs and 99% of Europeans work for SMEs. Our platform is not an openmarket – it is designed for employer and employee transactions, and it facilitates investor participation.
Where did your idea come from?
When I first investigated co-ownership in a previous startup, I realised how difficult and financially disincentivizing it is in The Netherlands. Double taxation, paying tax upfront and extreme paperwork are some of the reasons why we believe so few employees are co-owners of companies in Holland (and Europe). Whilst governments talk about diminishing inequality and fostering financial inclusion, they also need to look at which structures in their systems are contributing towards this problem.
Our platform makes it easier for companies by digitising and automating the process but we’re also helping to influence policy affecting employee co-ownership on national level and even on European Parliament level. It’s time to modernise and innovate in Europe if we want to compete with the US and Asia.
Which companies are you working with?
The platform is built for the Dutch legal and tax environment but it can be programmed in any kind of legal jurisdiction and that’s our long term goal. At present clients are Dutch startups, accelerators and SMEs such as Common Easy, Rockstart and Solar Clarity.
How do other countries compare in employee co-ownership rules?
Through our research at the European Federation of Employee Share ownership (EFES), we discovered only around 3.5-5% of employees own shares in their companies and a vast majority of those owners are top managers, high income earners already. As a bloc, Europe is performing pretty poorly although some countries such as France are doing better than others.
In the US there is a greater representation of employee co-ownership – above 25 per cent. There is a culture of employee co-ownership and the US has introduced an employee stock ownership plan (ESOP) which helps. The ESOP model encourages share distribution by providing tax incentives to the company and employee.
Are EU members modernising their rules?
In The Netherlands, we are seeing some gradual changes and The Share Council is lobbying the government so employee-owned equity is only taxed if and when the holding has been liquidated, rather than upfront (current rule). Next to the national parliament we are also in conversation with representatives of the European Parliament, to see if we really can make the change. We hope for more information on that this year!
How has the pandemic affected your business?
So far we see an increase in our market. The pandemic shows us how important it is to work together and stay connected. Companies and entrepreneurs start to quickly understand the great advantage of having your team co-own your company. It motivates, it retains, it creates a fellowship and it just puts all the incentives in the right place.
Do you think everything we are going through will affect wealth inequality (positively or negatively) long term?
As many with me, I very well understand that a crisis of the magnitude we are currently feeling will not pass without leaving a mark. Logicly it has to affect the wealth gap as we know it right now. If this will be for better or worse, that depends on the way you look at it.
If this goes on long enough we will see our monetary system starting to collapse because the debt ratio is getting out of balance. This would be a great win for the ones like myself who try to fight this monetary system and try to redistribute wealth. But you also will have heavy losers (perhaps like myself), who will see their social security backup dissolving. In the long term I think these kinds of shake ups are for the better, but it will only work for those who are accepting that we can’t all live like kings when we want to have a more equally divided society where every individual has an equal fair chance to flourish.