Certified EO Blog
A New Chapter for Certified Employee-Owned
November 6, 2024
I am proud to share that Ten28 Holdings has made a majority investment in Certified Employee-Owned. As part of this exciting step, we are welcoming Joe Belsterling into the role of President. This is a major milestone for Certified EO and another step towards our vision of building an employee-owned economy. Kramer and I launched Certified Employee-Owned in 2017 to help companies unlock the competitive advantages of employee ownership. Over the past seven years, we’ve grown our network to over 700 companies - nearly 10% of all ESOPs across the United States. I’m proud of the work we’ve done with our Members and the visibility we’ve created for employee ownership. For all the success we’ve seen, I think Certified EO remains at the beginning of its journey. With millions of businesses reaching critical inflection points in the coming years as part of the Silver Tsunami, employee attrition and churn trending consistently higher, and the ever increasing wealth gap, the employee ownership community is reaching a critical juncture and employee-owned companies have an increasingly important role to play in the future of the economy. Now is the time to invest heavily in the next chapter of growth for Certified EO to accelerate this vision. Joe brings extensive and relevant leadership to Certified EO. He most recently founded and served as CEO of MajorClarity, an education technology and career certification company. Under Joe’s guidance, MajorClarity launched national career readiness benchmarking initiatives, built a best-in-class customer success team that achieved the highest student usage rates in their space across the U.S., and grew to serve over 6.5M students at 5,000 schools. He shares our passion for employee ownership, which is why Ten28 Holdings has invested in Certified EO. I’m confident that Joe’s expertise, skillset, and commitment to our mission and vision will help Certified EO continue its growth and success into our next chapter. In the coming months, Kramer and I will transition to advisory roles. We are excited to see Certified EO reach new heights.
Read More ▶Young Employee-Owners Have the Most to Gain
October 15, 2024
Young Employee-Owners Have the Most to Gain Only 1 in 200 American companies are employee-owned. That means employee ownership can be an unfamiliar concept for most American workers, especially those new to the workforce. Companies that are employee-owned can struggle to convey the real benefits of employee ownership to their younger workforce. Ironically, young employees often have the most to gain from employee ownership both financially and culturally. So how can companies unlock the engaging power of employee ownership with this tough audience? The key lies in framing employee ownership so that it resonates with younger workers' priorities today instead of focusing on a distant future. The Problem: Employee Ownership Can Feel Abstract Employee Stock Ownership Plans (ESOPs) are often discussed with employees as retirement benefits. Technically, an ESOP is a retirement plan, so the connection is logical and the communication naturally centers on saving for the distant future. But for young professionals, the concept of "retirement" may seem abstract. They’re usually focused on more immediate goals, such as paying off student loans, purchasing their first home, finding a partner, or starting a family. In addition, job-hopping is more common in the modern economy. Many younger employees don't know how long they will stay with their current employer. An ESOP that's framed as a retirement plan may not feel like a priority or enough motivation to stay at a job. As employee ownership is relatively uncommon, younger workers may not comprehend the benefits of working at a company that follows this model. If none of their peers have experienced this environment, it’s harder for them to see how they could benefit. It’s just too abstract. How Employee Ownership Benefits Younger Employees While it’s true that the financial benefits of employee ownership take time to build, many other aspects of this model appeal directly to the needs of younger employees. Here’s how companies can better communicate the value of employee ownership to the next generation: 1. A unique workplace culture with ownership from day one All employees immediately benefit from the unique workplace culture fostered by employee ownership. There are tangible day-one benefits to working at a business that has an employee ownership model. Employee ownership motivates employees to take charge of daily work decisions and gives them a sense of shared responsibility. For younger professionals, this ownership culture can provide a sense of belonging and purpose from day one. They can witness how invested employee-owners are in the company's success and how they work together to achieve goals. 2. Growth opportunities without job-hopping Many young professionals feel the pressure to change jobs often to advance their careers. Staying too long at one workplace can be viewed as stunting your professional growth and income. Employee-owned companies are different because they provide a stable job environment that rewards tenure. There are more opportunities for skill-building, professional development, and career growth than at traditional companies. Employee-owned companies value managers who understand the unique model, so they’re more likely to promote from within. For young workers, employee ownership is an opportunity to experience personal and professional growth without jumping from job to job. Studies show that employee-owners tend to stay at a job longer than their peers at traditionally structured companies. The stability that comes with employee ownership means that younger employees can experience upward mobility while staying in one place. They can build long-term relationships with coworkers and customers and grow with their company, accumulating knowledge, experience, and equity. 3. Harnessing the power of compound growth The financial benefits of employee ownership and its role in building long-term wealth are undeniable. But while younger professionals may not feel the urgency of preparing for retirement, they actually stand to gain the most from an ESOP. As with any form of investing, time is a powerful ally. The longer an employee-owner stays with the company, the more shares or stock they accrue. Over time, the value of those shares can grow significantly through the power of compounding. On top of that, employee-owners generally hold shares in a private company, a form of ownership that can often outperform publicly traded shares, although results are never guaranteed. As Warren Buffett – investor, businessman, and chairman of Berkshire Hathaway – famously said, “The stock market is a device for transferring money from the impatient to the patient.” What Buffett and other legendary investors have long understood is that time in the market – or in this case, time in the employee-ownership plan – can yield life-changing results. For young professionals, joining an employee-owned company is a real opportunity to build wealth. According to our analysis of Federal Reserve data, if every American business were to become employee-owned, median household wealth would increase by over $100,000. Framing Employee Ownership for the Next Generation In order to effectively engage younger workers in the concept of employee ownership, organizations must adapt their messaging. Instead of focusing solely on retirement benefits, they should highlight the unique cultural advantages, the opportunities for personal and professional growth, and the long-term financial potential of employee ownership. Employee ownership offers younger workers stability, meaningful work, and a sense of purpose. While the long-term financial rewards might not be front-of-mind for someone new to the workplace, framing employee ownership as a way to build long-term wealth while experiencing career growth is a powerful message.
Read More ▶Employee Ownership Benefits Everyone
August 30, 2024
Employee ownership isn't a buzzword or a trendy business model — it’s a fundamentally different approach to business that is a game-changer for everyone involved. Whether you’re an employee-owner, a customer, or part of the local community, employee ownership benefits you. Here’s how. Employee-Owners Benefit Employee-owners inherently have a stronger relationship with the company than workers at a conventional business. The nature of employee ownership shifts the dynamic between employees and their workplace, empowering and motivating workers while creating a people-first culture. 1. Wealth-Building The biggest benefit of employee ownership is the ability to build life-changing wealth. Our analysis of Federal Reserve data shows that if every American business were to become employee-owned, median household wealth would increase by over $100,000. Employee owners automatically benefit when their company does better, and they have the opportunity to build wealth outside of traditional retirement and investment accounts. 2. Ownership Culture When employees are financially invested in the growth of the business, they develop a sense of ownership, knowing they are part of something bigger. This direct link between effort and reward means they're more likely to be motivated and engaged at work. From daily decision-making to building relationships with team members to suggesting ideas for improvement, the ownership mindset influences every aspect of the job and leads to a culture of ownership. Customers Benefit Customers who work with employee-owned businesses stand to benefit from their positive culture. 1. Better service with trusted partners Good customer service is key to business success, and employee-owners have an incentive to ensure their company does well. Clients of employee-owned companies can naturally expect better customer service than they'd receive elsewhere. A vital component of the client-business relationship is trust. Employee-owned companies offer job stability and a favorable work environment, which leads to lower turnover. Customers benefit from strong relationships with people who are familiar with their needs and committed to providing good service for the long haul. 2. Dealing directly with an owner Dealing directly with employees who have a stake in the business can lead to more efficient decision-making. Employee owners are empowered to shape decisions, which means customers benefit from working with business partners who have more agency and autonomy. Non-Participant Employees Benefit Some workers at employee-owned companies may not directly participate in the employee-ownership model or aren't eligible yet. For example, some companies have a union that does not participate in an ESOP (Employee Stock Ownership Plan), preferring instead to be part of the union’s pension plan. Non-participants still see benefits from employee ownership. They might not own shares, but they are still part of the culture and will benefit from the positives such as stronger relationships, lower turnover, team members who care more about their work, and happier customers. And while they may not have the direct effort/reward relationship with the company that employee-owners do, non-participant workers still indirectly benefit when the company does well. The Community Benefits 1. Stable jobs Communities gain from having employers who provide stable jobs for local people. The job stability offered to employee-owners translates into a stronger and more resilient local economy. For example, during the COVID-19 pandemic employee-owned companies were 4x more likely to retain jobs. 2. Wealth stays local Employee-owned companies tend to have deep roots in their communities because employees are invested in them. They're less likely to make decisions that would have a negative economic impact on a community to achieve bottom lines, such as moving to a cheaper location. Research has also proven that the benefits of employee ownership also lead to better business outcomes. The result is stronger companies that are rooted in place, which creates robust local economies. Overall, employee ownership is a structure that benefits companies and allows the people who contributed to the business to share in its success. Whether you’re an employee-owner, a customer, part of the community, or someone seeking a job at an employee-owned company, there are clear benefits that make this approach to business a win-win for all.
