July 9, 2024 • 21 mins
Unlock the secrets to transforming your business into an employee-owned powerhouse as we sit down with experts Mark Hand and Jenny Everett from the Research Cluster on Employee Ownership and Workplace Democracy. Discover a new world of business models including employee stock options, ESOPs, and worker cooperatives, enriched with real-life examples like Brookshire's, Bob's Red Mill, and Black Star Co-op. We also shine a spotlight on the cutting-edge concept of purpose trust ownership, showcasing how companies like ACP International and Patagonia use these trusts to benefit both employees and the planet. Learn how Organically Grown Company successfully balances profit with stakeholder benefits through its purpose trust framework.
In the latter half of our conversation, we explore how democratic practices in the workplace can revolutionize corporate governance and community organizations alike. With insights from Mark Hand’s teaching experiences at the University of Texas at Arlington, we draw compelling parallels between political democracy and corporate policy, emphasizing the power of transparency and employee involvement. From full worker-owned cooperatives to incremental democratic practices like employee representation on boards, we cover a spectrum of approaches to foster a more inclusive and participatory business environment. Don’t miss our discussion on the Kensington Corridor Trust and how perpetual purpose trusts can reshape community-focused real estate initiatives. This episode is a comprehensive guide to innovative ownership models that promise to leave a lasting legacy for businesses and communities.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Joel (00:00):
What if investing in each other could change the world?
I'm Joel Skeen with bizradious,and this is the Mindful
Marketplace.
All right, welcome back to thesecond half of a really
fascinating and energizingconversation I've been having
here with Mark Hand and JennyEverett, who work together with
(00:22):
the research cluster on employeeownership and workplace
democracy.
Jenny Everett, who workedtogether with the Research
Cluster on Employee Ownershipand Workplace Democracy.
If you didn't hear the firsthalf of this episode, go back
and take a listen to that,because both Mark and Jenny
really got to share a lot ofgreat information on the
overview of what is employeeownership and why is it
something that's being talkedabout more and more right now.
We also got into why businessowners who are hitting the
(00:45):
retirement age may want toconsider employee ownership as
the best model to leave a legacyin their business.
So we're going to pick back uphere.
Jenny and Mark, thanks so muchfor your time today.
Welcome back to the show.
Mark (00:58):
Thank you.
Joel (01:00):
Yeah.
So we ended by kind of talkingabout there's all of these
business owners who are hittingthat retirement age.
They've spent decades buildinga big business, building a
business.
Maybe it's big, maybe it'ssmall, but they built a business
, they want to leave a legacywith that business and they're
considering alternative optionsrather than just letting some
company bigger than them buythem or maybe passing it on to
(01:23):
maybe maybe want the business,maybe don't want the business,
Right?
And so I guess where I'd liketo start is by actually talking
about how does this actuallywork?
You know, if, if someone wantedto hypothetically have a
business that wasn't just ownedby one person but that had some
sort of worker ownershipinvolved or some kind of equity
(01:44):
stake for their people, what arethe models that have already
been used and who's used them?
Mark (01:49):
I'm happy to jump in there .
Yeah, so before we get toemployee ownership trusts and
perpetual purpose trusts, whichwe're particularly excited about
, I think it's worth just aquick overview of some of the
options that are out there.
Your listeners are probablymost familiar with employee
stock options, which are thesort of things that you might
get if you work at a startup.
And then, in addition to those,there's something called the
(02:11):
employee stock ownership plan,or ESOP, and that's basically a
retirement account that youremployer contributes to and then
holds interest on your behalf,and there are about 6,000 of
those across the country,somewhere between 6,000 and
7,000 of those.
Here in Texas.
One of the big grocery stores,brookshire's, has one of these
models, and Bob's General Millhas an ESOP program.
Joel (02:37):
There's a pizza company in Louisiana called Johnny's it
has this little thing whereeverybody gets a slice of the
pie, flour and greens.
That's right, bob's.
Mark (02:44):
Flour Mill.
Yeah, yeah, yeah, yeah, bob'sRed Bell.
That's right, that's it, that'sthe one, sorry.
And then the less common butstill powerful one is a worker
cooperative, where a company isowned by its members, which are
its employees.
So there's a brewery in Austin,for example, that's called the
(03:06):
Black Star Co-op your listenershave probably heard of, and the
idea is that every member orworker there gets one option,
one vote, and there's somewherebetween 750 and 1,000 of those
across the country, and sothat's the lay of the land.
And part of what Jenny and I areinterested in is a form of
ownership that's called purposetrust ownership, and the idea is
that you would put a companyinside of a trust which is then
(03:28):
tasked with making sure that acompany runs according to its
mission.
So if you take the case of atech company here in Texas
called ACP International, theymake road signs, and if you ever
see one of those little, thesort of things sticking out of
the ground that tell you thatthere's a Wi-Fi cable underneath
, they generate those.
