Momentum has been building for employee ownership
Two days ago, I heard Mayor Jesse Arreguín of Berkeley say, “One in five Berkeley residents will soon be over 50, including business owners struggling to sell their businesses.” He added, “And in the era of the Great Resignation, our employers are wondering what kinds of benefits and incentives will keep their best employees.”
Then the mayor ended with his punchline: “Our city’s economic recovery during the height of the pandemic was about just keeping doors open. The next phase must include co-ownership as part of our equitable long-term recovery.”
Berkeley is one of a handful of municipalities across the country building support for employee ownership into its regular work. City contract bids include extra points for employee-owned enterprises. The business permitting process has a spot for co-operatives to identify themselves. They pay local experts to deliver outreach and technical assistance services for retiring business owners who want to sell to their employees. They offer a small business revolving loan fund to help finance new and converting employeeowned businesses.
Why should we care? As California State Sen. Josh Becker said, later that day: “Employee-owned businesses outperform their peers in productivity, performance, and resilience.” He added, “This model makes all the sense in the world. That’s why I decided to co-sponsor SB 1407 — The California Employee Ownership Act.”
That new law now rests in the hands of Tara Lynn Gray, director of the California Office of the Small Business Advocate (CalOSBA). She is charged with figuring out how to make sure the whole state now actively supports employee-owned enterprises. At the federal level, there’s a version two underway for the 2018 Main Street Employee Ownership Act. Both pieces of legislation passed with unanimous bipartisan support.
Sen. Becker was right: The case for employee ownership is clear. In a recap of the recent research: • “Workers at employeeowned businesses have 46% longer job tenure (and) report productivity levels 9-19% higher than in (non-employee owned) businesses.
• Employee-owned companies had higher average employment growth in the pre-recession period from 2006-2008than the overall economy, as well as faster post-recession growth from 2009 to 2011.
• During the pandemic, employee-owned businesses kept considerably more money in employees’ hands — and in the economy — than other firms by securing employees’ jobs, and maintaining work hours, salary, and workplace health and safety.
• People of color working in ESOPs (Employee Stock Ownership Plans) have substantially more wealth than their peers nationwide, indicating that employee ownership can help reduce the racial wealth gap.”
So if you’re a business owner, you get both a decent sale price and the confidence of watching your employees carry forward your legacy.
If you’re in workforce or economic development you look at the 32.1 million employees nationwide who are working for businesses owned by someone over 55, get chills when you learn that only 3040% of businesses up for sale actually end up selling, and realize that an aggressive employee ownership conversion push can be significant to our region’s economic recovery strategy.
And if you’re currently an employee, I’ll leave you with the story of Christian Garcia, master baker and worker-owner with Proof Bakery. Christian was being recruited by a celebrity chef to work in his brand-new high-end restaurant in downtown LA. After deep reflection, he decided his best path forward was to instead become one of the workerowners who bought out Proof Bakery’s former owner, Na Young Ma, and carried forward her legacy as their own. Three years later, he’s even happier with his choice now than on the day he said no to the celebrity chef and yes to co-owning his own business.
Leila Roberts is the director of the North Coast Small Business Development Center, serving current and future small businesses across Humboldt, Del Norte and Tribal Lands. Leila is known among her peers and partners as a broken record about the powerful benefits of employee ownership. She can be reached at leila@ northcoastsbdc.org. Learn more at northcoastsbdc. org/worker-owned.