Read More ▶100% Member Funded: Our Journey to 700 Members
August 8, 2024
I’m thrilled to share that Certified Employee-Owned just welcomed our 700th Member! We’re excited to pass this major milestone a few months shy of our seven-year anniversary. Our growing member network represents progress towards our vision and demonstrates the value of certification. By helping our Members unlock the competitive advantages of employee ownership, we are strengthing the companies that turn the idea of employee ownership into action. Our continued success can be traced back to a single decision made in the early days of Certified Employee-Owned: the choice to be 100% Member funded. This guidepost has kept 100% focused on providing value to our Members and ensures that we are we are always striving to grow the employee ownership community. This post gives background on that decision and how it has influenced our growth over the years. Why Be 100% Member Funded? The decision to be 100% Member funded dates back to our beginning. Kramer and I launched Certified Employee-Owned in 2017 because we loved the idea of employee ownership, but we were struck by the lack of awareness and understanding among the general public. When we learned that there were over 6,400 employee-owned companies in America, all we could think was, “why haven’t we heard of this before?” Our vision was to combine the reach of employee-owned companies, create national recognition of the model, and turn employee ownership into a major advantage in terms of hiring, retention, engagement, and customer acquisition. It was clear to us that a major lever for scale was to help companies share their ownership story. But we also knew that there would be any challenges along the road. How could we ensure that our new organization would stay focused on it’s mission? Every business person knows that growth comes with challenges and potential distractions, so it was critical for us to stay focused on our Members. We also understood the power of incentives, so we started to think about our revenue model and how we could link that to our mission. We realized that a commitment to generate 100% of our revenue from employee-owned companies would hardcode our mission into our DNA. 100% Member Focused Being 100% Member funded means that we have always had an intense focus on creating value for our Members. We have no other choice. Every dollar we make comes from employee-owned companies, and they only pay us if certification provides them more value than it costs. Focusing on our Members is more than just an ideal for us, its a way of life. Member focus has been behind many of our best decisions. After our launch in 2017 we received a ton of positive feedback about the idea of a big network amplifying the voice of employee ownership, but not everyone saw the value of the network because we only had a few dozen Members. We needed to create a strong direct incentive to get certified, so we set up conversations with our founding Members who helped understand an immediate need: sharing their ownership story with current employee-owners. With that direction we set out to create the tools and playbook that would help companies save time and increase engagement, which has turned into our most popular service today. Members have been instrumental in providing the ideas and insights that have fueled our growth. Their feedback and suggestions have helped us grow our template library to over 100 pieces of content. Member feedback on hiring led us to create EO Jobs, the first and only job board for employee-owned companies. Members have joined our webinars to share their insights with the network, and have provided hundreds of examples that have made their way into our case studies and best practice library. The decision to be 100% Member funded has also helped us decide what not to do. With over 700 Members, we’ve built a valuable source of information about the community. Perhaps there might be a way for us to package our data and insights into something useful for service providers? While we love the community of companies that support employee-owned businesses, that would divide our focus and our attention. We prefer to stay 100% Member focused. 100% Aligned on Growing Employee Ownership The commitment to be 100% Member funded also keeps us focused on growing the employee ownership community. At the end of the day, there are two ways to grow the number of employee-owners: you can create a new employee-owned company or you can make an existing employee-owned company more successful. By focusing 100% on our Members, we’re growing the community by making employee-owned companies stronger. Here’s how it works. Members love supporting our work to promote employee ownership, but the decision to get and stay certified is made like any other business decision. Members maintain their certification if the benefits outweigh the costs. By creating surplus value for our Members, we’re providing them a direct financial benefit that increases their growth and profitability. Through 100% Member focus, we’re directly growing the employee ownership community. While we’re thrilled to have 700 Members, we still feel like we’re at the beginning. We will continue to grow our network and exponentially increase the value we provide to our Members. The future of employee ownership is bright, and we’re proud to be a part of making that future happen. Everything we want to accomplish happens through our Members, and that’s why we are so happy to be 100% Member funded.
Read More ▶I’m an Employee-Owner, What Do I Own?
July 1, 2024
In his 1999 letter to Amazon shareholders, Jeff Bezos shared a story relevant to every employee-owned company: “At a recent evet at the Stanford University campus, a young woman came to the microphone and asked me a great question: ‘I have one hundred shares of Amazon.com. What do I own?’ I was surprised I hadn’t heard it before, at least not so simply put. What do you own?” A similar question is probably on the mind of your employees when you tell them that they’re owners. Everyone has had a job, but few people have had the opportunity to own a piece of their employer. Employee ownership is a unique experience, and workers learning about it for the first time are likely asking themselves: “you say I’m an employee-owner, what do I own?” There’s a direct answer to this question: legally, ownership is a claim on the future earnings of a business. The ownership of a company is broken down into fractional pieces called shares of stock. The owners of the stock, also known as the shareholders, are entitled to the current and future profits of the company. So as an employee-owner, you own a piece of the future success of your company. This answer is a great starting point, but it can be improved by integrating your company’s vision for success. This is the approach Bezos took when he answered the student by saying, “you own a piece of the leading e-commerce platform,” and then detailing his vision for Amazon. With the benefit of hindsight this answer might seem obvious, but in 1999 it was not clear that Amazon would become a ubiquitous everything store that is one of the five most valuable companies in the world. Bezos’s answer is powerful because it expresses a clear vision for the long-term future of Amazon. The lesson for employee-owned businesses is that you can help your employees get excited about ownership by helping them understand your company’s vision. In other words, by showing them what they own. But there’s a deeper level to this question when it’s asked by an employee-owner. Unlike the student who was a shareholder of Amazon, an employee-owner has a direct influence on the value of their investment. The harder they work, the more they delight your customers, and the more they contribute ideas to improve the company, the better they will do financially as an owner. Of course, a single individual’s actions might have a limited impact on the bottom line profits of their company. It’s common for employees to think, “sure I can work harder, but I’m just one employee out of hundreds, can I really make a difference?” The answer is that ultimately a company’s performance is driven by the sum of all the actions taken by its employees each day. Small improvements add up to big impact when everyone is on board. In addition to owning a piece of the change they create, an employee-owner also owns a piece of the impact of every other employee at the company. This means that employee ownership creates alignment. Employee-owners have an incentive not just to work hard themselves, but to collaborate, to be a great team member, and to ensure that everyone else is doing everything possible to make the company successful. Every company will have a different answer to the title question. A great answer will combine the insights in this article to provide a simple articulation of the vision of the company as well as a compelling elaboration of the consequences of broad-based employee ownership. It will touch on the direct financial aspects of ownership. It will help employee-owners understand the long-term vision of the company. And it will help them understand their individual role in the company’s success while also emphasizing that, as employee-owners, we’re all in this together. If you’re thinking about how to build an ownership culture, start by thinking about how you would answer if someone at your company asked this question: I’m an employee-owner, what do I own?
Read More ▶Why You Should Talk About Being "Employee-Owned" Instead Having An “ESOP”
May 14, 2024
When it comes to employee ownership, ESOPs (Employee Stock Ownership Plans) have often been the go-to choice. And rightfully so — ESOPs have proven their worth over the past 50 years and currently in use at over 5,700 employee-owned companies. They are responsible for helping millions of workers benefit through share ownership and have produced inspiring stories of life-changing wealth. Despite the benefits of the structure, there's a crucial communication pitfall that comes with the term "ESOP" that is holding companies back. For many people, "ESOP" is another acronym in a sea of business jargon. The term ESOP lacks the familiarity and resonance needed to truly engage. Today just 1% of the labor force currently participates in private-company ESOPs, meaning the vast majority of people have no personal experience. On top of that, someone new to the idea cannot intuitively grasp what’s involved with an ESOP because there is no context that can be gathered from the term. Finally, “ESOP” is not a great jumping off point with a job seeker or employee. If someone is engaged enough to even ask what an ESOP is, the typical response involves concepts like “retirement plan” and “ERISA,” which are not energizing. These issues combine to create a lack of connection that can lead to disengagement rather than enthusiasm. Luckily there's a more effective way to communicate your company's employee ownership structure: "employee-owned." Employee-owned is an intuitive concept that has positive influence and is already connected to exciting ideas like better compensation and a more employee-friendly environment. It opens up a conversation about how your company takes a different, more people-focused approach. “Employee-owned” speaks to the financial benefits of ownership but also a better culture that matters the first day someone walks through your doors. We’ve long counseled our 680+ Members to frame external and internal conversations around being employee-owned, and we’ve seen it work. The communication advantage of “employee-owned” over “ESOP” is intuitive, but it’s also grounded in science. I first became interested in public opinion on employee ownership as a PhD student at Stanford Graduate School of Business. I had read research on the many benefits of employee ownership to workers and companies, but was struck by the complete lack of visibility. Why had I never heard of this before? The most recent study on public awareness was decades old, so I decided to run my own survey and found strong interest. We’ve continued to conduct public opinion research because we see it as foundational to our mission to help our Members share their ownership stories. Our most recent survey illustrates the advantages of “employee-owned” over “ESOP.” In 2022, we surveyed a national audience and asked them a simple question: “You’re thinking about applying for a job and you see this on the job description, how does that affect how likely you are to apply?” When we tested “employee-owned” we found that 23% of respondents were more likely to apply. When we tested “ESOP” we see just 9%. Moreover, 25% said they were less likely to apply for a job at an ESOP company, indicating a net negative influence for “ESOP” but a net positive influence for “employee-owned.”. Our work is corroborated by the 2018 General Social Survey, which found that 72% of respondents preferred working for an employee-owned company over one owned by investors or the state, irrespective of their political affiliations. So why does "employee-owned" resonate? To answer that question we conducted a follow-up study. We surveyed a national audience and asked a different question: “What are the advantages of working at an employee-owned company?” Respondents could type whatever they thought made sense and we did a bottoms-up categorization of similar answers. Four themes emerged: increased agency, better compensation and benefits, a sense of ownership, and an employee-friendly environment. This indicates that, contrary to “ESOP”, “employee-owned” comes with many positive associations in the minds of Americans. Our work demonstrates that “employee-owned” communicates a deeper, more meaningful relationship between the company and its employees beyond just stock ownership. This makes it the obvious approach when communicating with job seekers and current employees. Positioning your company as employee-owned can also benefit your relationships with customers because it emphasizes values such as better service, longer-term relationships, and the advantages of dealing directly with an owner. This can be particularly compelling in industries where trust and personal connections are paramount. In summary, while ESOPs are undoubtedly valuable structures for employee ownership, the term itself is not great for communication. By shifting the focus to "employee-owned," you can better engage job seekers, current employees, customers, and even your community. It's not just a semantic change, it's a strategic shift that can enhance your company's branding, marketing, and overall appeal in the eyes of stakeholders. So, the next time you talk about your company's ownership structure, remember to lead with what truly matters — being employee-owned.