It's a manufacturing company,and when the owner, joe Nussbaum
(03:48):
, began to think aboutretirement, he chose a trust,
and so now ACP International iscontrolled by trust, and that
trust says from now on, acpInternational has to be run to
the benefit of its employees andthen, over time, the ownership,
the financial ownership of thecompany will transition from Joe
(04:11):
to the trust and ACP willcontinue to be able to operate
on its own, owned by that trust,to the benefit of the employees
.
Patagonia is probably the mostfamous example of a company that
is using this Instead ofbenefiting its employees.
The Patagonia Purpose Trust nowhas as its mission, as its
purpose, to benefit the planetand it controls the company
Patagonia, ensuring that it isoperating to that mission.
(04:31):
So there's a couple of examplesone big, one small, one that's
focused on the planet, onethat's focused on its employees.
Joel (04:37):
So in either way, essentially a trust is created
that then owns the company andthe trust has the ultimate
control to say what the purposeis, that then the company can
try to fulfill that purpose.
So it's kind of like areorganizing of priorities, if I
kind of understand it, whereprofit still matters because
obviously you can't do businessif you don't stay in business,
(05:00):
business but that maximizingprofit may not be the number one
priority of the trust.
Rather, either the benefit ofthe workers is the purpose of
the trust, or the planet orwhatever.
Whoever designs the trust canset as the primary purpose that
the business has to serve thatpurpose.
Am I understanding that right?
Mark (05:22):
Yeah, go ahead If I give one more example that might line
this up.
And there's a company in Oregoncalled Organically Grown
Company and when they set uptheir purpose trust, they
decided that they wanted to usethe trust to ensure that they
(05:42):
could to the board.
That committee is tasked withbenefiting their employees,
making sure that their growersof food benefit from the work
that they're doing, theirdistributors, then also their
investors, and so the job of thetrust is to make sure that, in
addition to making money, thateach of those stakeholders
benefits from the way that thecompany is run.
Joel (06:02):
Stakeholders the benefits from the way that the company
is run.
Yeah, yeah, I also want tounderstand too, because it
sounds like this is the way thatit's been done before, but you
mentioned that it's somethingthat has only really been, for
the most part, accessible topretty large companies, like, if
you're Patagonia, you may beable to do this, but it may be
harder for the local fleecemaker in your town, if you have
one, to do that.
(06:23):
So tell us a little bit aboutthe changes in innovations that
are happening in these trusts Iknow you guys are specifically
excited about.
You said it's a, it's a purposetrust.
Is that the name of it?
Mark (06:33):
That's right.
So, legally speaking, these arenon-charitable purpose trusts
with, without an ascertainablebeneficiary.
Now, that's a mouthful, but thechange is that in some states
Now that's a mouthful, but thechange is that in some states,
you are now allowed to have atrust that owns a company in
perpetuity that doesn'tdesignate a specific beneficiary
, like, say, your kid you had atrust fund or your pet.
(06:55):
It can have a class of peoplelike your employees or your
other stakeholders as thebeneficiary of the trust, and
that shift that has taken placeover the course of the last 20
years or so is the thing thathas started to enable this, and
so it is.
It's.
(07:16):
Whereas ESOPs tend to work bestfor larger companies because of
the cost of setting them up andmaintaining them, an employee
ownership trust that might cost$30,000 to $60,000 to set up is
much more available to a muchwider swath of companies in the
United States.
Joel (07:28):
I guess what would be the biggest.
Yeah, go ahead, Jenny.
Jenny (07:31):
Oh, that's part of the reason we're excited about these
structures is we think theyhave a real potential to fill
this need, and you know we weretalking in the earlier part
about the silver tsunami.
We have all these companiesthat could consider employee
ownership, but an ESOP structureor co-op structure just might
not be right for them forvarious reasons, and so could
these new trust structures be asolution that could really scale
(07:53):
and fill that niche.
Joel (07:54):
Are there certain kinds of businesses that like, let's
say, we've got three differentbusinesses that all have
interest in being some kind ofemployee ownership, you know,
moving forward.
But which kind of businesseswould be good for an ESOP?
Which kind of businesses wouldbe good for an employee trust?
And then which kind ofbusinesses would be good for an
ESOP?
Which kind of businesses wouldbe good for an employee trust,
and then which kind ofbusinesses?
(08:15):
I'm curious, because youmentioned the breweries.
We have a brewery here inAsheville that's also a worker
owned co-op.
So I'm kind of wondering, likeare breweries really good for
this?
Or like what?
Which kind of companies does itmake most sense to be either an
ESOP, a employee trust, oractually be a worker-owned co-op
?
Mark (08:31):
So I think that you're stepping right into one of the
questions that this industry isasking right now, and the way
that I think about it is that itdepends on the characteristics
of the business and then on whatit is that the owner is
optimizing for.
And so, with a workercooperative, if you're
interested in that, what itmeans is that you're committing
(08:51):
yourself to that one person, onevote decision making structure,
so it's maximally democraticand that might work really well
for some companies.
So if you are, let's say, agroup of lawyers, you might be
interested in a co-op structure.
There's a partnership structure, but maybe you could use a
co-op structure too.
