At Lancaster meeting, nonprofits urge employee ownership

//January 25, 2018

At Lancaster meeting, nonprofits urge employee ownership

//January 25, 2018

The numbers were reeled off by Hilary Abell, co-founder of Project Equity, which is working with Lancaster-based nonprofit Assets to encourage employee ownership in Central Pennsylvania.

She spoke Jan. 23 at a breakfast seminar in downtown Lancaster about what she and others have called a “silver tsunami.”

“There’s a potential business crisis in our country,” she told the audience of 75 people. “Every day about 10,000 baby boomers are retiring, many of them own businesses. Over 85 percent of business owners do not have a succession plan in place, and less than 15 percent of businesses get passed on to the second generation. Additionally one-third of business owners over 50 report having a hard time finding a buyer. What if the buyer was its own employees?”

She argued that employee ownership has several benefits, including the ability to give workers a voice in key decisions. Businesses, meanwhile, can benefit from lower employee turnover and higher productivity. Employee ownership also offers a path for continuing the business, and an opportunity for the business owner to leave a lasting legacy.

There are also benefits to society that are derived by retaining local ownership of businesses. “Local businesses often play a key role in supporting community efforts,” Abell said.

It was a message echoed by Craig Dalen, director of impact business strategy at Assets. But instead of statistics, he cited a recent letter to CEOs by Larry Fink, the founder, chairman and CEO of BlackRock Inc., a company that manages more than $5.7 trillion in assets.

In the letter, subtitled “A Sense of Purpose,” Fink writes: “We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

Models of employee ownership include a worker-owned cooperative and an ESOP (employee stock ownership plan).

Abell explained that a worker-owned cooperative (or worker coop) is a company owned and controlled by the people who work there. The board of directors is made up by a majority of worker-owners who are elected by the full membership on a one-person, one-vote basis. Profits are shared based on hours worked.

ESOPs are retirement plans that hold all or a portion of the company’s shares in a trust on behalf of the employees.

Abell said the commitment to transitioning to an ESOP is something that should be done over time.

“There’s about a two-year process from the time an owner begins researching the concept to the actual roll-out. But we really encourage people to think about it five to ten years out. That way the owner can begin building the concept into the business’ corporate culture,” she said.