Read More ▶There’s More Than One Way To Be Employee-Owned
March 1, 2024
Roughly 6,400 companies in America are employee-owned. They range from five employees to over 250,000, are headquartered in all 50 states, and operate at scale in every industry. One reason employee ownership has been so successful is flexibility. No matter the company size, sector, or lifecycle stage, there is an employee ownership structure that will work. At Certified Employee-Owned, we champion all types of employee ownership. Our simple and clear definition of “employee-owned” sets a standard that can easily be applied to any business. As interest in employee ownership grows, we thought it would be helpful to outline the major ownership structures including: Employee Stock Ownership Plans (ESOPs) Worker Cooperatives Direct Share Ownership Employee Ownership Trusts (EOTs) Equity Compensation Plans Employee Stock Ownership Plans (ESOPs) Most employee-owned companies in the US have an Employee Stock Ownership Plan, commonly referred to as an ESOP. An ESOP is a retirement benefit plan that’s open to all employees and invests primarily in the employer’s stock. ESOPs operate like 401(k)s, holding stock in s special trust that an employee-owner can access when they retire. Technically any business can have an ESOP but, due to the cost and administrative overheard, a company usually needs at least 30 employees for the plan to work. ESOPs can own any portion of a business and we’ve seen this percentage vary from 1% to 100%. Many large public companies have ESOPs that own a tiny fraction of outstanding shares, which is why it’s important to keep in mind that not all ESOPs are employee-owned. ESOPs are popular because they have many benefits. They have substantial tax advantages. For example, a 100% ESOP-owned S-corporation is exempt from federal income tax. By law ESOPs are broad-based, which makes them inclusive. Employees do not need to make a financial contribution to receive their shares, participation is automatic, and all employees who work at least half-time and meet a certain age threshold are eligible for ownership. Companies usually adopt an ESOP as a means of providing liquidity to selling owners. Based on an informal survey of our Members, we estimate that over 95% of ESOPs are created through conversion. As of the date of this article there are 5,734 employee-owned companies with an ESOP. Notable examples include Wawa, WinCo Foods, and Davey Tree. Worker Cooperatives Worker cooperatives are democratically owned and governed by their employee-owners. Worker participation in governance is the hallmark of a worker cooperative and usually includes employees voting on the board of directors on a one-person, one-vote basis. Worker cooperatives have a long history in the United States. There have been several waves of growth, including a large wave spanning the the 1970s and 1980s. Worker Cooperatives are currently in the midst of another wave spurred on by several development organizations including the US Federation of Worker Cooperatives (USFWC) and the Democracy at Work Institute (DAWI). Unlike ESOPs, a substantial number of Worker Cooperatives are employee-owned from the very beginning. A 2021 survey run by DAWI found that 88% of worker cooperatives are the result of startups, and just 12% are the result of business transitions. Additionally, worker cooperatives are almost all 100% owned by employees, though occasionally a company transitioning to a cooperative might have a period of joint ownership with the departing owner. Typically, worker cooperatives have eligibility requirements for becoming a worker-owner. This generally comes in the form of a waiting period of one to several years and a buy-in that ranges from a few hundred dollars up to a thousand. Not all coops have a buy-in, and those that do often offer worker-owners with favorable financing to encourage participation. As of the date of this article, there are 400 worker cooperatives. Notable examples include Cooperative Home Care Associates, Evergreen Cooperatives, and A Slice of New York. Employee Ownership Trusts (EOTs) Employee Ownership Trusts (EOTs), sometimes referred to as Employee Ownership Purpose Trusts, are quickly gaining traction as an innovative employee ownership structure. Modeled off an approach pioneered in the UK by companies like John Lewis Partnership, EOTs have been growing in the US since 2016 thanks to the work of groups like EOT Law, Common Trust, and Purpose Owned. EOTs are extremely flexible which allows selling owners to craft an employee ownership structure that closely aligns with their vision for the future. They are generally much less expensive than alternatives, especially ESOPs. And they can be set up to exist in perpetuity, which gives selling owners to confidence that their legacy of employee ownership will continue as long as their company continue to operate. EOTs are still in the early stages in the US and unfortunately don’t yet benefit from tax incentives. Despite that headwind, today there are roughly two dozen EOTs in the US and that number grows every year. Prominent examples of EOTs include Arbor Assays, Bicycle Technologies International, Text-Em-All. Direct Share Ownership Direct share ownership is another flexible option for employee ownership. While larger companies are likely to choose an ESOP for tax reasons, smaller companies sometimes find distributing shares directly to employees as a better method for implementing employee ownership. Direct share ownership has become increasingly popular thanks to Teamshares. Founded in 2019, Teamshares buys smaller companies and then sells the business back to employees over a 10- to 20-year time period. At this point we’re aware of 50 companies that use direct share ownership to achieve at least 30% employee ownership, and that number is growing rapidly. Equity compensation Equity compensation incorporates stock-based employee benefits including stock options, restricted stock, RSUs, stock appreciation rights, and phantom stock. Equity compensation is typically given to the employee at no cost. Equity compensation plans are popular ways to compensate executives and offer equity to employees at early stage startups because they are flexible and generally offer employees favorable tax treatment compared to giving them shares directly. Not many companies are using equity compensation to achieve 30% employee ownership, but there are a few and these structures offer a compelling option for newer companies that are growing and want a cheap, flexible way to bring early employees along as owners. All of the structures in this article have unique strengths and weaknesses. But they work towards the same goal: changing the relationship between company and employee by giving everyone a chance to earn an ownership stake. No matter the size, sector, or lifecycle stage, there is an employee ownership structure that can help any company build a team of owners.
Read More ▶Why Aren't There More Employee-Owned Companies?
January 24, 2024
Supporters of employee ownership see it as a win-win that benefits workers and companies alike. They point to the life changing wealth built by employee-owners and the transformational impacts of ownership culture on business performance. The research done by proponents is so positive and the success stories are so prevalent that it can be startling to learn that fewer than 1 in 200 American businesses are employee-owned. If employee ownership is so great, why aren’t there more employee-owned companies?Taking a clear-eyed look at the constraints holding our community back can be challenging, but to grow it’s necessary to be honest with ourselves. In this blog post I outline four leading theories on how to grow the number of employee-owned companies, each associated with a potential blocker:Raise AwarenessImprove Financing OptionsReduce Transaction Cost and ComplexityCreate New StructuresRaise AwarenessPerhaps the most straightforward theory about what’s limiting employee ownership is that there are a large number of people who simply don’t know about the model. Awareness is certainly low among the general public. According to estimates based on data collected from our Members and the companies we’ve listed on our Directory of Employee-Owned Companies, just one percent of the labor force works at an employee-owned company. Our Members report that most new employees come in with zero familiarity. You can easily go through high school and college without hearing the words “employee ownership.” I myself never heard about the concept during three years at a major management consulting firm. To grow the number of employee-owned companies, the key audience to reach is business owners. Based on our 630+ Members, over 90% of employee-owned companies are created through conversion, and clearly business owners can’t covert to EO if they aren’t aware that it’s an option. Is awareness low among business owners? This is much more difficult to gauge. But there are a number of efforts that propose the answer is yes and are focused on raising awareness among business owners, either by reaching out to business owners directly or by targeting trusted advisors such as accountants, lawyers, and bankers. Two prominent recent awareness campaign are the EO Equals effort spearheaded by Project Equity and the Pittsburgh Citywide Taskforce on Employee Ownership led by the Pennsylvania Center for Employee Ownership.Improve Financing OptionsA second theory sees issues related to financing as the primary barrier to growing the number of employee-owned companies. As mentioned previously, the vast majority of employee-owned companies are created through a conversion where the owner(s) of the business sell it to the employees. A large portion of these transactions require the owner to provide seller financing. The details vary from deal-to-deal, but seller financing has two main challenges:The seller doesn’t get their money right away and instead is paid out over time, often over the course of 10 years. Sellers, like all people, tend to prefer money upfront.Due to #1, the seller is still linked to the company for many years. Many business owners prefer a clean break. Employee ownership is rarely the only option considered by a selling owner. Alternatives such as private equity or selling to a competitor are often able to provide most, if not all, of the purchase price upfront. It’s easy to see why a seller might take that deal, even if they prefer the legacy preservation that comes from converting to employee ownership.There are a number of creative new initiatives looking to provide improved financing options for employee ownership. Funds such as Mosaic Capital Partners and Apis & Heritage are turning the private equity model on its head and use private capital to create employee-owned companies. Venture-backed Teamshares offers small-business owners cash upfront and then sells the company back to employees over a 10 to 20-year time period. Recent policy proposals have floated the idea of government loan guarantees for employee ownership conversions, both and the national and state level. Reduce Transaction Cost and ComplexityToday, over 95% of employee-owned companies use an Employee Stock Ownership Plan (ESOP). According to Department of Labor data, roughly 250 - 300 new ESOPs are created annually and we estimate that currently around 5,700 employee-owned companies have an ESOP. While ESOPs are popular, they also have substantial transaction cost and complexity. ESOPs are great, but they can also be expensive. The cost to create an ESOP can vary widely, but a conversion generally ranges from $80,000 to over $250,000 and ongoing administration can be $50,000 to $100,000 a year. While certainly comparable, or sometimes less, than investment banking fees involved in an alternative path, the cost of ESOPs makes them out of reach for most companies under 40 employees. One major source of cost and complexity is regulatory. The ESOP structure was codified in law along with 401ks and profit sharing plans in 1974 as part of the Employee Retirement Income Security Act (ERISA). As a result ESOPs, are overseen by the Department of Labor (DoL). The DoL ensures that ESOPs are executed in a fair manner that sets employees up for success. However, for many years, the DoL has declined to provide clear and specific guidance around their expectations for important aspects of ESOP creation and oversight, opting instead to use litigation. This has created an unfortunate level of uncertainty for ESOP professionals and for owners who want to do something good by transitioning the business to their employees.In 2023 major progress was made when The ESOP Association successfully lobbied the DoL to provide clarity on the definition of adequate consideration when it comes to ESOP valuations. This is a huge step forward in reducing regulatory uncertainty that hopefully will result in the creation of more ESOPs.An ambitious idea to further reduce the cost and complexity of the ESOP is to take it out of ERISA entirely. ESOPs are not part of ERISA for any fundamental reason, but simply because Senator Russell Long was a champion for the idea and was the Chairman of the Senate Finance Committee at the time that ERISA was