And then if you're trying toset up an ESOP, part of what you
(09:14):
might be prioritizing there issetting up retirement assets for
your employees and maintainingthe flexibility to then sell to
another company in a way thatwould maximize their retirement
accounts, and so ESOPs are oftenreally about building assets.
For individuals they tend to bea little bit bigger because of
the cost of setting them up, butreally the motivator there is
(09:37):
building assets and thenemployee ownership trusts or
perpetual purpose trusts.
People tend to be drawn towardsthem because of their
flexibility, and so there isn'ta sort of size requirement there
or an optimal size.
A lot of the companies that wesee are going to be between 20
and 100 employees or somethinglike that.
I think that's just because ofthe companies that have
initially been drawn to it, butthere are much larger ones, like
(09:59):
Patagonia and maybe even HobbyLobby I haven't been able to
confirm.
And then the other way that theflexibility attracts owners is
that you can choose how muchyou're going to change your
management structure separatelyfrom the conversion to the trust
.
And so there's some employeeownership trusts that we've
encountered, like BicycleTechnologies International in
(10:20):
New Mexico, and at least out ofthe gate, as they converted to
an employee ownership trust, theway that the company is managed
hasn't changed very much.
And then as the owner thentransitions out, then more and
more of the management will betransitioned to those employees,
and so the flexibility of thetrust structure seems to be the
thing that owners really getattracted to.
Jenny (10:42):
The one other thing I would add to this and we talked
a little bit about this at thebeginning is one of the reasons
that business owners mightchoose a perpetual purpose trust
is that ability to lock in thepurpose which a co-op and an
ESOP don't really have thatmechanism.
So those are really goodoptions for companies that are
primarily interested in theemployee piece, but if they have
(11:04):
another aspect to theirbusiness that they want to
preserve into perpetuity thepurpose trust allows them to do
that Right.
Joel (11:11):
Maybe they care about a particular part of their town or
a neighborhood in their townthat's been disenfranchised.
Maybe they care a lot about theenvironment, like in the case
of Patagonia.
Jenny (11:20):
Yeah, or the suppliers that they're sourcing from, or
yeah, exactly.
Joel (11:24):
Right, Right.
No, that makes a ton of sense.
You mentioned the earlier.
You mentioned how this you feellike this model of the employee
trust is really scalable, andyou've also mentioned the
flexibility.
Is the scalability due to thatflexibility or is there more to
it than that?
Jenny (11:41):
I think it's a good question.
I mean, the flexibility rightnow is probably both a bit of a
blessing and a curse, becausethese tools are so new and we
don't have a lot ofstandardization and templates,
and so a lot of the work thatwe've been doing on the field
building piece is figuring out.
You know what do the variousactors that are working to help
businesses convert, you know,what are they learning from best
(12:02):
practices?
What are we looking at,research wise, to maybe start to
standardize to a certain degree, and that gets into policy
considerations as well.
Part of the scalability andMark mentioned this is it's just
a more affordable optionBecause ESOPs are ERISA
regulated.
There's a lot of regulation anda lot that goes around
(12:23):
complying with that regulation,and so for companies some
smaller companies just might notmake sense.
And again because this is anewer space, there's only 50 or
so companies in the countryright now that have done this,
but they're getting faster to doas well, so it may be a more
expedient option for owners whowould like to convert sooner
(12:46):
rather than later.
So those are some of thereasons we think it could scale,
but early days still.
Joel (12:51):
Well, and I'm also curious to just thinking out
loud here a little bit aboutcould a perpetual purpose trust
be put together not just by acompany, but could some other
type of community organization,whether it's a church or a
neighborhood or a social co-opor anything like that?
Do you see potential for thisto become a tool for impact
(13:14):
investing that people can docollectively?
Jenny (13:17):
Yeah, absolutely, and there's some great examples
around the country of groupsthat are doing neighborhood
trusts, which, again, are basedon the same kind of legal
structure but focused onproperty or community at a
neighborhood level, versus asingle company.
Joel (13:31):
Yeah, that'd be so cool if, if your neighborhood had a,
had a trust that you could, youguys got to get together and
vote and say, hey, we want tobuild a playground here, we want
to, you know, do these otherthings with.
I think that's.
That's a really innovativething.
Mark, I see you uh, you gettingexcited.
You have something to say there.
Mark (13:56):
Sure, yeah Well, I'm just always excited about this stuff,
I think.
But one example that I thinkyour listeners could look at is
the Kensington Corridor Trust inPhiladelphia.
It's one of the groups that isexperimenting with how it is
that we might use this structurein order not just to house
corporate assets, but to housereal estate assets and set them
to a particular purpose.
Joel (14:06):
Yeah, I'm also curious from you, Mark, too, because I
know that when it comes todemocratic workplaces, you kind
of have a different, you kind ofhave a deeper background in
this stuff, because you actuallyyou actually kind of teach it
at at the university.
Which school is it in Texasthere?
I apologize, I forgot already.
Mark (14:22):
You're good.
