By Jessica Rose, Director of Employee Ownership Programs at The Democracy Collaborative
As we head into the final months of 2018, I’m amazed at the distance we’ve come in catalyzing discussion, innovation, and real growth in employee ownership. We’ve seen the passage of the Main Street Employee Ownership Act, the first piece of legislation in decades designed to facilitate employee ownership conversions. New research and market analysis is laying the groundwork to spur new investments. And new institutions are emerging to catalyze those investments.
Fifty by Fifty has been participating in all of these efforts, bringing our expertise to wide-ranging discussions and initiatives, as we discuss below.
Tuesday, November 13, saw the launch of Evergreen Cooperative Corporation’s Fund for Employee Ownership, a groundbreaking new investment fund that will acquire small and medium businesses and, by converting these businesses to employee ownership, preserve jobs and build wealth in low- and middle-income communities in the greater Cleveland area. By acquiring businesses from owners who are approaching retirement, the Fund will help these owners access the wealth they have created while preserving their legacy. The strategy is a win-win-win for exiting business owners, workers, and the Northeast Ohio community
As a strategic advisor to the fund, I am thrilled about the Fund’s potential to catalyze employee ownership. The number of employee-owned companies in the U.S—about 7000—has been stagnant for decades. Our theory is that the lack of growth is caused by a lack of agency: No one is incentivized to promote employee ownership in a way that can compete with traditional private equity, which has nearly 2000 funds actively seeking deals every day. The Fund for Employee Ownership, which will raise patient capital from mission-driven investors, will compete in this arena, buying businesses at fair market value but then using the expertise of Evergreen Cooperatives to convert these businesses to employee ownership, build an ownership culture, and support them by bringing them into the Evergreen Network. It is our ambition that The Fund will demonstrate a new innovation in community wealth building and employee-owned business development that will continue Evergreen’s legacy as an inspirational model for the field.
The Fifty by Fifty team through research, publications, and conference presentations has continued our work to raise awareness, deepening understanding, and growing support for employee ownership.
Most recently, I presented at two important gatherings, SOCAP#18 and “Financing the Preservation of Legacy Businesses,” a meeting hosted by Capital Impact Partners with the ICA Group, Working world, Democracy at Work, and Citi Community Development. The convening highlighted findings from Capital Impact’s newly released report, Coop Conversions at Scale: A Market Assessment for Expanding Co-op Conversions in Key Regions and Sectors. Fifty by Fifty did the first employee-ownership presentation at SOCAP two years ago, and interest has grown so much that SOCAP#18 featured an entire track on alternative ownership models. At both these conferences I spoke about the role of capital in taking employee ownership to scale—a theory that Marjorie Kelly and I are researching and supporting some hypothesis testing with the launch of the Fund for Employee Ownership (see above) and other partnerships.
Marjorie Kelly spoke about employee ownership at a recent gathering focused on bringing concern about inequality into business schools. It was sponsored by the Aspen Institute Business and Society Program and the University of Michigan Ross School of Business. Joseph Blasi of Rutgers, who joined Marjorie on the panel, said that of 115 or so scholars researching employee ownership in his network, only 10 to 15 are from business schools.
Developing New Employee Ownership Models
In addition, Fifty by Fifty has released a new paper, The Corporation as Living System: Enterprise Design for a Sustainable, Equitable Economy, based on research supported by Partners for a New Economy. This paper builds on our series of blogs exploring the relationship between employee ownership and ecological sustainability. Our initial findings support our core hypothesis: Ownership by workers, combined with mission-driven governance, is an emerging model — viable in today’s economy — that embodies critically needed design elements required for true environmental and social sustainability. The employee-owned benefit corporation stands in stark contrast to publicly owned companies with distant shareholders who have only one interest—short-term profit gains.
As we grow our presence through our blog and social media, please follow @democracycollab and @marjorie_kelly using the hashtag #fiftybyfifty.
Creating Policy Incentives
In August, the Main Street Employee Ownership Act (MSEOA), having been tucked into the National Defense Authorization Act, became law. The MSEOA is intended to make it easier for businesses converting to employee ownership to access loans through the Small Business Administration preferred lender program, but newly proposed regulations may present obstacles.
Fifty by Fifty will be submitting comments during the public comment period (through November 27), and we encourage individuals and organizations that support employee ownership to do the same. We have all the information you need to submit comments here.
We’ve heard a lot lately about the “forgotten Americans.” Growing inequality and lack of opportunity, whether in inner cities or rural communities, are hurting the future of our nation. Employee ownership is a proven path to better jobs, increased wealth, and stronger local economies. We look forward to building the strength of our movement so that we can reach our goal of 50 million employee owners by 2050.
Fifty by Fifty
Millions of Americans already have an ownership stake in their workplace. More than 7,000 U.S. companies are owned wholly or in part by their employees—the people who work there every day.