being created. While these favorable circumstances led to the creation of the most successful vehicle for employee-owned companies today, they have also led to much of the burdensome regulation that could be holding our community back. Removing the ESOP from ERISA and greatly streamlining the tax benefits could unleash growth analogous to the recent success of the Employee Ownership Trust in the UK. Driven by a much simpler framework, the number of employee-owned companies in the UK increased 37% in 2022. During that same time period, the number of employee-owned companies in America remained flat at around 6,400. Perhaps we can use the UK as inspiration to simplify our structure and unleash growth.There have been a number of non-regulatory proposals to streamline the cost and complexity of the ESOP. One idea is to create a “simple ESOP” with standardized plan design that receives streamlined regulatory treatment. Another is to use technology to reduce many of the ongoing administrative costs. Create New StructuresPerhaps the most creative and high-potential idea for creating new employee-owned companies is to create new structures. While the two legacy models - ESOPs and worker cooperatives - have been very successful, there might be untapped markets waiting for new approaches. This offers huge potential grow the employee ownership community, for example by increasing adoption among smaller companies, which as we pointed out in the 2022 blog post, could expnd the market for potential employee ownership conversions by hundreds of thousands of companies. Currently there are three promising new structures being explored. The first is the Employee Ownership Trust (EOT). Inspired by the success of the UK, groups such as EOT Law, Common Trust, and Purpose Owned have been setting up EOTs in the US since 2016. EOTs generally are more flexibly than legacy structures, and they’re substantially cheaper than ESOPs. The model is still in its early stages in the US and unfortunately doesn’t yet have tax incentives, but despite that headwind today there are roughly two dozen EOTs in the US. The second alternative structure is to do employee ownership through broad-based, direct ownership of company stock. This approach is being spearheaded by Teamshares (mentioned above) and the summary of the approach is that Teamshares offers a selling owner favorable terms, and then the employees buy up to 80% of the company from Teamshares over a period of 10 to 20 years. Teamshares is off to a hot start, with over 80 companies converted since their launch in 2019.The third alternative approach would be to implement broad-based employee ownership through stock options. Stock options are most well-known for their use in Silicon Valley, but they are an extremely flexible structure that can be designed in a broad-based way. Options plans are also low-cost, typically costing a few thousands dollars to implement and administer. Options are generally not a long-term solution, but could be a great fit for new companies who want to give early employees a stake in the outcome and then later convert to another employee ownership structure such as an ESOP.Which of these four theories is the correct approach? Weighing in on the likelihood is a matter of speculation. Advocates for each approach to growing employee ownership all have passionate and persuasive arguments, but ultimately nobody knows what will work until the number of employee-owned companies in the US starts to grow. At Certified EO, we’re diligently tracking the creation of new employee-owned companies as part of our larger effort to make our Directory an up-to-date list of all employee-owned companies. When we see that number start to grow, we’ll be sure to let you know.
Read More ▶Become an Owner With Employee-Owned Jobs
October 19, 2023
Two months ago we launched Employee-Owned Jobs, the first and only job board for employee-owned companies. We were guided by a vision to bring together companies building broad-base prosperity and job seekers who want to become employee-owners. We expected excitement from the employee ownership community, but we’ve been blown away by the response. In roughly three months, we’ve had over 19,000 users and the positive feedback from our Members has been tremendous. This blog post shares more about our vision to connect job seekers and employee-owned companies. We’ll cover:The Advantages of Becoming An Employee-OwnerGreat Hires Amplify Ownership CultureStronger Together: Building Support For Employee OwnershipOwn Your Job: The Advantages of Becoming An Employee-OwnerThe promise of employee ownership is simple: if you work for a good company and put your time in, you will be treated well. First and foremost, there’s the opportunity to build life-changing wealth. Looking across our Members, employee-owners tend to receive an allocation of company stock between 5% - 15% of their annual salary. The benefit increases the more they make, but the average value is around $5,000 a year. Stock allocations cost employee-owners nothing and generally come on top of the usual benefits. Employee-owners also see increased job stability and career growth. Companies exist to benefit their owners, so a company that is owned by its employees is going to approach big decisions a bit differently. For example, during the COVID-19 pandemic, employee-owned firms were three times more likely to retain staff. We also see companies investing in their employee-owners with training and education. Finally, many employee-owned businesses prefer to grow leadership through internal promotion, opening career pathways for entry-level workers.Perhaps the most immediate benefit of working at an employee-owned company is being a part of an ownership culture. Broad-based ownership creates alignment up and down a company. It increases engagement, strengthens bonds, deepens relationships, and creates an elevated sense of accountability. The result is a more motivated and effective team working together towards a common goal. Best of all, it’s a benefit that a new employee experiences the first day they walk in the door.If the benefits of employee ownership sound good to you, you’re not alone. In nationally representative opinion surveys, we’ve found that 3 out of 10 job seekers would be more likely to apply to a job if they learned the company is employee-owned. But there’s an issue: how would you go about finding a job at an employee-owned company? Employee-Owned Jobs solves this issue by aggregating over 9,000 open positions, making it easy to become an employee-owner. Great Hires Supercharge Ownership CultureHiring great people can strengthen a company’s culture and create a tremendous competitive advantage. Engaged employees put in more effort, are better team members, and care more about the customer. A recent meta-analysis from Gallup found that teams scoring in the top quartile on engagement had 10% higher customer loyalty, 23% higher profitability, and 18% lower turnover. Hiring great employee-owners creates a positive feedback cycle that supercharges engagement. Motivated new hires will put more energy into getting up to speed, will be less likely to leave in the crucial ramp-up period, and will be faster to understand the benefits of employee ownership. The energy they bring will boost culture, which in turn will make it easier to attract more of the right candidates. Employee-owned jobs is the best way to tap into an applicant pool that is excited about employee ownership. Users find us through a variety of channels. Maybe they have already worked at an employee-owned company. Perhaps they know someone who has benefited from an ESOP. Or maybe the idea just strikes a cord deep inside. Whatever the case, the pull is real: in the first three months we’ve had over 19,000 users and we’re just getting started with our promotion.Stronger Together: Building Support For Employee OwnershipMaking it easy to hire great employee-owners is the next step towards our vision of building an employee-owned economy. Over the past six years we’ve grown our network to 600+ Members and a simple theme has emerged: we’re stronger together. Companies do a great job talking about employee ownership on their careers pages, in interviews, and on job offers. But what has been missing is a comprehensive effort to drive massive awareness and interest.With Employee-Owned Jobs, we’re able to mount this campaign. We’ve begun by promoting EO Jobs within the employee ownership community. In Q4, we will begin outreach to 1,462 community colleges and 7,271 trade schools across the United States. We will equip career centers with resources to share the advantages of employee ownership, we will participate in webinars, and we will drive massive interest in becoming an employee-owner.The Advantages of Becoming An Employee-Owner Great Hires Amplify Ownership Culture Stronger Together: Building Support For Employee Ownership Own Your Job: The Advantages of Becoming An Employee-Owner The promise of employee ownership is simple: if you work for a good company and put your time in, you will be treated well. First and foremost, there’s the opportunity to build life-changing wealth building. Looking across our Members, employee-owners tend to receive an allocation of company stock worth between 5% - 15% of their annual salary, an average dollar value of around $5,000/year. Stock allocations cost employee-owners nothing and generally come on top of the usual benefits. Employee-owners also see increased job stability and career growth. Companies exist to benefit their owners, so a company that is owned by its employees is going to approach big decisions a bit differently. For example, during the COVID-19 pandemic, employee-owned firms were three times more likely to retain staff. We also see companies investing in their employee-owners with training and education. Finally, many employee-owned businesses prefer to grow leadership through internal promotion, creating greater career opportunities. Perhaps the most immediate benefit of working at an employee-owned company is being a part of an ownership culture. Broad-based ownership creates alignment up and down a company. It increases engagement, strengthens bonds, deepens relationships, and creates an elevated sense of accountability. The result is a more motivated and effective team working together towards a common goal. Best of all, it’s a benefit that a new employee experiences the first day they walk in the door. If the benefits of employee ownership sound good to you, you’re not alone. In nationally representative opinion surveys, we’ve found that 3 out of 10 job seekers would be more likely to apply to a job if they learned the company is employee-owned. But there’s an issue: how would you go about finding a job at an employee-owned company? Employee-Owned Jobs solves this issue by aggregating over 8,500 open positions, making it easy to become an employee-owner. Great Hires Supercharge Ownership Culture Hiring great people can strengthen any company’s culture and create a tremendous competitive advantage. Engaged employees put in more effort, are better team members, and care more about the customer. A recent meta-analysis from Gallup found that teams scoring in the top quartile on engagement had 10% higher customer loyalty, 23% higher profitability, and 18% lower turnover. Hiring great employee-owners creates a positive feedback cycle that supercharges engagement. Motivated new hires will put more energy into getting up to speed, will be less likely to leave in the crucial ramp-up period, and will be faster to understand the benefits of employee ownership. The energy they bring will boost culture, which in turn will make it easier to attract more of the right candidates. Employee-owned jobs is the only place to find a wide variety of jobs at employee-owned companies. That means it’s also the best way to tap into an applicant pool that is excited about employee ownership. Users find us through a variety of channels. Maybe they have already worked at an employee-owned company. Perhaps they know someone who has benefited from an ESOP. Or maybe the idea just strikes a cord deep inside. Whatever the case, the pull is real: in the first three months we’ve had over 19,000 users and we’re just getting started with our promotion. Stronger Together: Building Support For Employee Ownership Making it easy to hire great employee-owners is the next step towards our vision of building an employee-owned economy. Over the past six years we’ve grown our network to 600+ Members and a simple theme has emerged: we’re stronger together. To date, a number of companies have done a great job talking about employee ownership on their careers pages, in interviews, and on job offers. But what has been missing is a comprehensive effort to drive massive awareness and interest. With Employee-Owned Jobs, we’re able to mount this campaign. We’ve begun by promoting EO Jobs within the employee ownership community. In Q4, we will begin outreach to 1,462 community colleges and 7,271 trade schools across the United States. We will equip career centers with resources to share the advantages of employee ownership, we will participate in webinars, and we will drive massive interest in becoming an employee-owner.
