Fifty by Fifty co-founder and Mendoza alum Jessica Rose featured prominently
By Karen Kahn
Employee ownership is the topic of a recent article in the Mendoza Business Magazine, published by Notre Dame’s Mendoza Business School. Author Brett Beasley, associate director of the Notre Dame Deloitte Center for Ethical Leadership, makes the case for reviving American capitalism through broad-based ownership, a principle, he notes, that aligns with Catholic teachings and values.
Catholic Social Teachings Support Employee Ownership
Back at the end of the 19th century, Pope Leo XIII worried about the emergence of the winner-take-all economy that was not so different from what we see today. He wrote, “a small number of very rich men have been able to lay upon the masses of the poor a yoke little better than slavery itself.” Rather than abolishing ownership, which he feared would make men lazy, Pope Leo XIII sought to expand ownership. In the 1891 encyclical letter “Rerun Novarum,” he wrote, “The law should favor ownership, and its policy should be to induce as many as possible of the people to become owners.”
Four decades later, Beasley writes, Pope Pius XI also “praised work arrangements that allowed employees to ‘become sharers in ownership or management or participate in some fashion in the profits received.’”
The law should favor ownership, and its policy should be to induce as many as possible of the people to become owners.”—Pope Leo XIII, 1891 encyclical “Rerun Novarum”
In more recent times, the U.S. Conference of Catholic Bishops (USCCB) has supported employee ownership and other forms of profit sharing, proclaiming in its Economic Justice for All statement that broad-based ownership “can enhance productivity, increase profitability of firms, provide greater job security and work satisfaction for employees, and reduce adversarial relations.” An anti-poverty program, USCCB provides grants for workers to start 100-percent employee-owned cooperatives.
Employee Ownership Remains Underutilized as a Tool for Greater Equity
Beasley turned to Mendoza alum Jessica Rose to understand why employee ownership, which has been debated for over a century, remains underutilized as a means of bringing greater equity to the U.S. economy. Rose is the CFO and director of employee ownership programs at The Democracy Collaborative.
Rose says that among the biggest obstacles to growing employee ownership is the lack of awareness among business owners. She notes, “Often the sale to employees is an attractive option for business owners. It is an opportunity not only to get fair market value for your business but also to reward the people who helped you succeed and cement your legacy.” But too few business owners considering retirement know that selling to their workers is a viable option. That’s why Rose, along with colleague Marjorie Kelly, founded the Fifty by Fifty initiative: to build awareness and grow employee ownership nationwide.
As the research Beasley cites makes clear, employee-owned businesses have a good track record. They have been shown to outperform conventional firms in sales growth and sales per worker. Workers with a greater sense of ownership, both in terms of ownership shares and engagement, are more loyal to their firms; they become more engaged and, through expressing their ideas and offering suggestions, improve overall performance.
Successful employee-owned firms can be found in most sectors of the economy. Rose talks about her trip to Mondragon, where cooperatives are building European railways and advanced industrial equipment. Beasley reminds readers that as consumers, we often don’t realize we are buying products from employee-owned supermarkets (Publix) or stopping for gas at the employee-owned quick stop (Wawa). Employee ownership may not have spread sufficiently through the American economy, but nearly 7000 businesses touch our lives almost daily.
Picking Up the Pace of Employee Ownership through New Models
Will employee ownership grow more robustly in the 21st century? asks Beasley. He argues that new models such as franchises and platform cooperatives, and new interest among impact investors, suggest that employee ownership is positioned to go to scale. Arguing that diversification is healthy, he refers to the work of Oxford University professor and employee ownership expert Jonathan Michie who has made the point that “a diversity of ownership models works like biodiversity in a healthy ecosystem, making the overall economy more robust and resilient and less vulnerable to recessions.”
Pope Leo XIII would likely be pleased to see that the growing momentum for a more democratic economy.
Karen Kahn provides communications consulting and editorial support for Fifty by Fifty.