BY ZOE SULLIVAN | NOVEMBER 13, 2018, NextCity.org
Cleveland’s Evergreen network of cooperative businesses today announced a new fund to buy-out retiring small business owners and transfer their businesses into employee-ownership. (Credit: Democracy Collaborative/John Duda)
Tameka Thomas had returned to society after a five-year prison sentence, and a month after her release, she landed a job with Evergreen Cooperatives in Cleveland with help from a re-entry transition program.
“I thought it was going to be really, really hard to find employment when I came home,” Tameka Thomas says. “I am so thankful for Evergreen for giving me a second chance and for believing in me and just trusting in me and just giving me the opportunity to prove to everyone that even though I made a mistake, that mistake doesn’t define me.”
While Thomas was grateful for the job when she landed it, she didn’t realize that she had found herself in a cooperative business — that is, a business where the workers collectively own the business, make major management decisions and share in the profits.
“You understand the importance of filling these orders that we have, as opposed to coming to work and ‘Why do we have to push out a thousand scrips? Why do we gotta do that?’” Thomas says. “Becoming an owner-operator, you know: if we don’t meet this quota, we don’t get paid. If we don’t fill this order, we lose customers. So, you just tend to have a different outlook.”
She thrived in the environment, and is now a department supervisor. “I started out on the production floor, and I worked my way up,” Thomas says.
Evergreen Cooperatives launched in 2008 to create living-wage jobs in seven low-income Cleveland communities. Instead of trying to lure corporations offering low-wage jobs, the coalition behind Evergreen Cooperatives aimed to catalyze worker-owned businesses with the idea that low-income residents could be trained for the jobs created. Currently, Evergreen employs more than 250 people at three core businesses: an industrial laundry, an urban greenhouse, and an energy-efficiency contractor. The laundry recently took on the Cleveland Clinic as a client, as Next City previously covered.
Now, however, the organization is looking to expand via a different pathway. Today, Evergreen Cooperatives announced the launch of the Fund for Employee Ownership, an investment fund aimed at supporting the conversion of existing businesses to cooperative or Employee Stock Ownership Plan (ESOP) models.
As it did with the original Evergreen network, the nonprofit research and advocacy group Democracy Collaborative is supporting the launch of the Fund for Employee Ownership. The fund will leapfrog the start-up process, explains Jessica Rose, chief financial officer at the Democracy Collaborative. Typically it can take many months, even a year or more, to train employees before they’re prepared to purchase a business from its existing owner. The Fund offers to buy-out owners when they’re ready to sell or retire, and then get to the hard work of converting to employee ownership.
“We’re excited about the opportunity to accelerate that process of developing more employee-owners,” Rose says.
The businesses that undergo conversion will be professionally managed but employee-governed. “One hundred percent worker-owned, one worker, one vote basis,” Rose says. “The workers will be participating in meaningful decisions: what management to hire; how to deal with profit; board governance.”
Joining the Evergreen network will also allow companies to economize by sharing back-office support, Rose explains, and to benefit from a team that “knows what it takes to run a participatory business.”
The change in strategy from starting new businesses to converting existing ones, Rose says, aims to acknowledge the fact that the baby-boomer generation is retiring. “That opportunity is a national story,” Rose says, acknowledging that while the Fund currently is focused on Cleveland and northern Ohio, the vision is to develop a model other communities can implement.
Employee-ownership has other champions among those focused on helping millions of business owners think through what to do as they consider retirement — a phenomenon that could have major consequences for cities.
One of those champions is Andy Manchir, who provides exit planning services for business owners looking to retire. He also trains other exit-planning professionals on ESOPs. Before working on exit-planning, Manchir worked for Fortune 500 companies. Now, his company has an ESOP. “We kind of practice what we preach that way,” he says.
“I like how [employee ownership] gives a good opportunity for business owners while at the same time for rank-and-file employees who work with them and for them. That’s what gets me fired up about this,” Manchir says of ESOPs.
“What that does is it really kind of forces savings in a way our current plan doesn’t do for folks,” he adds. “So many people are going to retire without retirement plan savings. It’s just bad policy for the country.” Manchir says that ESOPs provide a way to address that shortcoming.
Manchir notes that there are tax incentives for ESOPs, and that organizations such as the Exit Planning Institute, which trains exit planners around the country, are making efforts to spread awareness of worker-owner models for retiring business owners.
“There’s a ton of closely-held businesses out there that employ the majority of Americans,” Manchir says. “Those are the owners that really have to be looking out for ‘well, how am I going to transition as I get close to retirement?’”
Indeed, around six million operating companies are privately-owned in the United States, representing around $30 trillion in sales. According to U.S. census data, baby boomers aged 54 to 72 own 63 percent of these companies. Those baby boomer-owned businesses represent roughly $10 trillion in wealth poised for transition, according to the Exit Planning Institute.
