Fifty by Fifty releases report identifying new ownership design
by Karen Kahn
Fifty by Fifty has identified 50-plus leading-edge firms with a powerful new ownership design: the mission-led employee-owned firm. In a new report, Mission-led employee-owned firms: The Best of the Best, these companies are shown to significantly outperform conventionally owned firms in overall environmental and social impact. These businesses include well-known brands such as Eileen Fisher, King Arthur Flour, New Belgium Brewery, Dansko, and Clif Bar as well as social enterprises such as Cooperative Home Care Associates and environmental leaders such as EA Engineering and 10 members of the purchasing cooperative Amicus Solar.
“These mission-led employee-owned firms represent next generation enterprise design,” says Marjorie Kelly, co-founder of Fifty by Fifty, an initiative of The Democracy Collaborative aimed at growing employee ownership. “These companies are designed to meet the challenges of the 21st century: ecological crises and growing wealth inequality.”
Convening of Best of the Best Leaders
The new Fifty by Fifty report was released at an invitation-only convening of leaders of mission-led employee-owned firms. That meeting, co-sponsored by Fifty by Fifty and the Center for Sustainable Business at New York University Stern School of Business, provided an opportunity for these cutting-edge enterprises to come together to discuss how to grow this ownership model.
In her introductory remarks at the meeting, Sarah Stranahan, who led Fifty by Fifty’s research and co-authored the report, said, “In spite of your differences, we at Fifty by Fifty see you as a coherent group; in fact, we have a name for you, ‘next generation enterprises.’ We think that you all, individually and collectively, are doing something very important. You are demonstrating that businesses that care about their employees, care about the environment, and care about their communities, can succeed. We want to see you thrive!”
Mission-led employee-owned firms consistently appear in vastly disproportionate numbers among B Lab’s Best for the World honorees: among the 45 U.S. employee-owned B Corporations, 82 percent were named Best for the World in 2017 or 2018.
Fifty by Fifty uncovered this next generation enterprise design when conducting research on the environmental impact of employee ownership, funded by Partners for a New Economy. In comparing employee-owned mission-led firms (i.e., B or benefit corporations) to firms that were employee-owned but not mission-driven, the research found that employee ownership, in and of itself, did not improve environmental performance. But when a purpose-driven company was also employee-owned, these firms significantly outperformed B/benefit corps that were not employee owned, in addition to far outperforming conventional firms.
Employee-owned B Corps are assessed for their environmental and social impact by the nonprofit B Lab, which creates B Scores in five areas: governance (mission, ethics, accountability), worker (labor policies), environment (land, water, air), customers (underserved populations, health and well-being) and community (job creation, diversity, civic engagement).
Employee-owned B Corps achieved overall B Scores that were on average 20 points higher than similar firms that were not employee owned. Their scores were double those of conventional businesses.
Moreover, mission-led employee-owned firms consistently appear in vastly disproportionate numbers among B Lab’s Best for the World honorees: among the 45 U.S. employee-owned B Corporations, 82 percent were named Best for the World in 2017 or 2018.
Society does not often look to ownership design as a solution to ecological crises or inequality, but Fifty by Fifty’s research suggests that enterprise design is a powerful lever for change.
Ownership Design Is a Lever for Change
Society does not often look to ownership design as a solution to ecological crises or inequality, but Fifty by Fifty’s research suggests that enterprise design is a powerful lever for change. These mission-driven employee-owned firms offer a real alternative to investor-owned, publicly traded companies designed for an earlier era of 19th century industrialization. Laser-focused on short-term gains for shareholders — who are overwhelmingly the wealthiest 10 percent — these investor-controlled companies hinder our ability to adapt to a new era of ecological fragility and growing inequality.
The employee-owned B/benefit corporation is an enterprise design that demonstrates how business can become a powerful force for good. Employee ownership is a mechanism for building shared prosperity and rewarding those who help create wealth. When combined with a deep social and ecological mission, employee ownership protects that mission over the long term; this structure provides founders and family a way to preserve their legacy by selling to employees rather than to financial interests, which too often leads to loss of local jobs and diminishment of social mission. As co-authors Stranahan and Kelly put it, next generation enterprises “have much to teach the larger business world about what is needed for ownership design for the 21st century and beyond.”
Karen Kahn provides communications consulting and editorial support for Fifty by Fifty.
Fifty by Fifty, an initiative of @Democracy Collab, is working to transform the U.S. economy by growing employee ownership. Join our campaign, and we’ll send our monthly newsletter, filled with great company stories, right to your inbox.