Two colleagues and I at the University of San Diego, Karen Henken and Juan Roche, are developing a global seminar for executives to study business – for – good models around the world. We plan to launch the 15-day, ten-month seminar in San Diego in January 2024 and a few months later we’ll spend five days visiting companies and organizations in Spain. Then in July we’ll spend five days visiting Rwanda.
We will study concepts related to how business can collaborate with government and non-governmental organizations to be a force for social and environmental good.
This post explores one of the models – worker ownership – that we will examine during site visits in this year-long seminar.
Forms of Worker-Ownership
Worker-ownership can take various forms – from partial to complete ownership and/or decision making by employees. In the early 1840s in the UK a consumer co-op called the Rochdale Society of Equitable Pioneers became the prototype for the modern cooperative movement. What was originally called the Rochdale Principles has morphed into seven principles by which co-ops around the world operate today.
Cooperatives are for profit businesses owned by the workers. Substantial research demonstrates that cooperatives tend to be more productive than other forms of enterprises (Chen, 2016) and twice the number of co-ops still exist five years after being created compared with other business models (Co-op Business Survival report, 2019).
During the seminar we will be visiting the largest worker-owned cooperative in the World — The Mondragon Cooperative Corporation (MCC) founded in 1956 in Spain. Started by a Catholic priest in the then impoverished Basque region, MCC today employees more than 80,000 people in over 200 co-ops in retail, finance, industry and knowledge.
On a later trip, we’ll visit several retail and agricultural co-ops in Rwanda.
Employee Stock Ownership Plans (ESOPs)
ESOPs are another form of worker ownership in which employees own part or all of the company they work for. We plan to meet with several organizations in Southern California that have this form of worker-ownership.
In most cooperatives each member has one vote. An alternative method is proportional voting in which votes are allotted according to the number of equity shares a person holds.
Similar to co-ops, the research demonstrates that ESOP’s create higher productivity, job satisfaction and employee retention. Employees receive shares through ownership in a trust, typically distributed according to relative pay. As they work longer for the company, employees earn increased right to the shares. Basically, this means that employees end up owning the business and have some control rights and voting rights within the business. When an employee leaves the company, the stock is redeemed at fair market value (unless there’s a public market for the shares). ESOPs are often used to facilitate succession planning, allowing company owners to sell their shares on a tax-advantaged basis and transition out of the business.
According to the Employee-Owned certification organization with more than 500 members in the US, employee-owned organizations build employee wealth, create a better work environment and result in stronger performance.
A new report from the Morehouse College International Comparative Labor Studies (ICLS) highlights how the equity and wealth-building that comes from employee ownership can address current economic challenges for small businesses and ultimately help narrow the racial wealth gap.
We’ll be launching the Global Seminar website in a few weeks. Meanwhile, if you would like more information, just scan this QR code.
Thanks for reading!
Paula
References
Chen, M. (26 March 2016). “Worker Cooperatives Are More Productive Than Normal Companies”. The Nation. Archived
Co-operative Business Survival: Co-operatives UK Research Report 2019 (PDF) (Report). Co-operatives UK
Donastorg, M. (April 20, 2023). Employee Cooperatives May Help Narrow Racial Wealth Gap, The Atlanta Journal-Constitution.
IRS guide to evaluating ESOP Plans https://www.irs.gov/pub/irs-tege/epchd804.pdf