I'm at the university of Texasat Arlington.
Jenny (14:25):
You just lost all your Texas listeners, but that's okay
, the university of Texas atArlington.
Joel (14:32):
It's great Texas Tech.
I know those are.
I know about Rice that's inTexas.
I got a friend yes that's right.
Mark (14:38):
That's right.
That's right.
There are a lot of gooduniversities down here.
Come and see us.
So I teach a course ondemocratic theory, and one of
the things that I do with mystudents is is I introduced them
to the idea that the principlesthat we might want to follow in
the way that we governourselves might also be
principles that we want tofollow in the workplace.
And so when we think about theability to speak your mind, the
(14:59):
ability to know what ishappening in the decision-making
rooms that might affect you,that all of these things are
things that in the governmentalspace we've kind of worked out,
but in the corporate spacethey're still pretty fringe and
still pretty niche.
And so one of the things that Ihave my students do is that I
have them pick an organizationthat they're a part of, or that
they would like to be a part of,and then go see how democratic
(15:19):
it is or how hierarchical it is.
So is the company that theywork for more like an autocracy
or more like a democracy?
And you can see students, asthey begin to think about this,
they start to get nervous, andas they go out and have
conversations with, say, theplaces that they work.
They realize that when they askthese questions, that they're
now stumbling into theseunspoken questions of power, and
(15:41):
so, for me, as a politicalscientist, that's part of what
I'm interested in is how it isthat power is distributed, and
despite the fact that ourPolitical philosophers have
helped us figure out how to moveaway from kingdoms many
hundreds of years ago and buildanother option that works, we're
still at the very beginning ofcompanies beginning to look at
(16:02):
themselves and say does thishave to be a kingdom, does this
have to be an authoritarianstructure or is there another
way?
And so there are some groupsthat have started to figure this
out, groups that have startedto figure this out.
One of the most obvious andaccessible is something called
the great game of management,where companies begin to open up
their books, their financialstatements, to employees, and
(16:22):
that's a risky thing to dobecause it exposes where power
lies, but there areorganizations that help
companies walk through how it isthat we can take that step
towards what I, as a politicalscientist, might call a more
democratic form of management.
Joel (16:34):
That question that you have about power and ownership.
It seems like those two thingsare pretty uniquely connected
and I imagine that's why thosestudents are making that
question.
I've never done that type ofexercise.
I actually thought through hey,is the place that I'm, is this
group that I'm in, do theyoperate more like a democracy,
or is it more like a theocracyor more like a dictatorship?
(16:55):
Who knows Right?
Sure, and in almost anyorganization.
Mark (16:59):
I would say, in almost any organization you could say, are
there places where we couldshare information more widely
and effectively?
Are there places where thereare big decisions being made
that affect a lot of peoplewhere we could figure out ways
to incorporate more of thepeople affected by that decision
into the making of thatdecision?
And so there's sort of thosebaby steps that you can take
towards a less hierarchical,more democratic workplace.
Joel (17:22):
Right, cause there are other ways to move in this
direction that doesn't eveninvolve such a huge like a huge
shift to a different ownershipmodel.
Like some people, some, somecompanies, just make sure that
their employees haverepresentation on the board.
Some companies, they make sureto include all the different
stakeholders, or as many as theycan or are expanding to, and so
(17:47):
there's ways to get in thisdirection.
I like the way you described itbecause it puts it in a
perspective of a spectrum thatthere are.
A worker-owned co-op may be wayoff to one side of, like, total
democratic ownership, butthere's other ways that you can
actually start to move in thatdirection if you're an
entrepreneur or a business ownerlike that.
(18:07):
I've got a couple minutes leftand I just kind of want to end
with something, jenny, you weretalking about at the beginning
or in the first half, which isabout the kind of bipartisan
support of this.
You know, in some ways thisdoes feel kind of radical.
It does feel like a completelyradical and different way of
doing business, but in otherways it seems like it's just a
natural kind of progression of,as you said, moving from
(18:27):
kingdoms to, you know, businessowners and, you know, kind of
having the ownership lie thereand then moving to the actual
workers and the people.
But I'm curious yourperspective on why you think it
resonates across the board in aworld where most things are very
divided that have to do withbusiness or the economy.
Jenny (18:45):
Yeah, it's kind of remarkable.
It's one of the few areas wherethere is some consensus, though
maybe for different reasons,right.
So you know, on the progressiveside, I think it's more again
about worker rights, it's aboutwealth inequality, it's about
shifting of assets.
Those are the types of issuesthat people care about that this
(19:06):
resonates with.
On the more conservative side,it's about securing Main Street.
It's about keeping businesseslocal, particularly in rural
communities.
That can be really effective ifyou know, one of their Main
Street companies goes out ofbusiness or is purchased by
private equity and then sold off.
Job security, job creation,that kind of thing.
So it just really touches on alot of issues that are
(19:29):
cross-cutting, and so it's beeninteresting to see, even in this
current administration, whereCongress is coming together and
passing legislation and beingproactive around this in a way
that we're not seeing acrossmost other issues.