Manchir, like Thomas, also sees employee-ownership as an incentive to work hard and perform well. “On average, there’s good academic research that shows the employee-owned business outperforms the traditionally-owned business,” he says. “There’s lower turnover rates in an employee-owned company. They grow a little faster, so therefore these things become more successful businesses.”
Back in Cleveland, Rose is already finding a receptive audience among the area’s business owners.
“We’re focused on industries that employ the kinds of workers we are looking to target,” Rose says, namely low-income people often with barriers to employment such as a criminal record.
The Fund’s first investor has put in roughly $5 million of concessionary debt, Rose says, describing that as “patient capital.”
“There’s a smaller market in the impact space of those types of investors, and we’re hoping that we can partner with more, but our ambition is that this can be at or near market rate [returns],” Rose says.
Around the country, more and more investors are indeed becoming interested in the worker cooperative market as a place where they can earn some financial return while also making a difference.
Although some businesses have already begun discussions with the Fund for Employee Ownership about conversion, Rose explains that succession issues prevent her from disclosing their names.
“It seems to really make a difference to people when you can look them in the eye and say we’re going to take care of the people,” Rose says of those early discussions.
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our monthly Bottom Line newsletter. The Bottom Line is made possible with support from Citi Community Development.
Zoe Sullivan is a multimedia journalist and visual artist with experience on the U.S. Gulf Coast, Argentina, Brazil, and Kenya. Her radio work has appeared on outlets such as BBC, Marketplace, Radio France International, Free Speech Radio News and DW. Her writing has appeared on outlets such as The Guardian, Al Jazeera America and The Crisis.
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Worker Cooperative Resolution Passes Unanimously in Cook County
By 
STEVE DUBB | eil
October 17, 2018; Chicago Reporter
Earlier this month, the Chicagoland Cooperative Ecosystem Coalition (CCEC) held its inaugural town hall meeting. As La Risa Lynch explains in the Chicago Reporter, the coalition, envisioned as a three-year pilot, brings together nonprofits, existing worker co-ops, advocacy groups, and co-op developers. The idea is that it will provide funding, training, technical assistance, and research and legal services, and raise public awareness about worker cooperatives.
Stacy Sutton, a professor at the University of Illinois at Chicago, tells Lynch that the worker cooperative movement is “growing and picking up momentum because there is a belief that through worker ownership you are creating…a more democratic and a greater equitable distribution of economic resources.” The lack of living wage jobs, even in a low-unemployment economy, is also fueling growth.
According to Renee Hatcher, director of the Business Enterprise Law Clinic at John Marshall Law School, there are now 18 worker cooperatives in Cook County, more than half of which are based in or started by communities of color. One of the most famous is the New Era Windows Cooperative, which was founded in 2012, four years after workers occupied the old Republic Windows and Doors in order to get the company to pay what it legally owed workers when they were laid off en masse.
Hatcher notes that in communities of color especially, cooperatives enable people to “collectively create jobs for themselves and decide how they want to set up their working conditions [because] worker exploitation…primarily happens in Black, Latinx and immigrant communities.”
Hatcher is a coauthor of a policy paper that seeks to lay out a strategy to support and grow the worker cooperative movement in the Chicago area. The report issued six recommendations. The first was to formalize a coalition of co-ops to build greater support for worker cooperatives. The five other recommendations were more policy-oriented, namely:
- “The City of Chicago, Cook County, and the State of Illinois should invest in the worker cooperative ecosystem and development infrastructure.”
- “The City of Chicago and Cook County agencies should support worker cooperatives through public contracting and procurement of goods and services.”
- “Institutions and organizations should engage worker cooperative businesses in anchor-based development and capacity building.”
- “The City of Chicago and Cook County should pass a resolution in support of worker cooperative businesses and development.”
- “The State of Illinois should pass a Limited Cooperative Association statute.”
While most of the policy recommendations are pretty straightforward, the Limited Cooperative Association idea, which combines aspects of a cooperative with aspects of limited liability company, is a little more complicated. As Lynch details, a standard worker cooperative classifies worker-owners as employees. “That,” writes Lynch, “triggers certain labor and IRS rules which can exclude immigrant communities from starting worker co-ops and make it cost prohibitive for others.” Hatcher elaborates that the current rules are “certainly a barrier for entrepreneurs that don’t have work authorization or don’t have legal status.” Some states, Lynch adds, such as Wisconsin, Iowa, and Tennessee, already have similar provisions in place.
The coalition is making rapid progress. In September, Lynch notes, “Cook County’s Social Innovation Commission approved a resolution to use community development block grants or other funding sources to support and develop worker co-ops.”
