The SVA has long supported worker buyouts in our three decades of saving The SVA has long supported worker buyouts in our three decades of saving jobs and business turnaround work. We’re seeing a new wave of worker ownership in American companies, a good thing. Organized worker ownership presents solutions to several problems that companies commonly face - including wealth inequality, lack of diversity, and lagging performance.
True democratic worker-owned firms, including employee stock ownership plans (ESOPs) and co-ops, are owned by the same people who work in, run and own the business. The shared ownership model promotes economic stability and allows all types of workers to build wealth through the company’s success. There are also millions of workers who belong to ESOP companies but, while having a share of the firm, do not participate in business decisions.
What is an ESOP?
An ESOP is an innovative ownership tool that provides tax advantages for the company and business owners as well as an opportunity for employees to grow retirement assets. Employees participate in the economic growth of their employer via company stock held in their retirement accounts (Forbes Magazine). ESOPs tend to be larger companies, the incorporation costs greater, and legal hurdles more complex to establish (as an ESOP trust is regulated under the ERISA guidelines, which also govern retirement benefits).
What is a Co-Op?
A worker cooperative is a “values-driven business that puts worker and community benefit at the core of its purpose.” The two central characteristics of worker cooperatives are (1) Workers own the business and they participate in its financial success on the basis of their labor contribution to the cooperative, and (2) Workers have representation on and vote for the board of directors, adhering to the principle of one worker, one vote. (Democracy at Work Institute).
Worker co-ops were more predominant in America in the late 1800s and early 1900s, but died out to a great degree (though consumer, energy and ag co-ops have remained viable). Worker ownership is a more established concept in European countries such as Spain and Italy. The idea of worker buyouts is slowly gaining traction again n American cities - including Pittsburgh.
Recently, the Pittsburgh City Council heard compelling testimonies from local businesses who have adopted worker ownership strategies. In conjunction with the PA Center for Employee Ownership (PaCEO), the Pittsburgh Chamber of Cooperatives, and the US Federation on Worker Cooperatives, Councilwoman Erika Strassburger created a Pittsburgh Task Force that will help raise awareness of worker-owned firms around our city. Read more about this exciting initiative HERE.
Image Credit: Tribune Review
In conjunction, we present three articles discussing the important benefits of worker ownership:
Reducing Economic Inequality through Democratic Worker-Ownership
Why the U.S. Needs More Worker-Owned Companies
Using Employee Ownership to Build a More Equitable Future for Work.
These articles present how this strategy can be utilized to produce better results, happier employees, and a more democratic company. (Thanks to Michal Peck of 1 Worker/1 Vote and the Harvard Business Review and its article for the shout-out to SVA’s Heartland Network as a model for responsible investment!)
We’re happy to provide the good news and opportunities that exist in the field. But workers also need to understand the costs, legal processes, and risks in trying to launch an enterprise or buy existing firms. There are differences between co-ops and ESOPs, and it is vital to obtain legal counsel before exploring this field. Unions can also sometimes help. We present these pieces as an optimistic look at worker ownership but with caveats.