Employee-owned

Bird Dog's picture

A few months ago, The Guardian asked the question: Is employee ownership the answer to our economic woes? To me, the answer is yes. An employee-owned company is a private enterprise that still has to make money to remain a going concern. From what I can see, the primary differences between a publicly held firm and an employee-owned business are that, for the latter, job stability is better and there is less focus on quarterly results. The Minneapolis Fed has a favorable take on this business model:

But research to date suggests that employee ownership holds a much more convincing economic argument: Firms that offer some form of ownership or other worker-reward system have demonstrated impressive performance, possibly better than those that don't.

They also weather recessions quite well. U.S. News explains how it works for John Lewis Partnership.

First, John Lewis Partnership governs itself in a way that promotes nimble decisions while staying accountable to the employees who own it. Employees (called "Partners") elect an 82-person governing body called the Partnership Council. The Partnership Council in turn elects about one third of the board. The Partnership Council has the power to dismiss the chairman (but has never done so). These checks and balances give employees real power, yet the chairman can act quickly and decisively.

 

Second, John Lewis Partnership inverts the typical relationship between investors and employees. At most businesses, outside investors have ultimate control. At this company, capital is seen as important input to business success, but outside investors do not control the business. To preserve 100 percent employee ownership and protect John Lewis Partnership from the pressures of day-to-day stock moves, the company does not sell its equity. It raises the money it needs using loans and bonds, financed in part by employees and customers.

"Owning our own capital allows us to take a longer term view than many conventional PLC [public limited company] organizations," says Patrick Lewis, Partners' Counsellor of John Lewis Partnership. Lewis represents the employees' interest in the ownership structure. "That gives us a significant advantage in the market—to the benefit of all our stakeholders—including our partners/employees."

Third, the organization's payroll is highly flexible. In good times, employee bonuses have boosted yearly pay by as much as 24 percent. (The bonus payout percentage is the same from lowest pay grade to the top, which means all employees share equally in both pain and gain.) Flexible pay helps cushion the company against downturns. It reduces the depth and duration of layoffs. The flexibility and fairness of the compensation system helps John Lewis Partnership retain an experienced and motivated staff that can spring into action when the economy improves.

 

Finally, the company enshrines its priorities—serving its employees—in a binding, written constitution. The constitution can only be changed by vote of the Partnership Council, which is controlled by employees.

On a local level, Full Sail Brewing is doing well. So is Winco, my preferred choice for big grocery runs. Its prices are the lowest around and, surprise, the other day I received a $10 credit from the company for my next purchase over $50. Boise-based Winco is killing Boise-based Albertson's, a subsidiary to a publicly held firm that is being bought by private equity. Another example is REI, which has been going strong since the 1970s (although it had its share of hiccups along the way). I remember cruising around the original store on Capitol Hill with my hippie brother-in-law. I also remember the dividend I received when I was a teenager. Back in college, in the early 1980s, one of the my business class case studies included Lincoln Electric, another employee-owned company with a long history of success.

So why aren't there more employee-owned companies and why don't we hear more about them? In my opinion, because Wall Street doesn't make money from those enterprises. And there's inertia. And access to capital could be an issue. Anyways, it's a capitalist business structure that can work, which is why conservatives should like it. Liberals should like it because it gives employees a real stake in how a company operates, including how it pays its executives, despite it being a capitalist model.

UPDATE: Oh, and I forgot to mention that our family just switched over to Group Health Cooperative. So far, the service has been stellar. My daughter has been already in three times and no complaints. My mom has had it for years without complaint. We switched because it's way cheaper than Premera, which covered 80% of most services. With Group Health, there's just a co-pay and the premiums are a few hundred less a month.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.

I'd like to make

(#299652)

my company employee-owned eventually, mostly for self-interested reasons. Watch me go off into bullet land when the subject turns to business...

 

  • It will make it easier to attract and retain talent
  • It will be easier to align employee behavior with company objectives
  • But also because might make it easier to sell my share of the company when I retire

 

I say it might because if we ever reach an enterprise scale selling probably wouldn't be that hard. However, a small creative services firm is probably harder to sell when the chief creative is heading for the door. My own employees, however, would probably be easier to convince about my irrelevance. ;)

"I don't want us to descend into a nation of bloggers." - Steve Jobs

There should be a website where you can search

(#299644)

for employee-owned businesses in your area. If one exists, I couldn't locate it.

 

Nice diary.

We Used to Call Them Co-ops

(#299647)

Here's a workers' cooperative advocacy group. It's got a little of what you're looking for.

Privately Held vs. Public

(#299642)
TXG1112's picture

I would argue that the important factor is not whether a company is owned by it's employees, but whether it is publicly traded or privately held. Employee owned is a good thing, but if the majority of the stock is owned by employees it achieves all the benefits of being private. The biggest benefits listed in in the quoted article have more to do with not being publicly traded than being employee owned though I agree there are some additional advantages to the employee owned structure.

 

--- I will not be pushed, filed, stamped, indexed, briefed, debriefed, or numbered. My life is my own.

Liberals do support employee owned businesses

(#299630)
HankP's picture

just not with the ridiculous tax breaks that Republicans have showered on them, mostly for the benefit of retiring owners and as a means of leveraging excessive debt onto employees.

 

I blame it all on the Internet