The Cook County measure, in which the Cook County Board of Commissioners asserted its support for the development and growth of worker cooperatives, passed unanimously on October 17th. Getting legislation passed in a county with 5.2 million people, a population of similar or greater size than more than half of the US states, is a considerable accomplishment.
Among the more significant provisions was one that encouraged the county’s Bureau of Economic Development to make available community development block grant (CDBG) funding “to support local worker cooperatives and cooperative conversions, strengthen existing organizations that are incubating and training worker cooperatives in Cook County, and help to equip other organizations to provide such services, focusing on services to low‐income residents or in underserved areas.”
Now that the group has gotten Cook County to pass the resolution, it is hoped that the city of Chicago will follow suit. Meanwhile, the coalition itself is maturing. The CCEC coalition has set some priorities. These include “mapping the existing Cook County and Chicago ecosystem of worker cooperative enterprises and business support services to developing a protocol for documenting metrics for worker-owned enterprises and support service organizations.”—Steve Dubb
Dubb is a senior editor at NPQ. Steve has worked with cooperatives and nonprofits for over two decades, including twelve years at The Democracy Collaborative and three years as executive director of NASCO (North American Students of Cooperation). In his work, Steve has authored, co-authored and edited numerous reports; participated in and facilitated learning cohorts; designed community building strategies; and helped build the field of community wealth building. Steve is the lead author of Building Wealth: The Asset-Based Approach to Solving Social and Economic Problems (Aspen 2005) and coauthor (with Rita Hodges) of The Road Half Traveled: University Engagement at a Crossroads, published by MSU Press in 2012. In 2016, Steve curated and authored Conversations on Community Wealth Building, a collection of interviews of community builders that Steve had conducted over the previous decade.
Collecting 34 interviews conducted by Democracy Collaborative Senior Fellow Steve Dubb, Conversations on Community Wealth Building is now available on Amazon or through your local independent bookstore.
Featuring interviews from…
Worker Cooperatives and Employee Ownership
Project Equity, Interviewed in 2010
Community Development Corporations
National Coalition for Asian Pacific American Community Development,
Interviewed in 2007
Community Investment and Institutional Strategies
Uptown Consortium,
Interviewed in 2007
Social Enterprises and Innovation
Office of Oakland Mayor Libby Schaaf,
Interviewed in October 2014
Community Development Corporations
Building the Engine of Community Development in Detroit,
Interviewed in 2008
Land Banks and Community Land Trusts
Burlington Associates,
Interviewed in 2011
Social Enterprises and Innovation
Native American Youth and Family Center,
Interviewed in 2014
Land Banks and Community Land Trusts
Lincoln Land Institute,
Interviewed in 2007
Community Investment and Institutional Strategies
Double Bottom Line Partners,
Interviewed in 2010
Cooperatives
U.S. Overseas Cooperative Development Council,
Interviewed in 2012
Worker Cooperatives and Employee Ownership
Opportunity Threads,
Interviewed in 2014 by John Duda
Worker Cooperatives and Employee Ownership
Democracy at Work Institute,
Interviewed in 2010
Social Enterprises and Innovation
REDF,
Interviewed in 2011
Worker Cooperatives and Employee Ownership
Namaste Solar,
Interviewed in 2013
Worker Cooperatives and Employee Ownership
Center for Popular Economics,
Interviewed in 2015
Land Banks and Community Land Trusts
Land Bank Authority,
Interviewed in 2009
Cooperatives
Latino Economic Development Center,
Interviewed in 2009
Worker Cooperatives and Employee Ownership
Ohio Employee Ownership Center,
Interviewed in 2008
Community Development Corporations
South Carolina Association of Community Development Corporations
Interviewed in 2011
Community Development Corporations
Communities In Schools,
Interviewed in 2009
Community Organizing and Education
NYC Department of Education,
Interviewed in 2012
Worker Cooperatives and Employee Ownership
Equal Exchange,
Interviewed in 2012
Social Enterprises and Innovation
North Lawndale Employment Network,
Interviewed in 2010
Community Development Financial Institutions
Capital for Opportunity and Change,
Interviewed in 2006
Community Organizing and Education
Roots of Success,
Interviewed in 2012
Community Development Financial Institutions
Opportunity Finance Network,
Interviewed in 2009
Community Organizing and Education
National Domestic Workers Alliance,
Interviewed in 2014
Community Organizing and Education
Church of the Messiah
Interviewed in 2013
Cooperatives
Interviewed in 2012
Community Investment and Institutional Strategies
Community Economist,
Interviewed in 2015
Social Enterprises and Innovation
SFMade,
Interviewed in June 2013
Community Organizing and Education
National Community Reinvestment Coalition,
Interviewed in 2010
Community Development Financial Institutions
Opportunity Fund,
Interviewed in 2008
Worker Cooperatives and Employee Ownership
United Steelworkers,
Interviewed in 2013