Read More ▶Six Years, Six Hundred Members
September 13, 2023
It feels like just yesterday that Kramer and I sat down to talk about the idea that would grow into Certified Employee-Owned. As we celebrate our six-year anniversary, we're filled with gratitude and amazement at how far we've come. From humble beginnings with twenty eight Founding Members, to a thriving community of six hundred, the evolution of Certified EO has been a testament to the power of employee ownership and the unwavering commitment of our Members. Inception and Growth We launched Certified EO in 2017 with a simple vision: use certification to define, organize, and amplify employee ownership. We believed wholeheartedly in the potential of employee-owned companies to transform not just businesses, but entire economies. Inspired by the success of programs like Great Place to Work and B Corporation, we saw certification as a proven model to build support for and grow employee ownership. Fast forward to today, and the numbers astound us. From that humble group of twenty-eight, we've grown to a remarkable six hundred Members. They aren't just numbers on a page; they represent the individuals, the teams, and the families who have chosen a different path for their businesses. Our Membership is a tapestry woven with stories of dedication, hard work, and the desire to create lasting legacies. Sharing Ownership Stories Our journey over the past six years has been about more than just accumulating Members; it's been about sharing helping companies share their ownership story. Employee ownership isn't just a business model, it's a belief that when employees are empowered and have a stake in the success of their company, magic happens. We’re proud to work directly with our Members to provide them the tools and playbook they need to build a culture of ownership. The larger our network grows, the more we are able to amplify the voice of our Members. Certification makes employee ownership easy to understand, and getting certified makes it easy to join forces with 600+ companies building a brand together with our Certification Mark. As our network has grown and national brands like Litehouse and WinCo Foods have backed our brand, we have created a powerful tool that our Members can use to stand out as a great employee-owned company. There’s a similar dynamic with our Directory of Employee-Owned Companies. The Directory is the only place to find an up-to-date list of every employee-owned company in America and it has become a go-to resource for people looking to get involved in the space. We’ve heard of people using our Directory to simply explore employee ownership, to network with other other employee-owned companies, and even to explore potential suppliers. The transparency and accuracy of our Certification data that powers the Directory has led to a partnership with the Healthcare Anchor Network to help over 1,000 hospitals identify procurement opportunities with employee-owned companies! Recently we took another step to amplify the voice of our Members by launching Employee-Owned Jobs, the only job board focused on open positions at employee-owned companies. With over 8,500 active listings, we’re making it easy for our Members to hire great employee-owners. We’re currently connecting with community colleges, trade schools, and workforce development centers to educate job seekers about the benefits of becoming an employee-owner. Looking Forward: Uniting Purpose and Potential If the past six years have taught us anything, it's that the potential growth and impact of employee ownership is boundless. Going forward we're committed to deepening our impact. We will continue to provide resources, guidance, and a platform for knowledge-sharing among our Members. We will grow our reach and our ability to promote employee ownership. Our commitment to amplifying the voice of the employee ownership movement will remain unwavering. We believe in a future where employee-owned companies aren't the exception, but the norm, and we’re excited to build that future in partnership with our Members.
Read More ▶The Top 25 Cities for Employee Ownership 2023
August 23, 2023
We’re excited to announce the release of The Top 25 Cities for Employee Ownership for 2023! Our second annual list showcases the cities in America that have successfully fostered a positive environment for employee ownership to thrive. Collectively, this year’s Top 25 Cities are home to 726 employee-owned companies. From small towns to large metros, these cities range in size from 23,000 people to over 2 million. They represent 17 states - 2 more than last year - with a range of cultures and political orientations. The diversity of cities in the Top 25 shows the broad appeal of employee ownership. Employee ownership changes the relationship between business and community. When employees have an ownership stake, companies become rooted in their communities. The wealth they build flows through the local economy, the jobs they create are more stable, and they become more involved in service. Employee ownership is a win for workers, businesses and communities. Our list is the result of a comprehensive effort to identify every employee-owned business in America, including Employee Stock Ownership Plans (ESOPs), Worker Cooperatives, Employee Ownership Trusts (EOTs), and broad-based equity compensation plans such as stock options. By combining our unique certification data with government fillings, news articles, website visits, and direct phone conversations we have curated the only up-to-date list of every employee-owned company in America. Our ranking of the Top 25 takes into account the number of employee-owned companies, their concentration relative to the city’s population, and the portion of companies that have recently become employee-owned. We restrict ourselves to all cities with at least five employee-owned companies. Our methodology creates a balanced list that puts every city on an even playing field. If you’re curious to see how many employee-owned companies are in your town, search your city in our Directory of Employee-Owned Companies. #1 - HARRISBURG, PENNSYLVANIA The capital of Pennsylvania, Harrisburg is the #1 city for employee ownership in 2023! Harrisburg is home to 15 employee-owned companies, including HB Global and Touch of Color Flooring. With a population of 58,320, Harrisburg has one employee-owned company for every 2,536 residents. Legislation has recently been introduced that would create resources for employee ownership. The legislation, LPRO 3835, also known as The Employee Ownership Assistance Program, would establish an office for employee ownership, as well as provide assistance to businesses converting to employee ownership. #2 - BERKELEY, CALIFORNIA Known for all things counter-culture, Berkeley is the #2 city for employee ownership. Home to 25 employee-owned companies, including Mal Warwick Donordigital, Alternative Technologies, Biofuel Oasis, Drought Smart Collective, and Heartwood Custom Woodworking. Berkeley continues to be a hub for employee ownership and worker cooperatives. In September 2022, California passed SB 1407, The Employee Ownership Act, to expand employee ownership in California. The law will establish a dedicated office for employee ownership. The law will aid existing businesses transition to employee ownership, while also expanding other employee-owned ventures, whether through new startups or aid provided to current employee-owned firms. The employee ownership office’s work encompasses ESOPs, worker cooperatives, and various other models. #3 - CINCINNATI, OHIO Sitting on the Ohio River, Cincinnati is the #3 best city for employee ownership and is home to 38 employee-owned companies, including Al. Neyer, Intrust IT, Ohio Valley Electrical Services, Parallel Technologies and The Motz Corporation. Top industries for employee ownership in Cincinnati include IT consulting, manufacturing, electrical contractors, and wholesalers. Cincinnati is also home to Co-Op Cincy, a non-profit organization that specializes in worker cooperatives. With a population of 304,548, Cincinnati has one employee-owned business for every 8,460 residents. #4 - FAIRFAX, VIRGINIA Just outside of the nation’s capital, Fairfax, Virginia is the #4 best city for employee ownership. Fairfax moved up 10 spots from 2022! Fairfax is home to 13 employee-owned companies, including Highlight Technologies, Miklos Systems, Bishop Equipment Company, and Foxhole Technology, Inc. With a population of 23,429, Fairfax has one employee-owned company for every 1,802 residents, making it the smallest city on the list. Major industries for employee ownership in Fairfax are consulting and engineering. #5 - MINNEAPOLIS, MINNESOTA Minneapolis rounds out the Top 5 as the #5 overall city for employee ownership! With 45 employee-owned companies, including Swanson & Youngdale, H2I Group, Kurt Manufacturing Company, Alliant Engineering, and Intuitive Technology Group. The city has taken an active approach to fostering employee ownership. In 2016, it expanded its Business Technical Assistance Program (B-TAP) to include services aimed at supporting the development of new Minneapolis co-operatives by offering feasibility training and technical assistance for businesses interested in converting into a cooperative. #6 – HONOLULU, HAWAII The state capital and largest city in Hawaii, Honolulu is the #6 best city for employee ownership. Honolulu is home to 37 employee-owned companies, including Generator & Power Systems LLC, Island Pacific Distributors, Roberts Hawaii, and The Solaray Corporation. Honolulu moved up 5 spots from the 2022 list! Top industries include engineering, wholesale, and HVAC services. A collaboration with Kaiser Permanente, Project Equity and Obran Cooperative, created the Business Resiliency Through Employee Ownership initiative to help improve economic health. One goal of this initiative is to provide resources for small businesses to transition to employee ownership. #7 – GRAND RAPIDS, MICHIGAN Located just east of Lake Michigan, Grand Rapids is the #7 best city for employee ownership, up from #12 on the 2022 list. Grand Rapids is home to 28 employee-owned companies, including Custom Profile, Progressive AE, Dorner Works, and Watkins Ross & Company. Employee Ownership Expansion Network (EOX) received a three year grant specifically focused on identifying businesses in the Grand Rapids and greater Kent County with owners that are near retirement to educate them on the benefits of employee ownership as an exit strategy. In turn, they hope to keep more businesses local while creating more employee-owners. #8 – HUNTSVILLE, ALABAMA Huntsville, Alabama is the #8 city for employee ownership in 2023, up 5 places from 2022. The most populous city in Alabama, Huntsville is home to 22 employee-owned companies, including Inline Electric Supply, Ignite, OASYS, Inc, Pinnacle Solutions, Radiance Technologies and Torch Technologies. Top industries for employee ownership in Huntsville are engineering, defense contracting, aerospace, and IT consulting. From introducing a state center to proposed legislation, there’s lots of interest in expanding employee ownership throughout the state. The Sand Mountain Cooperative Education Center for example, is working toward cooperative institutions to expand and strengthen worker-ownership. #9 - ST. LOUIS, MISSOURI St. Louis, Missouri is the #9 city for employee ownership in 2023. The gateway to the west, St. Louis is home to 31 employee-owned cities, including Balke Brown Transwestern, Roeslein & Associates, USA Mortgage. Top industries for employee ownership include real estate, construction, and engineering. With a population of 297,645 residents, St. Louis has one employee owned company for every 9,922 residents. #10 - WALNUT CREEK, CALIFORNIA Walnut Creek, California is the #10 best city for employee ownership for 2023, rounding out the top 10! Walnut Creek is home to 12 employee owned companies, including Brown and Caldwell, InVision Communications, and moved up 11 spots from 2022, MKA International, Inc., Davis Home Pros, and Skyline Capital Builders, LLC. Walnut Creek has a long history of employee ownership. Brown and Caldwell is one of the older ESOPs in the country as they established their program in 1962 — that’s over 60 years of being employee-owned! #11 - OAKLAND, CALIFORNIA Oakland, California is the #11 best city for employee ownership in 2023. Known as “The Town,” Oakland is home to 39 employee owned businesses, the 8th most of any city. Companies in Oakland include MN Builders, Menke & Associates, Monterey Mechanical, and Paramount Export Company. Oakland is also home to a number of non-profit organizations that promote employee ownership, including the National Center for Employee Ownership and The Democracy at Work Institute. #12 – DUBLIN, OHIO Dublin, Ohio is the #12 best city for employee ownership for 2023, their first appearance on our list and the second city in Ohio to make the list! A suburb of Columbus, Dublin is home to 10 employee owned companies which include Parallel Technologies, FST