Joel (19:43):
Yeah, I love to see it, Mark.
Any other final thoughts onthat before we head out?
Mark (19:46):
No, I think Ginny covered it really well.
Joel (19:48):
Very grateful to be here, joe, for the work that you all
are doing.
Can you once again say the nameof the blog that you guys have,
where you're publishingeverything here and where people
can find you to learn moreabout how they can you know how
they can make their workplacemore democratic?
Mark (20:06):
Happy to.
So we've got a weeklynewsletter that we send out from
the website EOWDorg, whichstands for employee ownership
and workplace democracy.
So that's EOWDorg, which standsfor Employee Ownership and
Workplace Democracy.
So that's EOWDorg, and ourweekly newsletter takes fewer
than six minutes to read everyweek.
Joel (20:20):
Awesome.
I'm going to subscribe rightnow and we're going to put that
website in the show notes foreverybody so they can get there.
Make sure to subscribe on allthe different platforms that,
wherever you get your podcastwhether it's YouTube, itunes,
spotify, iheartradio, stitcher,buzzsprout and make sure to
subscribe.
Leave us a like and a commentand, until next time, remember
(20:42):
we are each other.
What if investing in each other could change the world?
I'm Joel Skeen with bizradious,and this is the Mindful
Marketplace.
All right, welcome back to thesecond half of a really
fascinating and energizingconversation I've been having
here with Mark Hand and JennyEverett, who work together with
(00:22):
the research cluster on employeeownership and workplace
democracy.
Jenny Everett, who workedtogether with the Research
Cluster on Employee Ownershipand Workplace Democracy.
If you didn't hear the firsthalf of this episode, go back
and take a listen to that,because both Mark and Jenny
really got to share a lot ofgreat information on the
overview of what is employeeownership and why is it
something that's being talkedabout more and more right now.
We also got into why businessowners who are hitting the
(00:45):
retirement age may want toconsider employee ownership as
the best model to leave a legacyin their business.
So we're going to pick back uphere.
Jenny and Mark, thanks so muchfor your time today.
Welcome back to the show.
Mark (00:58):
Thank you.
Joel (01:00):
Yeah.
So we ended by kind of talkingabout there's all of these
business owners who are hittingthat retirement age.
They've spent decades buildinga big business, building a
business.
Maybe it's big, maybe it'ssmall, but they built a business
, they want to leave a legacywith that business and they're
considering alternative optionsrather than just letting some
company bigger than them buythem or maybe passing it on to
(01:23):
maybe maybe want the business,maybe don't want the business,
Right?
And so I guess where I'd liketo start is by actually talking
about how does this actuallywork?
You know, if, if someone wantedto hypothetically have a
business that wasn't just ownedby one person but that had some
sort of worker ownershipinvolved or some kind of equity
(01:44):
stake for their people, what arethe models that have already
been used and who's used them?
Mark (01:49):
I'm happy to jump in there .
Yeah, so before we get toemployee ownership trusts and
perpetual purpose trusts, whichwe're particularly excited about
, I think it's worth just aquick overview of some of the
options that are out there.
Your listeners are probablymost familiar with employee
stock options, which are thesort of things that you might
get if you work at a startup.
And then, in addition to those,there's something called the
(02:11):
employee stock ownership plan,or ESOP, and that's basically a
retirement account that youremployer contributes to and then
holds interest on your behalf,and there are about 6,000 of
those across the country,somewhere between 6,000 and
7,000 of those.
Here in Texas.
One of the big grocery stores,brookshire's, has one of these
models, and Bob's General Millhas an ESOP program.
Joel (02:37):
There's a pizza company in Louisiana called Johnny's it
has this little thing whereeverybody gets a slice of the
pie, flour and greens.
That's right, bob's.
Mark (02:44):
Flour Mill.
Yeah, yeah, yeah, yeah, bob'sRed Bell.
That's right, that's it, that'sthe one, sorry.
And then the less common butstill powerful one is a worker
cooperative, where a company isowned by its members, which are
its employees.
So there's a brewery in Austin,for example, that's called the
(03:06):
Black Star Co-op your listenershave probably heard of, and the
idea is that every member orworker there gets one option,
one vote, and there's somewherebetween 750 and 1,000 of those
across the country, and sothat's the lay of the land.
And part of what Jenny and I areinterested in is a form of
ownership that's called purposetrust ownership, and the idea is
that you would put a companyinside of a trust which is then
(03:28):
tasked with making sure that acompany runs according to its
mission.
So if you take the case of atech company here in Texas
called ACP International, theymake road signs, and if you ever
see one of those little, thesort of things sticking out of
the ground that tell you thatthere's a Wi-Fi cable underneath
, they generate those.
It's a manufacturing company,and when the owner, joe Nussbaum
(03:48):
, began to think aboutretirement, he chose a trust,
and so now ACP International iscontrolled by trust, and that
trust says from now on, acpInternational has to be run to
the benefit of its employees andthen, over time, the ownership,
the financial ownership of thecompany will transition from Joe
(04:11):
to the trust and ACP willcontinue to be able to operate
on its own, owned by that trust,to the benefit of the employees
.
