At Beyster Symposium,
panel presents innovative financing model
by Karen Kahn
In late June, the Rutgers Institute for the Study of Employee Ownership and Profit Sharing convened its semi-annual meeting of institute fellows and invited experts in La Jolla California. The summer meeting, known as the Beyster Symposium, is an opportunity for senior and emerging scholars, as well as legal and policy experts, to share their work and deepen their understanding of broad-based forms of participation in capital ownership and capital income, from employee stock ownership to profit sharing, to worker cooperatives. The institute has about 150 fellows at over 40 different universities, think tanks, and research centers in over 30 states.
Among the presenters at the June conference were Fifty by Fifty’s co-founders, Jessica Rose and Marjorie Kelly. Rose and Kelly organized a panel that considered the role of capital in taking employee ownership to scale. Other panelists included Chris Mackin of American Working Capital, Corey Rosen of the National Center for Employee Ownership, and Andrea Armeni of Transform Finance.
The panelists took as their starting point a commonly identified conundrum in the field: employee ownership has not grown significantly over two decades. They suggested that the problem isn’t that companies can’t find financing to convert to ESOPs, but that there is a lack of agency. What is needed, they argued, is the right vehicles to incentivize capital to “seek out and advance employee ownership.” “What if capital became the ‘knock upon the door,’ as private equity buyers are today?” they asked.
What if capital became the ‘knock upon the door,’ as private equity buyers are today?
Presenters agreed that a pipeline of potential conversions is readily available, if investors are prepared to enter the market. The investors they hope to activate in this arena are “impact investors” who are looking for reasonable returns while also growing sustainable employment and financial security among low-wage workers and people of color. Impact investors Diane Ives (Kendeda Fund) and Priyah Parrish (Impact Engine) presented their perspectives on employee ownership investment in short video clips.
Noting the limited options currently available for investing in employee ownership—high-impact, low-return Community Development Finance Institutions (CDFIs) or high-return, low-impact private equity groups—the panel presented a model for a different kind of investment vehicle, a private-equity-like fund that would buy out companies with the express purpose of turning those companies over to employees. The model is presented in more detail in a working paper from Transform Finance.
The panel presented a model for a different kind of investment vehicle, a private-equity-like fund that would buy out companies with the express purpose of turning those companies over to employees.
Panelists acknowledged that the employee ownership community’s expertise is essential to ensure ESOP deals are intentionally structured to best balance employee and seller interests. The new model puts a premium on impact: “Employee ownership is a tool, not the goal,” explained Kelly. The goal is to:
- Create good jobs
- Reduce inequality
- Keep jobs local
- Build community wealth
- Serve low-income workers and people of color.
To achieve those goals, funds would need impact guardrails that ensure non-extractive deal structures and tools for measuring impact. But, as the presenters concluded, the opportunity is now: “Employee ownership could be the next big asset class in impact investing.”
Karen Kahn provides communications consulting and editorial support for Fifty by Fifty.