For decades Marjorie Kelly has looked for ways that businesses can better contribute to the good of society. In 1987, after getting a master’s degree in journalism, she founded Business Ethics magazine to showcase socially responsible corporations. But after 20 years as president and publisher, she sold the magazine. She had come to an epiphany: Encouraging individual corporations to behave better was an insufficient route to improving society. Significant change would require a shift in the ownership structure of business. Kelly’s 2012 book, Owning Our Future,lays out ways to expand democratized ownership models, including employee ownership.
Research shows that when employees own the company, they make higher wages.
Through the Fifty By Fifty Network, which Kelly co-founded with Jessica Rose, she is now putting those ideas into action. Fifty By Fifty is based at the nonprofit Democracy Collaborative, where Kelly is executive vice president. It aims to increase the number of employee-owners in the United States from 10 million today to 50 million by 2050. It’s a shift they believe will transform our economy and our democracy.
Fran Korten caught Kelly at her home in Salem, Massachusetts, to learn more about the network, and its ambitious plans.
Korten: What makes you so passionate about expanding employee ownership?
Kelly: It’s the advantages it provides employees. Research shows that when employees own the company, they make higher wages, have about double the retirement savings, and are one-fourth as likely to be laid off. Their companies are more likely to be environmental stewards, and they don’t export their jobs overseas.
With employee ownership, a lot of things we worry about in the economy are on their way to being solved. That’s because you no longer have absentee shareholders looking only at their returns. It’s a radically different vision of a company.
Another reason I’m passionate about this work is that I see employee ownership as the first alternative business model that’s ready to go to scale. It’s a significant, proven model.
Asset ownership is the secret to security.
Korten: What led you to feel that owning assets is so important?
Kelly: I grew up in a family of eight children. My dad owned his own company, a small business that supplied photographic plates to the printing trade. There were 10 of us supported on one salary, and we lived pretty well. My father never saved a dime, but he owned a business. He and my mother owned a house. He owned some real estate. And I learned, not in words but from the arc of his life, that asset ownership is the secret to security. It’s the key to a comfortable retirement.
Financial security is what so many people lack today. I’ve always felt safe because my father provided a foundation of asset ownership. We weren’t rich, but we were secure.
Korten: Where did Fifty By Fifty’s goal of 50 million employee-owners come from?
Kelly: Thomas Dudley, a Ph.D. student at the Stanford Business School,conducted research that showed that half of all employees in the U.S. could own their companies. When you can find one employee-owned company in an industry, that shows it can work in that industry. The ICA Group, one of our network partners, believes there are whole industries that employees can own. Home care is an example. Employee-owned companies could dominate the whole industry.
So we think our goal is doable. Our 50 million employee-owners goal would be about 20 to 25 percent of the workforce in 2050. That would be larger than all manufacturing employment in the United States at its height, in about 1980.
Korten: How would our economy and our society be different if you and your colleagues could actually reach that goal?
Kelly: We believe it would begin to restore the middle class. It would reduce inequality and stabilize companies with local ownership so they’re not sending jobs overseas. When companies are locally owned, three times as much money circulates locally. Other companies in the area—accountants, lawyers, grocery stores—tap this local wealth. So there are large economic benefits locally.
We also think expanding employee ownership can begin to restore democracy. The 99 percent cannot really be empowered as long as the 1 percent owns nearly all the assets.
Our greatest enemies are ignorance and invisibility.
Korten: How does the idea of employee ownership play politically?
Kelly: It crosses the aisle. Employee ownership is the only policy approach that I can think of that has been favored by both Ronald Reagan and Bernie Sanders. It was under Reagan when a lot of the tax advantages were put in place for Employee Stock Ownership Plans. And many of the business owners who are selling to their employees are Republicans—often in rural areas. Take Galfab, a company that sells waste-hauling equipment. It has 150 employees in rural Indiana. “Taking care of all the employees was foremost in our mind,” CEO Jerry Samson said when he announced the sale of the company to his employees. He decided not to take the highest bid he received. He didn’t want the company sold and moved to some other place, with all those people losing their jobs.
Korten: Are there forces out there that are against what you are trying to achieve?
Kelly: Our greatest enemies are ignorance and invisibility. There is a shocking lack of awareness about employee ownership—how big it is, how successful it is.
Korten: What are some employee-owned companies that I might recognize?
Kelly: You probably have seen King Arthur Flour in the grocery store. That’s 100 percent owned by employees. New Belgium Brewery that makes Fat Tire Amber Ale. That’s 100 percent employee-owned. Equal Exchange, which sells fair trade coffee, is employee-owned. Clif Bar, Dansko, Gardener’s Supply, W.L. Gore & Associates—the makers of Gore-Tex—they all have significant employee ownership.