Logistics, Ulrey Foods, Ruscilli Construction, and VARGO solutions. Co-Op Columbus supports the Central Ohio community to help worker-owned and shared-equity cooperatives thrive. #13 - ATLANTA, GEORGIA Atlanta, Georgia is the #13 city for employee ownership in 2023 and the second city to be ranked from Georgia. The capital of Georgia, Atlanta is home to 38 employee-owned companies, including 1910 Legacy Enterprises, Benning Construction Company, Ogden Forklifts, and Prestwick Construction Company. Atlanta is also home to the Georgia Center for Employee Ownership which aims to create more employee owners throughout the state by providing resources about the benefits of employee ownership. #14 – DENVER, COLORADO Denver, Colorado is the #14 best city for employee ownership for 2023! The Mile High City is home to 43 employee owned companies - making it the #3 city for total number of EO businesses, which include Progressive Retail Management, Bow River Capital, Logisticsflow, and Truce Media. The state’s capital also hosts the nation’s first permanent office for employee ownership which is a division of The Office of Economic Development & International Trade (OEDIT). The Colorado Employee Ownership Office offers resources for businesses who are considering employee ownership models. One of which is a grant to help offset the costs of transitioning to employee ownership. #15 – SPRINGFIELD, ILLINOIS Springfield, Illinois is the #15 best city for employee ownership. The state’s capital has 13 employee owned companies including Andrews Engineering, Henson Robinson Company, M.J. Kellner, and Springfield Electric Supply. With a population of 113,671, Springfield has one employee owned company for every 9,473 residents. #16 – FARGO, ND Fargo, North Dakota is the #16 city for employee ownership in 2023! The state’s most populous city, Fargo is home to 33 employee-owned companies, including Dakota Supply Group, OK Tire Store, and Fargo Glass & Paint Company. With a population of roughly 125,000, Fargo has one employee-owned company for every 4,800 residents. Top industries for employee ownership in Fargo include distribution, manufacturing, and engineering. #17 – SAN FRANCISCO, CALIFORNIA San Francisco is the #17 city for employee ownership in 2023. “The City by the Bay” is home to 57 employee-owned companies, making it #2 in terms of total number. , including Recology, Inheritance Funding Company, Matarozzi Pelsinger Builders. Recology Is one of the largest employee-owned companies from the list with just under 4,000 employees. The City and County of San Francisco and the San Francisco Small Business Development Center are partnering with Project Equity to educate locally owned businesses on the advantages of converting to employee ownership. San Francisco was also part of the Democracy at Work Institute’s 2019-2020 Shared Equity in Economic Development (SEED) Fellowship, an initiative focused on creating worker cooperatives. #18 – YORK, PENNSYLVANIA York, Pennsylvania is ranked #18 for employee ownership in 2023, up from #24 in 2022. The second city to be ranked from Pennsylvania, York is home to 9 employee-owned companies, including Weldon Solutions, Flnchbaugh, and Minnich’s Pharmacy. With a population of 43,907, York is also the second-smallest city on our list. York has one employee-owned company for every 5,488 residents. Top industries for employee ownership in York are engineering, HVAC, and manufacturing. #19 – BOULDER, COLORADO Boulder, Colorado is making its first appearance on the list as the #19 best city for employee ownership. The second city ranked from Colorado, Boulder is home to 11 employee owned companies which include Civic Consulting Collaborative, Namaste Solar, and Flatirons Bank. With a population of 107,645, Boulder has one employee owned company for every 9,786 residents. #20 – PORTLAND, OREGON Portland, Oegon is the #20 best best city for employee ownership in 2023. Known as the “City of Roses,” Portland is home to 37 employee-owned companies including Cascade Energy, Breakside Brewery, DKS Associates, Durham & Bates Insurance, and Hunter-Davisson all call Portland home. Top industries for employee ownership in Portland include architecture, engineering, and construction. #21 – IRVINE, CALIFORNIA Irvine, California is the #21 best city for employee ownership in 2023 - making it the fifth (but not final!) city from California to be ranked. There are 17 companies that are headquartered in Irvine including Bivar, Inc., International Education Corporation, MAAS Companies, and Murow Development Consultants. With a population of 283,700, Irvine has an employee owned company for every 16,688 residents. #22 - LYNCHBURG, VIRGINIA Lynchburg, Virginia is ranked #22 for employee ownership in 2023. Lynchburg is the second city from Virginia ranked on this year’s list and to 14 employee-owned companies, including Electronic Design & Manufacturing, Scott Insurance, and Wiley & Wilson. Lynchburg is one of just nine cities in the Top 50 for both the total number and per capita number of employee-owned companies. Top industries for employee ownership in Lynchburg include insurance, engineering, and HVAC services. #23 – SEATTLE, WASHINGTON Seattle, Washington is the #23 best city for employee ownership in 2023, a newbie to the list. There are 32 employee owned companies headquartered in The Emerald City including Charlie’s Produce, Harris Group, and PRR. Earlier this year, Washington’s governor signed a bill that would expand employee ownership resources. This new law will establish a state employee ownership program to promote ESOPs, worker cooperatives, and Employee Ownership Trusts (EOTs). This law can also provide a revolving loan fund to directly support the costs of transitioning to an employee ownership model. #24 – SAN DIEGO, CALIFORNIA San Diego, California is the #24 best city for employee ownership and the fifth (and final) city to be ranked from California. This SoCal city is home to 45 employee owned companies, including, ATA Engineering, Carrier Johnson, Epsilon Systems Solutions, Pegasus Clean, Quartus Engineering, Torrey Pines Landscape, and Western Lighting. In 2021, The Workforce Partnership released a study that revealed employee owned businesses throughout San Diego are more resilient and profitable than private companies. #25 – HOUSTON, TEXAS Coming in at the #25 best city for employee ownership, Houston, Texas is the final city on the list. Houston is home to 62 employee owned companies including Access Sciences Corporation, Pieper-Houston Electric LP, Stress Engineering Services. Houston is #1 for the number of employee owned companies and total population. We are proud to showcase the cities in America that have done the most to foster a positive environment for employee ownership. These cities are setting the standard for how to encourage employee ownership. At Certified Employee-Owned, we will continue to update our Directory of Employee-Owned Companies and create visibility for successful approaches to building an employee-owned economy. With a population of just over 2 million, Houston has one employee owned company for every 37,357 residents. Note: All data on the number of employee-owned companies comes from the Certified Employee-Owned Directory as of 7/28/2023. All data on city populations comes from the U.S. Census Bureau for the year 2020.
Read More ▶The #1 Best Practice For Building Ownership Culture
July 14, 2023
Every company wants to best engage their employees. When it comes to engagement, employee-owned companies have a secret weapon: building an ownership culture. If done correctly, an ownership culture unleashes people’s full potential by creating an environment where everyone can think and act like an owner. Companies see increased growth and profitability while employees experience a better day-to-day environment and wealth building through ownership. Our experience working with 575 employee-owned companies for over five years is that the number one best practice for building an ownership culture is cultivating a dedicated group of internal champions who are passionate about employee ownership. These champions are typically organized and empowered by the organization through the creation of an Employee Ownership Committee. This article outlines Certified EO’s perspective on creating and running a successful Employee Ownership Committee including: Getting Started With The Right People Structuring & Training Your Committee Introducing Your Committee Keeping Your Committee On Track Getting Started With The Right People What is a committee? It’s group of at least three people focused on a specific and shared goal. The key in the beginning is to start small. It’s better to have fewer people with higher average engagement. One way to find your initial members is to reach out to your workforce to let them know that you are starting an Employee Ownership Committee and provide easy ways for them to apply. It’s also fine to hand select people who you feel are passionate about employee ownership. Generally it’s nice to have your committee broadly represent the company. It’s better to have people from different levels within the company, and if your workforce is distributed across multiple locations, you might consider having a committee member from each location. But you have to start somewhere. Our recommendation is to focus on finding at least three people who truly understand employee ownership, and then build from there over time. Structuring & Training Your Committee In our experience, successful committees have leadership buy-in but are led by employee-owners. Once your committee is established, you’ll want to create a committee charter and by-laws to align on goals and expectations. Typically, this involves aligning on a mission statement, deciding on term limits, clarifying responsibilities of committee members, and defining leadership roles such as chair and vice chair. The consensus among our Members is that it’s best for the chair to come from the rank and file of the company, but it’s okay for the inaugural chair to be a member of management or leadership to ensure the committee gets off to a strong start. Your committee members should feel confident answering questions about your employee ownership. Your first few meetings as a committee might need to be spent entirely on educating the committee members, but this will be a worthwhile investment because the more knowledgeable your committee, the more successful they will be at building your ownership culture. Providing your committee with a budget will multiply their impact. Even though the committee should be run mostly by employee-owners, working with leadership will be key to ensure alignment and resource availability. Many Employee Ownership Committees have an executive sponsor who can advocate for the committee’s budget each year. Introducing Your Committee Your committee should be visible and accessible. Be sure to introduce the committee so employees know who to reach out to for questions. The committee announcement is also a good time to let your employee--owners know that they can expect more regular communication about employee-ownership. This is also a great time to remind your employees that, as owners, everyone at your company has a stake in the outcome. This way the committee announcement reinforces a key message about employee ownership. To make the committee accessible, we recommend creating a committee-specific email that employees can email with questions that anyone from the committee can answer. Many of our Members have seen great results from setting up office hours, where one or multiple committee members are available at a regular time (in-person or virtually) so that employee-owners can drop-in with questions. Even if nobody comes by, it’s nice for people to feel supported. Keeping Your Committee On Track Starting a committee is just the beginning of building a strong ownership culture. Maintaining a successful committee over time can be challenging. It’s important to keep things fresh. Rotate themes, responsibilities and committee roles so that your committee members stay interested and engaged. Consider adding new members annually, but always be sure to prioritize passion. Creating an annual communication plan is another way to keep your committee on track. Align on a theme for the year, decide on the right number of touchpoints, and identify who is responsible for each. A common pitfall is for the Employee Ownership Committee to become the party planning committee. An annual event is a great idea, but make sure your committee is focused on building your ownership culture throughout the year. The goals of your committee should change over time with your company and your employee-owners. In the beginning, your committee might be focused on building a strong foundation of EO basics. But over time the needs might evolve as understanding grows. At Certified Employee-Owned, we help guide our Members through this evolution while providing them the tools and playbook they need to share their ownership story. You can learn more about our work here.
