What if employee-owned businesses were the key to a healthier, more humane economy?
As a human-resources professional, Jennifer Briggs got used to firing people.
She'd refer to it as "layoffs," "right-sizing," or whatever euphemism her employer wanted her to use at the time. She was a foster child turned single mother who had relied on food banks to feed her kids, and, as unpleasant as it was, managing and cutting employees at a large public company became her livelihood. So she compartmentalized the painful parts as best she could: "I downsized a lot, and it wore me down," Briggs says. But, she adds with half a smile, "I'm really good at it."
In 2004, Briggs took a job as vice president of human resources and organizational development at New Belgium Brewing in Fort Collins, Colorado, not far from where she grew up. She liked that the company already had a culture of shared governance and a profit-sharing plan for employees. And it was during her tenure that co-founder Kim Jordan called an all-hands meeting and announced that she had sold the company.
The several hundred anxious employees each received envelopes; inside, Jordan told them, they'd learn the identity of the buyer. To the sound of an auditorium full of paper-tearing, one by one they found themselves holding a mirror. The tearing turned into silence, then cheering.
Since December 2012, the company has been 100 percent employee-owned.
This counterintuitive turn of events—that hundreds of people could unknowingly, without paying a cent, buy the company at which they work—is only possible, and actually somewhat commonplace, thanks to a device known as the Employee Stock Ownership Plan, or ESOP.
Beginning in 1974, Congress has recognized the ESOP as a tax-advantaged retirement plan, like a pension program or a 401(k). This meant that in addition to investing employees' savings in the broader stock market, the ESOP could invest in their company, even to the point of owning the whole thing. In the process, companies can issue shares to employees with money borrowed from the seller of the company, or a bank, and pay it back with employer's retirement contributions and any dividends that the shares earn. If their company does well, rank-and-file employees can end up reaping gains far beyond their wages, to the point of low-wage workers retiring as millionaires.
Through ESOPs, around 14 million employees at 7,000 firms in the United States co-owned by part or all of their employers, from the 200,000-strong Publix Super Markets to the 200 employees of Bob's Red Mill. (In comparison, there are only a few hundred worker cooperatives, the older major form of broad-based employee ownership.) The National Center for Employee Ownership lists over 300 lenders, accounting firms, and consultants around the country that specialize in servicing ESOPs. Since leaving New Belgium in 2017, Jennifer Briggs became one of those consultants. Colorado's governor, Jared Polis—who began his campaign at an ESOP grocery store—appointed Briggs to a new commission on advancing employee ownership in the state. Rather than cutting jobs, her job has become making owners.
Employee ownership is one of those mythical, elusive ideas that can claim bipartisan support in Washington. Senator Russell Long, a centrist Democrat, arranged for the earliest ESOP legislation in the 1970s. But one of the model's loyal supporters over the years has been Paul Ryan, the Republican former House majority leader. The 2016 Democratic Party platform approved of profit-sharing plans as a means of countering wealth inequality, while its Republican counterpart celebrated ESOPs as a means to "enable workers to become capitalists, expand the realm of private property, and energize a free enterprise economy." But lately the most strident support has been coming from the left.
Worker-owned businesses are part of Alexandria Ocasio-Cortez's resolution for a Green New Deal. Bernie Sanders has introduced employee ownership legislation in the Senate and, in May, proposed mandating employee ownership for large companies. Fellow presidential candidate Kirsten Gillibrand introduced the most important new employee ownership law in years, the Main Street Employee Ownership Act, which President Trump signed (knowingly or not) in 2018 as part of a defense appropriation. In a hyper-partisan climate, the co-sponsors were nearly split down the middle.
In Newark, New Jersey, Mayor Ras Baraka has established a fund to finance conversions of local companies to employee ownership. "Ultimately, we need to spread the access to capital," he says. "People need to own the things that they produce. It helps push back against gentrification, against displacement." City-backed employee ownership efforts are also underway in Madison, New York City, Oakland, Philadelphia, and elsewhere.
Nationwide, an initiative called Fifty by Fifty has set out to turn 50 million employees into owners by 2050. Behind its strategy is a demographic reality: More than 2 million baby-boomer business owners are set to retire in the coming years, often with no succession plan. Could their workers could fill the void?
"The chance to dramatically expand employee ownership is greater than ever," says Marjorie Kelly, an executive vice president at the Democracy Collaborative and co-founder of Fifty by Fifty. And "the real potential for an employee-centric economy lies with ESOPs."
The ESOP research agenda has long been housed at Rutgers University, which is now home to an Institute for the Study of Employee Ownership and Profit Sharing, where I recently completed a fellowship that funded me to contribute to the growing body of work on ESOPs and structures like them. At the institute's conferences, lefty worker co-op activists and politicians mingle with ESOP executives and the likes of Michael Keeling—the longtime president of the ESOP Association lobby, a Paul Ryan enthusiast, and a Texan who befriended George W. Bush at Yale. Keeling's contributions are not so much conference presentations as orations, and this June he used his time to implore those gathered not to fall into petty progressivism and recognize the trans-partisan opportunity that employee ownership represents.
A one-sided strategy, anyway, would drown in irony: The socialist left has embraced the invention of an avowed capitalist.
When Louis Kelso appeared on the Bill Moyers interview show A World of Ideas in 1990, Moyers had trouble categorizing his guest. Kelso, who'd grown up in poverty, became a successful corporate lawyer. He wore only blue-and-white, polka-dot bow ties. During World War II the Navy assigned him to Panama, and he used the plentiful downtime to compose an economics treatise that his client and friend, the popular philosopher Mortimer Adler, helped him condense the sprawling manuscript down to their nearly 300-page Capitalist Manifesto. When it appeared in 1958, it was a national bestseller. By the time of the interview, a year before Kelso's death, he was best known for devising the ESOP, which bore the whiff of communal co-ownership.
At one point, Moyers asked him whether he considered himself a capitalist or a socialist. "I don't know what I am. I don't fit any of the definitions. I think I'm the capitalist of tomorrow," Kelso responded.
The animating idea of Kelso's career, which he came to as a student and sailor and held to unfailingly afterward, was that the production of market value results from two kinds of inputs: labor and capital. As technology advances, labor becomes less important and capital, more. Capital, in turn, will end up claiming a greater share of the resulting profits. Kelso followed Karl Marx's analysis of the problem of capitalism—that capital wants to eat labor alive—but inverted the solution. Rather than folding the means of production under a workers' state, he wanted to create more capitalists. That, he believed, would ensure that ever more people own the means of production and reap their capital's returns. Creating more capitalists, he thought, would protect democracy and capitalism alike from capture by a small, wealthy elite.
New Belgium Brewery Worker
He didn't think the crushing inequalities capitalism could produce are capital's fault; the problem as he saw it is that only the wealthy have the opportunity to become true capitalists—to borrow and live off of what they own, and to co-own the means of production. If anyone could do those things, capitalism would be an equalizer.
At the time, the economics profession of the time wanted little to do with Kelso. A 1970 Time article quotes Milton Friedman calling Kelsoism "a crackpot theory" and "Marx stood on its head."