Stanford Social Innovation Review article argues for taking capital investment to scale
Typical progressive approaches to addressing the growing income and wealth gap—minimum wage, unions, taxation, or guaranteed income—have failed to move the needle, argue Marjorie Kelly and Karen Kahn—in a post at Stanford Social Innovation Review. In their commentary, the authors make the case for impact investors, including U.S. philanthropic leaders, to invest in transitioning business ownership to employees as a way to address the persistent wealth gap in the United States.
The authors identify a nascent movement among philanthropic investors to catalyze employee ownership and argue for commensurate policy supports that could bring more private capital to the field.
The authors identify a nascent movement among philanthropic investors to catalyze employee ownership and argue for commensurate policy supports that could bring more private capital to the field. Recent guidance from the U.S. Treasury Department on the State Small Business Credit Initiative opens up a real opportunity for states to address inequality by using their investment capital to transition businesses to employee ownership. Additionally, states could use revolving loan funds and other credit enhancement programs to provide patient, low-cost financing for sales to employees willing to rebuild local businesses in the wake of the pandemic.
“The Case for Investing in Employee Ownership” builds on the Fifty by Fifty report, Opportunity Knocking. Since that report was published in January 2021, new investment funds focused on employee ownership transitions have formed, with catalytic capital provided by philanthropic investors. These include the Employee Ownership Catalyst Fund, sponsored by Mission Driven Finance and Project Equity. Living Cities, a consortium of major U.S. foundations and financial institutions, is a lead investor. Mission Driven Finance also manages the Apis & Heritage Legacy Fund, which announced its first close at $30 million last summer, with investments from Rockefeller, Ford, and Skoll.
Read the full article on the SSIR website.