Read More ▶6,237 ESOP Companies in America: A Deep Dive on the Department of Labor (DOL) 5500s
June 12, 2023
The Department of Labor Form 5500s are the most commonly cited source of information on Employee Stock Ownership Plans. If you are part of the employee ownership community, have been to a conference, or even just read an overview of the employee ownership space, you have likely seen statistics derived from the 5500s. For example, there are around 6,237 Employee Stock Ownership Plan (ESOP) companies in the US with roughly 14 million participants. The 5500s are certainly an important source of information for the employee ownership community. But they also have a fundamental limit: not all ESOPs are employee-owned, and many employee-owned companies don’t have an ESOP. As every business person knows, if you want to grow, you have to measure what matters. Getting an accurate count of the number of employee-owned companies in America requires a simple standard that applies across all ownership structures. Our certification provides just such a standard. Despite their shortcomings, the 5500s remain a vital source of information on employee ownership. This article will give you a crash course including: What exactly are the Department of Labor (DOL) 5500s? 6,237 companies with an ESOP The 10 largest ESOPs in 2020 Certification measures what matters Appendix: how to download the ESOP dataset What Exactly Are the Department of Labor (DOL) 5500s? The Department of Labor oversees employee benefit plans created by the Employee Retirement Income Security Act of 1974 (ERISA), including Simplified Employee Pension Plans (SEPs), Profit Sharing Plans, 401(k)s, and ESOPs. Any company maintaining one or more of these plans is required to report key plan information to the DOL on an annual basis via the Form 5500. The DOL maintains a public archive of fillings going back to 1999, and anyone can access the data directly. For advocates of employee ownership, the data have a few challenges. Companies can apply for extensions and submit updated fillings, which creats duplicates. As with all self-reported information, some variables are extremely noisy. Collection takes quite a bit of time, so complete DOL fillings come out on an approximate two-year lage. Finally, companies with an ESOP are not required to report the total percent of the company owned by their employees, so there’s no way to tell how much of the company is owned by the ESOP. 6,237 Companies With an ESOP As of June 2023, the most recently available and complete DOL filling is the 2020 vintage (see Appendix for more detail). If you download the files from the DOL website, you will be struck by the size. You can open the CSV in excel but your computer might need some time to think because the file contains over 248,000 rows. Did the number of ESOPs increase dramatically? Unfortunately not. The file is much larger than the number of ESOPs because, as mentioned above, all employee benefit plans are required to submit an annual Form 5500. Selecting all fillings with an ESOP yields 6,603 rows. Added together, these fillings report 14,150,373 total participants and 10,304,341 active participants. But some companies have submitted multiple fillings. Others indicate a plan year that is well before 2020, in one case as early 2000. Ignoring these and counting only unique EINs we find 6,237 companies reporting 13,321,687 total participants and 9,755,354 active participants. The 10 Largest ESOPs in 2020 Sorting this list by number of active participants we can get a sense for the 10 largest companies with an ESOP: Company Active Participants WALMART INC. 1,689,489 THE HOME DEPOT, INC. 424,733 CVS HEALTH CORPORATION 237,061 LOWES COMPANIES, INC. 305,280 TARGET CORPORATION 356,847 WELLS FARGO & COMPANY 340,353 BANK OF AMERICA CORPORATION 283,172 COSTCO WHOLESALE CORPORATION 184,379 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION 271,120 AT&T INC. 281,286 Total 4,373,720 To members of the employee ownership community, this list is probably surprising. These aren’t the companies that come to mind when we think of large, employee-owned businesses. It helps to remember that companies with a wide variety of employee benefits plans are required to file a Form 5500. These companies are likely checking the ESOP box because they have an Employee Stock Ownership Plan that owns a small portion of the company, in addition to the many other employee benefit plans they offer (Walmart, for example, indicates 8 plan types). It might even be a legacy plan that is inactive. Due to the aggregate nature of the 5500s, it’s difficult to tell. Certification Measures What Matters The data quality issues highlighted above might cause some doubts about the reliability of the DOL 5500s. But the list of the 10 largest ESOPs points to a more fundamental issue: there’s a difference between ESOP and employee-owned. While they are a useful source of information, ultimately the DOL 5500s cannot tell us the number of employee-owned companies. Accurately measuring the size of employee ownership requires a definition of “employee-owned” that can be applied to any company. Certification provides many benefits, including a consistent standard that enables an accurate count of employee-owned companies. And as every business person knows, you have to measure what matters in order to create growth. At Certified EO, we have spent the past five years creating the infrastructure required to accurately count the number of employee-owned companies in real time. We have consolidated the publicly available sources of data of employee ownership, resolved the data issues, verified key variables by hand, and supplemented the raw data with critical information like the percent of the company owned by employees. The result of thousands of hours of work is our Directory of Employee-Owned Companies. The Directory provides an up-to-date number of employee-owned companies that changes as soon as we learn new information. It also transparently lists every employee-owned company and facilitates exploration through search and filters. The good news is that there are more employee-owned companies than companies with ESOPs! As of June 9th, 2023, our Directory lists 6,390 employee-owned companies, more than the number of companies with ESOPs listed in the 2020 DOL fillings. Using data collected during our certification process we estimate that employee-owned companies employ between 2 million to 3 million Americans. These numbers represent a more accurate measure of employee-owned companies and are a starting point for growth for our community. Appendix: Step-By-Step Instructions for Downloading the ESOP Dataset Go to the Form 5500 Datasets page on the Department of Labor website. Choose which year of data to download. In my experience, data sets are completed in the Fall on a 2-year lag According to the DOL, Go to the Form 5500 Datasets page on the Department of Labor website. Choose which year of data to download. In my experience, data sets are completed in the Fall on a 2-year lag According to the DOL, companies are required to file on “the last day of the seventh month after the plan year ends (July 31 for a calendar year plan),” but it seems like it takes a while for submissions to end up in the public data. For example, on June 12th, 2023 I downloaded the 2021 fillings and found roughly 6,100 entires for ESOPs. Either the number of ESOPs dropped dramatically from 2020 to 2021 or, more likely, the dataset is still being completed. Based on past years, I would expect that to happen in October of 2023 for the 2021 fillings. Open the data and filter for ESOPs using the TYPE_PENSION_BNFT_CODE variable Values of 2O, 2P, and 2Q correspond to non-leveraged ESOP, leveraged ESOP, and S corporation ESOP, respectively. Notice that companies will often have more than one plan type, it might be helpful to create a formula that returns true if the TYPE_PENSION_BNFT_CODE variable contains one of the ESOP indicators. After filtering you should see around 6,600 rows of data for the 2020 fillings, but be mindful of duplicates and late fillings. Sort by size (TOT_PARTCP_BOY_CNT) to begin your exploration.
Read More ▶Which States & Industries Are Best For Employee Ownership?