Patagonia is probably the mostfamous example of a company that
is using this Instead ofbenefiting its employees.
The Patagonia Purpose Trust nowhas as its mission, as its
purpose, to benefit the planetand it controls the company
Patagonia, ensuring that it isoperating to that mission.
(04:31):
So there's a couple of examplesone big, one small, one that's
focused on the planet, onethat's focused on its employees.
Joel (04:37):
So in either way, essentially a trust is created
that then owns the company andthe trust has the ultimate
control to say what the purposeis, that then the company can
try to fulfill that purpose.
So it's kind of like areorganizing of priorities, if I
kind of understand it, whereprofit still matters because
obviously you can't do businessif you don't stay in business,
(05:00):
business but that maximizingprofit may not be the number one
priority of the trust.
Rather, either the benefit ofthe workers is the purpose of
the trust, or the planet orwhatever.
Whoever designs the trust canset as the primary purpose that
the business has to serve thatpurpose.
Am I understanding that right?
Mark (05:22):
Yeah, go ahead If I give one more example that might line
this up.
And there's a company in Oregoncalled Organically Grown
Company and when they set uptheir purpose trust, they
decided that they wanted to usethe trust to ensure that they
(05:42):
could to the board.
That committee is tasked withbenefiting their employees,
making sure that their growersof food benefit from the work
that they're doing, theirdistributors, then also their
investors, and so the job of thetrust is to make sure that, in
addition to making money, thateach of those stakeholders
benefits from the way that thecompany is run.
Joel (06:02):
Stakeholders the benefits from the way that the company
is run.
Yeah, yeah, I also want tounderstand too, because it
sounds like this is the way thatit's been done before, but you
mentioned that it's somethingthat has only really been, for
the most part, accessible topretty large companies, like, if
you're Patagonia, you may beable to do this, but it may be
harder for the local fleecemaker in your town, if you have
one, to do that.
(06:23):
So tell us a little bit aboutthe changes in innovations that
are happening in these trusts Iknow you guys are specifically
excited about.
You said it's a, it's a purposetrust.
Is that the name of it?
Mark (06:33):
That's right.
So, legally speaking, these arenon-charitable purpose trusts
with, without an ascertainablebeneficiary.
Now, that's a mouthful, but thechange is that in some states
Now that's a mouthful, but thechange is that in some states,
you are now allowed to have atrust that owns a company in
perpetuity that doesn'tdesignate a specific beneficiary
, like, say, your kid you had atrust fund or your pet.
(06:55):
It can have a class of peoplelike your employees or your
other stakeholders as thebeneficiary of the trust, and
that shift that has taken placeover the course of the last 20
years or so is the thing thathas started to enable this, and
so it is.
It's.
(07:16):
Whereas ESOPs tend to work bestfor larger companies because of
the cost of setting them up andmaintaining them, an employee
ownership trust that might cost$30,000 to $60,000 to set up is
much more available to a muchwider swath of companies in the
United States.
Joel (07:28):
I guess what would be the biggest.
Yeah, go ahead, Jenny.
Jenny (07:31):
Oh, that's part of the reason we're excited about these
structures is we think theyhave a real potential to fill
this need, and you know we weretalking in the earlier part
about the silver tsunami.
We have all these companiesthat could consider employee
ownership, but an ESOP structureor co-op structure just might
not be right for them forvarious reasons, and so could
these new trust structures be asolution that could really scale
(07:53):
and fill that niche.
Joel (07:54):
Are there certain kinds of businesses that like, let's
say, we've got three differentbusinesses that all have
interest in being some kind ofemployee ownership, you know,
moving forward.
But which kind of businesseswould be good for an ESOP?
Which kind of businesses wouldbe good for an employee trust?
And then which kind ofbusinesses would be good for an
ESOP?
Which kind of businesses wouldbe good for an employee trust,
and then which kind ofbusinesses?
(08:15):
I'm curious, because youmentioned the breweries.
We have a brewery here inAsheville that's also a worker
owned co-op.
So I'm kind of wondering, likeare breweries really good for
this?
Or like what?
Which kind of companies does itmake most sense to be either an
ESOP, a employee trust, oractually be a worker-owned co-op
?
Mark (08:31):
So I think that you're stepping right into one of the
questions that this industry isasking right now, and the way
that I think about it is that itdepends on the characteristics
of the business and then on whatit is that the owner is
optimizing for.
And so, with a workercooperative, if you're
interested in that, what itmeans is that you're committing
(08:51):
yourself to that one person, onevote decision making structure,
so it's maximally democraticand that might work really well
for some companies.
So if you are, let's say, agroup of lawyers, you might be
interested in a co-op structure.
There's a partnership structure, but maybe you could use a
co-op structure too.
And then if you're trying toset up an ESOP, part of what you
(09:14):
might be prioritizing there issetting up retirement assets for
your employees and maintainingthe flexibility to then sell to
another company in a way thatwould maximize their retirement
accounts, and so ESOPs are oftenreally about building assets.
