The ESOP Podcast features Marjorie Kelly
In June, Marjorie Kelly, executive vice president of The Democracy Collaborative and co-founder of Fifty by Fifty, was a guest on The ESOP Podcast, with host Bret Keisling. Kelly and Keisling had a wide-ranging hour-long conversation about employee ownership, and the reasons why the number of employee-owned companies has failed to grow since the 1990s. In fact, as Keisling pointed out, the number of ESOP firms has dropped over the last 25 years.
In the interview, Kelly attributes this failure to grow employee ownership to two things: 1) the way in which we tell the story of employee ownership and 2) a missing agent: organized capital. Below is an edited excerpt from the interview (to listen to the entire podcast click on the podcast image above).
We Need a New Narrative
Marjorie Kelly: At the Evergreen Cooperative Laundry in Cleveland, long-term workers received year-end bonuses for 2020 of about $11,000 each. These are people making somewhere in the neighborhood of $15 an hour. But when you add bonuses, this can be in the neighborhood of $20 an hour.
So employee ownership is a substantial gain for people who have been most excluded in our economy. Today, that is a very powerful story. There are mayors interested in that. There are governors interested in that. There are investors interested in that, and our federal government is interested in that.
This is a big story. This is not just some technical details about how we’re going to convince owners to exit in a way that benefits them. That is how ESOPs have tended to be sold for many years, in this very technical way. There’s a whole industry of technical providers, and it’s all about persuading owners to exit and what’s the benefit for owners.
We need to begin talking about employee ownership in a bigger way. It isn’t just about exiting owners. It’s about concern for employees, for keeping jobs in the community.
That is not a compelling story for our nation at this moment in our history, when there’s so much concern about inequality, there’s so much concern about racial equity. Employee ownership is a much, much bigger story, and it ought to be a mainstream part of who we are as America.
We ought to have an economy built for all of us. It’s employees who are creating the wealth of companies. When they share in that wealth, the companies are more productive, they’re less likely to lay people off. They’re building wealth for people who are normally excluded.
John Barros, who is head of economic development in Boston, said once to us, it takes a job to get out of poverty, but it takes assets to stay out of poverty.
Spreading assets to ordinary people, this is the next stage of the American economy, the American dream. This is the next stage of broad prosperity. Employee ownership is a part of that. We need to begin talking about it in a bigger way, because it is a much, much bigger deal. It isn’t just about exiting owners. We need to bring in broader concerns: concern for employees, concern for the community, keeping jobs in the community. Exiting owners care about these things. Policymakers care about these things. The public cares about these things.
Capital Is the Missing Agent
Marjorie Kelly: The field for decades has really been taking an information route to growing employee ownership: We need to inform exiting owners and that’s how we’re going to spread employee ownership. But it’s not working. What we at The Democracy Collaborative concluded is that there’s a missing agent.
What’s needed to scale employee ownership is organized capital that will step forward and say, do you want to sell your company? We’ll do the rest for you.
Who has the agency to take employee ownership to scale? It’s not employees, they can’t really step up and buy the company. They don’t even know about employee ownership. The ideal agent is also not exiting owners. For them, it’s so complex. They have to go out and find advisors. They have to find debt. They have to stay on the hook with a portion of the debt. And they have to navigate the complexity of it all. Meanwhile, other people — private equity and competitive acquirers — are knocking on their door every week saying, do you want to sell your company? And all they need to do is say “yes,” and then it’s done.
In the research we did with a Rutgers University Beyster Fellowship, we came to the conclusion that what’s needed to scale employee ownership is capital. Not just debt, not just bank debt, because as people told us, if there’s a good deal, companies can find bank debt. What’s missing is organized capital that will step forward and say, do you want to sell your company? We’ll do the rest for you.
That private equity-like capital is what’s needed. In our new report called Opportunity Knocking, we lay out this argument and look at a dozen funds that are forming to do precisely this.
Many people are not used to thinking of business as a tool for social good. We in the employee ownership field know that it can be. It can be successful at producing wealth for people normally excluded. As we bring capital into employee ownership, that capital has to be deployed in the right way. The field needs to become comfortable talking about and focusing on more than technical issues and owner benefit. We need to begin bringing social values, social aims into the business and financial transactions of employee ownership.
Editor’s note: Thanks to Bret Keisling for his great show. The ESOP Podcast is available through Soundcloud and iTunes or you can follow on social media @ESOPPodcast.