Eileen Fisher clothing, which has about $350 million in annual revenue, is substantially employee-owned. Fisher has said that she didn’t want her company to be just a little morsel that’s devoured by some big company so they can go devour somebody else tomorrow. She put the ownership of her company in the hands of the people that she thought would steward the company’s mission. That’s her employees.
But the problem is that the public doesn’t know that Eileen Fisher or these other companies are employee-owned. We want to give a face to employee ownership. Eileen Fisher is known for putting her employees in her ads. It would be great if those ads said these are employee-owners. We want employee ownership to be as cool and as well-known as organic or buying local or green building. It should be one of these ideas that everybody thinks is great. It may help if employee-owned companies are certified. That’s a need Thomas Dudley is filling with his recently established organization, Certified Employee Ownership.
Korten: When you say “employee-owners,” are you talking about employees in a worker cooperative, or something else?
There are many forms of employee ownership. The worker cooperative is one.
Kelly: There are many forms of employee ownership. The worker cooperative is one. The Employee Stock Ownership Plan is another. ESOPs represent a much bigger proportion of worker-owned companies. That’s partly because ESOPs have financing advantages that worker co-ops don’t have. For example, bankers often are more willing to lend in an ESOP transaction. In a worker co-op, its not so clear who is on the hook if that debt that goes bad. There are solutions to that, but it can be a challenge. So, for a variety of reasons, worker co-ops tend to be smaller companies. ESOP companies can be huge. W.L. Gore & Associates has 10,000 employees and more than $3 billion in revenue.
Korten: I’ve heard some people say that ESOPs aren’t as democratic as worker-owned cooperatives. Is that right?
Kelly: There’s a lot of variety in ESOPs. The National Center for Employee Ownership, one of our Fifty By Fifty Network members, counts about 7,000 companies that have ESOPs. Some are publicly traded companies where the employees own just a tiny amount. Among the 10 million employee-owners today, about two-thirds are at these kinds of companies. When employees own, say, just 5 percent of a company’s stock, it doesn’t amount to much of a change in the company. But there are at least 1,600 ESOPs—with roughly a million employees—where employees own the majority of the stock. When employees own at least 30 percent of the stock, you can start to have a genuine empowerment culture.
Korten: Getting to 50 million employee-owners in this country sounds like a big challenge. How do you and your colleagues hope to get there?
Kelly: Fifty By Fifty plans to promote much greater awareness of employee ownership. We are also talking with impact investors (investors who want to generate a beneficial social or environmental impact with their money). Right now employee ownership is off the radar for impact investors, yet our research indicates that capital can be a big factor in expanding employee ownership. We found just one mutual fund, Parnassus Endeavor Fund, where all of their holdings have employee ownership. But they don’t advertise that fact. We want there to be many more such investment opportunities and for them to be well known.
Cities can help expand employee ownership. In Rochester, New York, for example, the mayor set up an entity to help launch employee-owned companies and convert businesses to employee ownership. New York City committed $3.3 million over two years to develop worker cooperatives.
And reaching out to civil society groups can help. There are Black empowerment groups that are promoting worker co-ops. They are building on the long tradition of worker co-ops in the Black community. That experience was beautifully documented in Jessica Gordon Nembhard’s recent book Collective Courage: A History of African American Co-operative Economics in Thought and Practice.
Korten: What can an ordinary person do to advance employee ownership?
Every economy is defined by its predominant form of asset ownership.
Kelly: Well, they should go to our website FiftyByFifty.org and sign up for our blog about advances in employee ownership. They can shop at companies that are employee-owned. They can encourage their senators and [congress members] to support federal legislation such as the WORK act, introduced by Sens. Bernie Sanders, Elizabeth Warren, and Kirsten Gillibrand. It would fund state employee ownership centers. A second bill would establish an employee ownership bank.
There are some opportunities to invest in employee-owned companies, like Equal Exchange. People should also think about whether employee ownership is possible at companies where they work. Or look for that when they’re job hunting. Citizens can encourage their city to advance employee-ownership. Cities are always surprised when companies that have been in their city for a long time are closed or sold. But the city could identify vulnerable companies and help them stay locally owned and, in some cases, shift to ownership by their employees.
Korten: So in conclusion, it sounds like you and your colleagues are attempting to change the very nature of our economy. Is that right?
Kelly: Absolutely. In studying history, I saw that every economy is defined by its predominant form of asset ownership. In a monarchy, the king and aristocracy own all the land. In a feudal economy, lords own the land. In communism, the state owns the means of production. In early-stage capitalism in the United States, the robber barons and railroad kings owned a lot of the economy. More recently ownership has passed into the financial markets. The next stage is to democratize asset ownership. If we want to have a more democratic country, then we need to have more democratic asset ownership.