For individuals they tend to bea little bit bigger because of
the cost of setting them up, butreally the motivator there is
(09:37):
building assets and thenemployee ownership trusts or
perpetual purpose trusts.
People tend to be drawn towardsthem because of their
flexibility, and so there isn'ta sort of size requirement there
or an optimal size.
A lot of the companies that wesee are going to be between 20
and 100 employees or somethinglike that.
I think that's just because ofthe companies that have
initially been drawn to it, butthere are much larger ones, like
(09:59):
Patagonia and maybe even HobbyLobby I haven't been able to
confirm.
And then the other way that theflexibility attracts owners is
that you can choose how muchyou're going to change your
management structure separatelyfrom the conversion to the trust
.
And so there's some employeeownership trusts that we've
encountered, like BicycleTechnologies International in
(10:20):
New Mexico, and at least out ofthe gate, as they converted to
an employee ownership trust, theway that the company is managed
hasn't changed very much.
And then as the owner thentransitions out, then more and
more of the management will betransitioned to those employees,
and so the flexibility of thetrust structure seems to be the
thing that owners really getattracted to.
Jenny (10:42):
The one other thing I would add to this and we talked
a little bit about this at thebeginning is one of the reasons
that business owners mightchoose a perpetual purpose trust
is that ability to lock in thepurpose which a co-op and an
ESOP don't really have thatmechanism.
So those are really goodoptions for companies that are
primarily interested in theemployee piece, but if they have
(11:04):
another aspect to theirbusiness that they want to
preserve into perpetuity thepurpose trust allows them to do
that Right.
Joel (11:11):
Maybe they care about a particular part of their town or
a neighborhood in their townthat's been disenfranchised.
Maybe they care a lot about theenvironment, like in the case
of Patagonia.
Jenny (11:20):
Yeah, or the suppliers that they're sourcing from, or
yeah, exactly.
Joel (11:24):
Right, Right.
No, that makes a ton of sense.
You mentioned the earlier.
You mentioned how this you feellike this model of the employee
trust is really scalable, andyou've also mentioned the
flexibility.
Is the scalability due to thatflexibility or is there more to
it than that?
Jenny (11:41):
I think it's a good question.
I mean, the flexibility rightnow is probably both a bit of a
blessing and a curse, becausethese tools are so new and we
don't have a lot ofstandardization and templates,
and so a lot of the work thatwe've been doing on the field
building piece is figuring out.
You know what do the variousactors that are working to help
businesses convert, you know,what are they learning from best
(12:02):
practices?
What are we looking at,research wise, to maybe start to
standardize to a certain degree, and that gets into policy
considerations as well.
Part of the scalability andMark mentioned this is it's just
a more affordable optionBecause ESOPs are ERISA
regulated.
There's a lot of regulation anda lot that goes around
(12:23):
complying with that regulation,and so for companies some
smaller companies just might notmake sense.
And again because this is anewer space, there's only 50 or
so companies in the countryright now that have done this,
but they're getting faster to doas well, so it may be a more
expedient option for owners whowould like to convert sooner
(12:46):
rather than later.
So those are some of thereasons we think it could scale,
but early days still.
Joel (12:51):
Well, and I'm also curious to just thinking out
loud here a little bit aboutcould a perpetual purpose trust
be put together not just by acompany, but could some other
type of community organization,whether it's a church or a
neighborhood or a social co-opor anything like that?
Do you see potential for thisto become a tool for impact
(13:14):
investing that people can docollectively?
Jenny (13:17):
Yeah, absolutely, and there's some great examples
around the country of groupsthat are doing neighborhood
trusts, which, again, are basedon the same kind of legal
structure but focused onproperty or community at a
neighborhood level, versus asingle company.
Joel (13:31):
Yeah, that'd be so cool if, if your neighborhood had a,
had a trust that you could, youguys got to get together and
vote and say, hey, we want tobuild a playground here, we want
to, you know, do these otherthings with.
I think that's.
That's a really innovativething.
Mark, I see you uh, you gettingexcited.
You have something to say there.
Mark (13:56):
Sure, yeah Well, I'm just always excited about this stuff,
I think.
But one example that I thinkyour listeners could look at is
the Kensington Corridor Trust inPhiladelphia.
It's one of the groups that isexperimenting with how it is
that we might use this structurein order not just to house
corporate assets, but to housereal estate assets and set them
to a particular purpose.
Joel (14:06):
Yeah, I'm also curious from you, Mark, too, because I
know that when it comes todemocratic workplaces, you kind
of have a different, you kind ofhave a deeper background in
this stuff, because you actuallyyou actually kind of teach it
at at the university.
Which school is it in Texasthere?
I apologize, I forgot already.
Mark (14:22):
You're good.
I'm at the university of Texasat Arlington.
Jenny (14:25):
You just lost all your Texas listeners, but that's okay
, the university of Texas atArlington.