May 3, 2023
Everyone involved in employee ownership has a responsibility to strengthen our community. Advocates, service providers, trade organizations, businesses, and employee-owners all benefit when our ranks increase. But to grow successfully, we must understand where employee ownership thrives.In this article, we combine our certification data with data from the US Census Bureau to analyze where there are a surprisingly large number of employee-owned companies. Looking at company size, industry, and headquarters location, we find insights that will help our community grow:Manufacturing, Professional Services, and Construction are the top industries for EO. Combined they have almost 600,000 non-EO firms, which means focusing on these sectors seems like the biggest growth opportunity for employee ownership. 100 - 500 employees looks like a sweet spot for employee ownership. It also represents a large growth opportunity with roughly 93,000 non-EO firms and over 18 million employees.10 - 20 employees has far fewer employee-owned firms than baseline, likely due to limits of current structures. With over 640,000 non-EO firms it represents a big opportunity to grow firm numbers (less so employee numbers), but this requires new EO structures such as Direct Share Ownership.Vermont, North Dakota, Maine, Iowa, Hawaii are the top states for EO by concentration. Together these states have around 67,000 non-EO firms with more than five employees, which makes it a smaller opportunity in terms of raw numbers. But efforts in these states will benefit from dense networks of peer firms that can advocate for employee ownership.California, Pennsylvania, and Ohio are the largest states (by number of firms) with an above-baseline level of employee-owned companies. This represents an alternative geographical approach that might yield more potential conversions because combined these three states have over non-EO 480,000 businesses.Details on our methodology and additional findings are below.Data on Employee-Owned and US CompaniesTo understand where employee ownership thrives, we must have a detailed understanding of both the number of employee-owned companies and the number of all US businesses. Looking at only the raw number of employee-owned companies can be misleading because it ignores baseline concentration. For example, if 5% of employee-owned companies were in a particular state, we would interpret that differently if 10% or 1% of all businesses were in that state.Data on employee-owned companies comes from our Directory of Employee-Owned Companies, an up-to-date list of all businesses that meet our standards of significant, broad-based employee ownership. We pulled the numbers on March 1, 2023 and in some cases we supplemented our information with 3rd party sources. Data on all US businesses come from the Census Bureau’s Statistics of US Businesses (SUSB). At the time of our analysis the most recently available series was the 2019 data set. Employee-Owned Companies By Ownership StructureThere are a number of different ways a company can be employee-owned. The following table breaks down the number of employee-owned companies by ownership structure:By far, the most common structure is the Employee Stock Ownership Plan (ESOP), accounting for roughly 90% of employee-owned companies. Worker cooperatives are the second most common structure, followed by a few emerging structures that are small but have the potential for rapid growth. Direct Share Ownership in particular is showing promise as the best structure for companies with fewer than 30 people, including newly formed businesses. Due to the emerging nature of these structures, our numbers are best thought of as lower bounds. All told there are at least 6,416 employee-owned companies in America. Employee-Owned Companies By SizeUsing information collected during our certification process to project the number of employees at every employee-owned company, we can analyze the size distribution:It’s important to note that the distributions are censored to exclude firms with fewer than 10 employees. The purpose is to focus on companies that have a substantial number of non-founder employees, which is the relevant comparison group for employee ownership. The chart clearly shows that employee-owned companies skew larger than baseline. There are fewer in the 10 - 20 size bucket, with 48.9% of all firms in this range but just 12.7% of employee-owned companies. The two distributions are in the same ballpark for 20 - 100 employees. But all buckets greater than 100 employees have far more employee-owned companies than baseline. Roughly a third (32%) of employee-owned companies are in the 100 - 500 range, 4.4x the baseline of 7.2%. We see a similar trend in the 500 - 1,000, 1,000 - 2,500 and 2,500+ categories. The simplest explanation for the skewed distribution comes from the well-known fact that ESOPs generally don’t work for small companies. The cutoff varies depending on who you ask, but is broadly stated to be between 20 and 40 people. Given that 90% of employee-owned companies have an ESOP, that would explain the skew. There are two implications for growing employee ownership. First, if you’re doing ESOPs, focus on firms with at least 100 people. The large difference in concentrations leads us to think that the 100 - 500 size range in particularly good. According to the SUSB this range has 94,957 total firms with 18,612,620 employees, which makes it a sizeable growth opportunity.Second, there is probably a huge opportunity to create and promote structures that work for firms too small for an ESOP. The 10 - 20 size range has 640,827 firms in the 2019 SUSB, but we estimate just 712 employee-owned companies. In my opinion, Direct Share Ownership models using stock options are the most promising opportunity here.Employee-Owned Companies By IndustryNext we can use the North American Industry Classification Systems (NAICS) to look at the distribution of employee-owned companies by industry:Three data notes. First, while NAICS is included in the DOL 5500 data for ESOPs, it is extremely messy. We have gone through and recategorized the industry information for all 6,300+ companies in our database. Second, we exclude the “Finance and Insurance” category for this analysis because there are a large number of community banks with a small ESOP (below our 30% threshold) that we are still cleaning. Finally, again we exclude small firms, this time those with fewer than five employees.Three sectors, Manufacturing, Professional Services, and Construction, account for nearly half of all employee-owned companies (48.7% combined). All three sectors far exceed the baseline distribution, but Manufacturing in particular stands out with 2.7x the expected concentration. These industries likely represent a substantial growth opportunity for our community. In the 2019 SUSB there are 144,201 Manufacturing firms, 213,955 Professional Service firms, and 242,885 Construction firms. Converting and additional 1% of each of these industries would roughly double the number of employee-owned companies. The importance of the baseline analysis are clear when looking at Retail Trade. On an absolute basis this is the 5th largest sector for employee-owned companies. But the concentration is 48% lower than baseline. There are three sectors that jump out as particularly challenging for employee ownership. Health Care, Accommodation & Food Services, and Other Services (details on this category can be found here). While there are employee-owned companies in each of these sectors, they all lag the baseline substantially. These industries account for 39.6% of all businesses but just 3.4% of all employee-owned companies. There are two ways to interpret this lag. There might be something about these sectors that makes it difficult to be employee-owned, or these might be industries where there are missed opportunities. A good starting point might be to connect with the employee-owned companies who do operate in this sector to get their thoughts on what is driving this trend. Employee-Owned Companies By StateWe can use the headquarters location of each firm to look at concentration by State. Again we focus on firms with at least 5 employees:California, New York, and Texas are the top three states for total number of employee-owned companies with 13.4%, 5.5%, and 5.2% respectively. But again the baseline analysis provides a more nuanced picture. Both New York and Texas have a lower share of employee-owned companies than expected given their share of all businesses. The implication is that these states might not actually be as opportune for employee ownership as the raw numbers imply.In terms of concentration relative to baseline, the top states for employee ownership are: Vermont (3.0x baseline)North Dakota (2.5x baseline)Maine (2.3x baseline)Iowa (2.2x baseline)Hawaii (2.0x baseline)Together these states account for 6% of all employee-owned companies but just 2.7% of all companies. Together they represent 67,348 total firms with more than five employees, many of which will have peers or neighbors that are employee-owned. Another approach to geography is to look at the largest states with an above-baseline level of employee-owned companies. This would suggest California (1.1x baseline), Pennsylvania (1.1x baseline), and Ohio (1.4x baseline) are the places to focus. This approach might yield more conversions because these three states have over 480,000 businesses with at least 5 employees.The states with the lowest number of employee-owned firms relative to baseline are Delaware (18%), Rhode Island (44%), Nevada (45%), New Jersey (45%), and Florida (48%). Again the interpretation here is a complex. Perhaps there is something about these states that discourages employee ownership, or perhaps these states simply represent opportunities to bring employee ownership up to par. The only way to know for sure is by contacting some of the 267,410 businesses in these states to see how many are interested in exploring employee ownership.
Read More ▶How Certification Protects and Grows Employee Ownership
March 31, 2023
Employee ownership is an exciting idea that has the potential to address some of our country’s biggest challenges. By changing the relationship between company and employee, employee ownership helps workers build wealth, creates a better day-to-day environment for employees, and makes companies more successful. But the employee ownership community also faces challenges that impeded our growth. Employee ownership can be confusing and hard for people to understand. Worse, the goodwill that we have created is threatened by pretenders because any company can call themselves employee-owned. By setting a standard that people know and trust, Certified EO plays a unique role in helping our community overcome these issues. By making employee ownership easy to understand, building trust, and protecting our goodwill, certification benefits everyone in the employee ownership (EO) community including companies, trade organizations, lobbying groups, research hubs, state centers, service providers, and most importantly employee-owners. Certification Makes Employee Ownership Easy to Understand The details of employee ownership can be confusing to insiders, let alone someone with no prior knowledge. There are many different structures - ESOPs, Worker Cooperatives, Employee Ownership Trusts, and Direct Share Ownership - each with their own nuances. For example, ESOPs have allocations, contributions, vesting, valuation, distributions, and forfeitures. From a technical point of view the details are critical, but for most people they are overwhelming. Certification makes employee ownership easy to understand. Our standard of significant, broad-based employee ownership is a yardstick that applies across all structures and boils employee ownership down to the basics: Ownership: at least 30% of the company must be owned by employees (excluding founders). Access: reasonable access to ownership must be open to every employee. Concentration: employee ownership must not be too concentrated. These simple concepts help people understand if they’re aligned with our community in terms of basic principles. It also helps companies communicate this alignment with an easy-to-recognize mark. And it resonates! Last year we ran a nationally-representative opinion poll and found that 25% of Americans would be more likely to apply to a job if the description had our certification mark. Certification Builds Trust People understand third-party certification. There are many examples of successful certifications across the United States: Great Place to Work, Made in America, USDA Organic, Fair Trade, and Veteran- and Women-Owned Businesses. Certifications are a familiar concept that help people understand whether a company’s claims are potentially misleading or indeed truthful. The independent validation of third-party certification builds confidence, especially with people who are unfamiliar with employee ownership. It can help job seekers, new hires, existing employee-owners, clients, customers, purchasing agents, and government officials trust that EO is truly as good as it sounds. For example, when a manager is explaining the wealth-building potential to a skeptical new hire, it helps to say, “you don’t have to take my word for it, we’re certified.” The rigor of our process amplifies the trust-building. Just 1 in 200 American companies qualify for Certified Employee-Owned. We have worked with academics to verify that 30% employee ownership would transform the lives of tens of millions of Americans. And we conduct a comprehensive review of every new Member. All these efforts pay off in trust and confidence. Certification Protects Our Goodwill As employee ownership becomes more well-known, our community will face a major issue: anyone can call themselves employee-owned. Maybe the CEO is the sole owner and they claim that they are also an employee, so technically their company is 100% employee-owned. Or maybe a company that has distributed 1% of shares across all employees starts talking about their employee ownership. Afterall, every employee is also an owner. You might be think these claims are absurd, but unfortunately we’ve already come across companies making such misleading statements. These examples show there is a lot of gray area around what it means to be employee-owned. This creates the possibility for the employee ownership equivalent of “greenwashing” and it will become more common as awareness of this amazing idea continues to grow. Impersonators damage the concept of employee ownership and, if left unchecked, will create negative opinions and impressions that do irreversible damage. As a community, we must defend our goodwill before it is diluted to the point of being meaningless. Aligning around a common standard with a clear and rigorous process and building a common brand will help fend off pretenders. Goodwill is an amazing asset, but it is fragile and we must protect it with certification.
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