City Lab, Why Does Sweden Have So Many Startups? by ALANA SEMUELS
How a tiny country with high government spending bred a large number of vibrant young businesses
STOCKHOLM— This is a high-tax, high-spend country, where employees receive generous social benefits and ample amounts of vacation time. Economic orthodoxy would suggest the dynamics of a welfare state like Sweden would be detrimental to entrepreneurship: Studies have found that the more a country’s government spends per capita, the smaller the number of startups it tends to have per worker—the idea being that high income taxes reduce entrepreneurs’ expected gains and thus their incentive to launch new companies.
There are several dimensions to answering that question, many of which involve changes that took place in the past 30 years. Since 1990, Sweden has made it easier for upstarts to compete with big, established firms. The 20th-century economist Joseph Schumpeter theorized that economies thrive when “creative destruction” occurs, meaning new entrants are able to replace established companies. Sweden used to have a heavily regulated economy in which public monopolies dominated the market, which made it difficult for such replacements to occur, but regulations have since been eased. While Sweden was making it harder for monopolies to dominate the market, the U.S. was changing its regulatory landscape to favor big companies and established firms (largely through overturning anti-monopoly laws and permitting industry consolidation), argues Lars Persson, an economist at Sweden’s Research Institute of Industrial Economics who has studied new-business creation in Sweden.
A new Competition Act in 1993 sought to block big mergers and anti-competitive practices. “The general lesson is that if you make it more difficult for monopolies to dominate the market, then you will have new firms entering the market,” according to Pontus Braunerhjelm, a professor of economics at Sweden’s Royal Institute of Technology.
Sweden also gives some credence to the controversial idea that cutting corporate tax rates can help stimulate entrepreneurship. The reforms of 1991 lowered corporate income taxes from 52 percent to 30 percent. (Sweden’s corporate tax rate today, at 22 percent, is much lower than the U.S.’s 39 percent, though few companies actually pay a rate that high.) Before the reforms of the 1990s, Sweden favored established companies over individuals who wanted to start a business in a number of ways: Individuals in Sweden had to pay taxes on their firm’s income and their own income from the business, while established businesses had a number of ways to reduce this double taxation.
All of these dynamics, added up, create a lot of businesses, which in turn employ a lot of people. Swedish companies that survive for at least three years create five new jobs for every existing 100 jobs in the economy, according to the OECD, while that number is only two in the U.S. “When you look at the total net job creation in Sweden relative to other countries, Sweden is one of the best performing countries,” Calvino, the OECD economist, said. Startups in Sweden also have among the highest survival rate after three years; 74 percent of all its startups make it past three years.
The country’s startups also appear to benefit from characteristics that are less about the economy and more about culture. For instance, because Sweden is relatively small, Nilson and his co-founders frequently worked with and sought advice from the founders of companies like Spotify and Klarna and other successful ventures. This sharing of knowledge between entrepreneurs can make them each more productive. It’s also been argued that Swedes share cultural traits that make them more likely to collaborate. Erik Stam, a professor at the Utrecht University School of Economics, says that Swedes have high levels of trust in one another relative to other countries, which means they’re less likely to require complicated contracts to work with one another and which makes collaboration easier. There’s also an argument to make that because of this trust, supervisors tend to allow employees flexibility in what they do at work, which can spark new ideas.
Of course, there are parts of Sweden’s system that can make it difficult to start and run a company. Recruiting talented employees from abroad is difficult because income taxes for the middle class are so high relative to those in other countries, said Rune Andersson, the founder and chairman of Mellby Gård, a Swedish industrial giant. And Sweden currently levies an income tax on stock options, a form of compensation that many startups offer to entice prospective hires. (The government is changing that policy early next year.)
But Sweden does prove that a dynamic economy can coexist with relatively high taxes and a robust safety net. And it also proves that economies can change over time, from places where new businesses are few and far between to places where they thrive. Andersson told me that in the 25 years since he started his own business, Sweden has gotten better and better for entrepreneurs. “We have become a bit of a startup nation in Sweden, and that’s a new phenomenon,” Braunerhjelm said. It took a giant economic shock to bring the country to this point. One hopes other countries can do the same with less urgent prompting.
This story is part of a series supported by the Abe Fellowship for Journalists, a reporting grant from the Social Science Research Council and the Japan Foundation Center for Global Partnership. It originally appeared on The Atlantic.
Governing the commons
Exploring the need for new rights, responsibilities, economic and democratic practices to govern the contemporary commons; both political, physical and intellectual (eg the wiki movement, open source software and creative commons licensing). Linking this to international and local initiatives on Municipalism, Community Charters, Commoning, participative democracy and reclaiming contemporary commons (housing , food, parks, community centres , land rights etc) to develop a Charter of the Commons for London. This will including campaigning content and outlined the constitutional and legal changes needed to provide the framework needed to transition to commoning (including the need for a written constitution, rather than a mysterious one that is made up by the establishment as they go along).