Signs Point To Growing Interest In Employee-Owned Businesses

Jun 3, 2016

For 14 years, an annual conference in Vermont has focused on employee-owned businesses. Organizers say this year’s conference, held this week at Champlain College in Burlington, was the best attended yet. They say it’s one sign of growing interest in employee-owned business models.

Gardener’s Supply Chief Operating Officer Cindy Turcot, who chairs a national association of businesses whose stock is owned by employees, told attendees of the Vermont Employee Ownership Conference that although the number of employee-owned businesses has stayed fairly steady nationally, she believes it is about to grow and she urged people to spread the word.  

“Let the world see that an employee-owned company is not only financially successful, but that we treat our employees the best, that we have the most innovative business practices, that we have a great governance structure and that we’re keeping businesses in the communities that they want to be in and this, for us, is in Vermont,” Turcot said.

As evidence of a rising interest in employee-owned businesses, she cited the wave of retiring baby boomer business owners looking for ways to pass along their companies.

Turcot says their interest in employee-owned models is reflected in a surge of inquiries from lawyers, accountants and other professionals who work with businesses.

Employee ownership is also a growing field of study in academia.

"We're keeping businesses in the communities that they want to be in and this, for us, is in Vermont." - Gardener's Supply COO Cindy Turcot

There are other factors contributing to the heightened interest, according to Don Jamison, the co-founder and executive director of the Vermont Employee Ownership Center.

“I would trace it back to the last recession, the Occupy Movement, the focus on inequality and looking for real structural solutions to that, especially to cooperatives, but also ESOPs,” he says.

ESOPs [Employee Stock Ownership Plans] and co-ops are the two common types of employee-owned businesses.

Co-ops are fairly straightforward and well-suited to smaller businesses. While they can differ in some ways, each worker is an equal owner. There are about 18 employee-owned co-ops in Vermont.

An ESOP is more complex and more expensive for a company to establish. It’s generally suited for larger businesses.

In an ESOP, a trust funded by the business purchases the company’s stock on the employees' behalf. 

There are tax benefits for companies where 30 percent or more of the stock is employee-owned through the trust.  

There are about 30 ESOPs in Vermont, including well-known businesses like King Arthur Flour, Carris Reels and Gardener’s Supply.  

The Vermont Employee Ownership Center says studies show ESOP employees have better wages and benefits and their retirement accounts are 2.5 times larger than workers in similar companies that are not owned by their employees.

"What we're looking to do here is to share our company with our employees. If the shareholders sell to someone in California ... the employees will get pink slips." - David Brown, owner of a Woodstock software firm

A company is considered employee-owned if a broad cross-section of workers can participate in ownership.

Beyond the numbers, advocates say an employee-owned culture can be more open, inclusive and productive. But people who work at employee-owned businesses say that doesn’t happen by itself, and each business has to find the best way to accomplish it.

Stone Environmental, a Montpelier firm with roughly 50 employees, made the transition to an ESOP earlier this year.

Steve Karcher told attendees the company’s employees are trying to determine what their ownership means in the way the business is run; for example, whether they should have representation on the board of directors.

“We’re actually at a point where the first thing for us to do is to overcome what seems to be a little natural cynicism. ‘OK, so now we’re owners, but you tell us we can’t make all the decisions, what is going to be the benefit?’ We’re working hard to figure out how to really incorporate it into the culture,” said Karcher.

Among those attending the conference were people looking to turn their own businesses over to employees.

Chris Hansen runs a consulting and training firm that works in the mental health field. She has just a few employees, but a change in circumstances means she won’t have a partner to help her run the business, so she’s interested in transitioning to a workers cooperative.

“My skill set is not necessarily with being a director, so I’d love to be able to spread the responsibility,” she says.

Hansen says the values of her business already align well with those of employee-owned companies.

David Brown is one of two owners of a Woodstock company that develops software used in manufacturing.

His partner is retired and Brown is looking for ways to assure that if the company is sold, its future in Vermont is secure. One solution might be to form an ESOP.

“What we’re looking to do here is to share our company with our employees. If the shareholders sell to someone in California, the shareholders will get a lot of money, but the employees will get pink slips,” he says. 

Brown says he attended the conference to learn whether the idea of transitioning to an employee-owned business is right for his company and its 30 employees.