In April, Shambala became the first UK festival to adopt an Employee Ownership model, with parent company Kambe’s original co-founders ceding the business to the team members who have helped build the successful event over more than two decades.
At the time, Kambe said the transition was designed to give employees a direct stake in the festival, while simultaneously protecting Shambala’s independence, directly referencing the climate of acquisition from “major live entertainment conglomerates”.
“Shambala stands for independence and, in an increasingly commercialised festival scene, we simply could not sell to venture capitalists or the big promotion companies,” said co-founder Chris Johnson upon the announcement. “While exploring alternative paths, we fell in love with the Employee Ownership model.”
Dan Raffety, another Shambala co-founder and its current Head of Music, led the Employee Ownership transition. For him, the move is also part of a wider belief in alternative models of ownership, rooted in people, sustainability and community rather than the maximisation of profit.
Here, he discusses why the company chose this route, what it means in practice, and whether the model could offer a viable path for other independent festivals.
Can you tell us more about why you chose this route and why now?
The reasons behind us moving into Employee Ownership are deep and wide!
We believe that we have created something truly special and at its foundation is our independence and culture. Employee Ownership is the only way that we have found which ensures that both of these are at the centre of our future.
Our employees are amazing. They are talented, skilled, loyal and committed – who better to entrust the future of Kambe to?! They should be at the centre of what we are, how we do it and where we are going. Employee Ownership ensures this is the case.
Employee Ownership is a model in which we truly believe. The current capitalist model is patently broken- its relentless extraction of profit and resources destroys communities, culture and the planet. Shared, collective ownership comes in many forms and, at the heart of them all, people, sustainability and community become enshrined as the central purposes of the business rather than purely maximising profits. If shared ownership was widespread the world would be a much, much better place!
And why now? The co-founders have been running Shambala and Kambe for over 25 years and we know that we cannot run and own it for ever. Succession is inevitable and, fundamentally, either we control this or events will control us. Either we plan or we have to submit to the chaos and upheaval as we react to things out of our collective control.
It is, surely, much better to get ahead of it all and design the passing on of our stewardship. So that is what we have been doing for the past 5 years!
Shambala co-founder Dan Raffety.
Did you get offers from the VCs and big promoters that you have sought to avoid?
No. I am not sure whether we should take this as the deepest of compliments or an insult!
What will this mean for the company and Shambala in practice? How will things change?
In essence, not a lot will change. Day to day the company will operate in the same way with the same management structure. We have always been a very open company, more of a family rather than a business, so our employees have always had a deeper connection to Kambe than just a job. They care deeply about what we do and how we do it, our ethics and principles, our audience, artists, clients and contractors. The step to actual “ownership” is, in reality, quite small in comparison to lots of companies who make this transition without a pre-existing strongly engaged culture.
In Kambe, the employees have always been involved and consulted in the company’s future, it’s strategy and have huge input into the development of our events. This will continue, develop and strengthen.
There are some very profound changes, though. The company must now operate in the best interests of the employees both current and of the future and the Board of Directors is held to account by Employee Trustees to ensure this is the case. The ultimate power sits with the Employee Trust – this is the body that owns the company on behalf of the employees.
There is also a financial benefit for the employees. Alongside having a voice in the company’s future and culture, the employees are entitled to a share of any profit – the first £3,600 being tax free.
What role will the co-founders have going forward?
The co-founders will remain involved. They have always had evolving roles and they will continue to evolve alongside the need of the company. In the short term, not a lot will change but, over the mid-term, the co-founders will actively pass on their experience and knowledge to the team and slowly recede from day-to-day operations. They will remain at the company’s disposal for as long as needed and wish to play an active part in the future of the company and festival.
"It is a wonderful business model that I wholeheartedly recommend both from a business perspective as well from a wider community and cultural standpoint."
How viable is a move like this for other independent festivals? Do you have to be a certain size, for example?
I think that transitioning into Employee Ownership could be viable for many members of the AIF but there are potential finance hurdles and also strict rules regarding eligibility that need to be understood.
There will, obviously, be costs involved to cover things such as advice, consultancy, legals, accounting and training. Alongside this, there will also be a significant amount of time that will be needed to be invested in to the process.
There are technicalities that need to be met in order to be eligible for becoming an Employee Owned Company. Perhaps the most important one is the “Participator Fraction”. This is the ratio between Shareholders and Employees and it must not exceed 40%. So, if you have 1 Shareholder, you need at least 3 employees to be eligible; If you have 5 Shareholders, you will need at least 13 employees.
What advice would you give to other companies that might be considering this?
It is a wonderful business model that I wholeheartedly recommend both from a business perspective as well from a wider community and cultural standpoint. The model, though, is full of technical details so it is critical to do a lot of research and to seek proper advice to determine if it is the right path for you and your company, and also to understand how it could happen in your organisation.
Take your time. It is not a quick process. From making our decision that this is the route for us, it has taken us about 5 years to transition and to finalise the transaction. And, I think, that this is probably just the next step on a longer journey rather than the final destination!