Joel (14:32):
It's great Texas Tech.
I know those are.
I know about Rice that's inTexas.
I got a friend yes that's right.
Mark (14:38):
That's right.
That's right.
There are a lot of gooduniversities down here.
Come and see us.
So I teach a course ondemocratic theory, and one of
the things that I do with mystudents is is I introduced them
to the idea that the principlesthat we might want to follow in
the way that we governourselves might also be
principles that we want tofollow in the workplace.
And so when we think about theability to speak your mind, the
(14:59):
ability to know what ishappening in the decision-making
rooms that might affect you,that all of these things are
things that in the governmentalspace we've kind of worked out,
but in the corporate spacethey're still pretty fringe and
still pretty niche.
And so one of the things that Ihave my students do is that I
have them pick an organizationthat they're a part of, or that
they would like to be a part of,and then go see how democratic
(15:19):
it is or how hierarchical it is.
So is the company that theywork for more like an autocracy
or more like a democracy?
And you can see students, asthey begin to think about this,
they start to get nervous, andas they go out and have
conversations with, say, theplaces that they work.
They realize that when they askthese questions, that they're
now stumbling into theseunspoken questions of power, and
(15:41):
so, for me, as a politicalscientist, that's part of what
I'm interested in is how it isthat power is distributed, and
despite the fact that ourPolitical philosophers have
helped us figure out how to moveaway from kingdoms many
hundreds of years ago and buildanother option that works, we're
still at the very beginning ofcompanies beginning to look at
(16:02):
themselves and say does thishave to be a kingdom, does this
have to be an authoritarianstructure or is there another
way?
And so there are some groupsthat have started to figure this
out, groups that have startedto figure this out.
One of the most obvious andaccessible is something called
the great game of management,where companies begin to open up
their books, their financialstatements, to employees, and
(16:22):
that's a risky thing to dobecause it exposes where power
lies, but there areorganizations that help
companies walk through how it isthat we can take that step
towards what I, as a politicalscientist, might call a more
democratic form of management.
Joel (16:34):
That question that you have about power and ownership.
It seems like those two thingsare pretty uniquely connected
and I imagine that's why thosestudents are making that
question.
I've never done that type ofexercise.
I actually thought through hey,is the place that I'm, is this
group that I'm in, do theyoperate more like a democracy,
or is it more like a theocracyor more like a dictatorship?
(16:55):
Who knows Right?
Sure, and in almost anyorganization.
Mark (16:59):
I would say, in almost any organization you could say, are
there places where we couldshare information more widely
and effectively?
Are there places where thereare big decisions being made
that affect a lot of peoplewhere we could figure out ways
to incorporate more of thepeople affected by that decision
into the making of thatdecision?
And so there's sort of thosebaby steps that you can take
towards a less hierarchical,more democratic workplace.
Joel (17:22):
Right, cause there are other ways to move in this
direction that doesn't eveninvolve such a huge like a huge
shift to a different ownershipmodel.
Like some people, some, somecompanies, just make sure that
their employees haverepresentation on the board.
Some companies, they make sureto include all the different
stakeholders, or as many as theycan or are expanding to, and so
(17:47):
there's ways to get in thisdirection.
I like the way you described itbecause it puts it in a
perspective of a spectrum thatthere are.
A worker-owned co-op may be wayoff to one side of, like, total
democratic ownership, butthere's other ways that you can
actually start to move in thatdirection if you're an
entrepreneur or a business ownerlike that.
(18:07):
I've got a couple minutes leftand I just kind of want to end
with something, jenny, you weretalking about at the beginning
or in the first half, which isabout the kind of bipartisan
support of this.
You know, in some ways thisdoes feel kind of radical.
It does feel like a completelyradical and different way of
doing business, but in otherways it seems like it's just a
natural kind of progression of,as you said, moving from
(18:27):
kingdoms to, you know, businessowners and, you know, kind of
having the ownership lie thereand then moving to the actual
workers and the people.
But I'm curious yourperspective on why you think it
resonates across the board in aworld where most things are very
divided that have to do withbusiness or the economy.
Jenny (18:45):
Yeah, it's kind of remarkable.
It's one of the few areas wherethere is some consensus, though
maybe for different reasons,right.
So you know, on the progressiveside, I think it's more again
about worker rights, it's aboutwealth inequality, it's about
shifting of assets.
Those are the types of issuesthat people care about that this
(19:06):
resonates with.
On the more conservative side,it's about securing Main Street.
It's about keeping businesseslocal, particularly in rural
communities.
That can be really effective ifyou know, one of their Main
Street companies goes out ofbusiness or is purchased by
private equity and then sold off.
Job security, job creation,that kind of thing.
So it just really touches on alot of issues that are
(19:29):
cross-cutting, and so it's beeninteresting to see, even in this
current administration, whereCongress is coming together and
passing legislation and beingproactive around this in a way
that we're not seeing acrossmost other issues.
Joel (19:43):
Yeah, I love to see it, Mark.
Any other final thoughts onthat before we head out?
Mark (19:46):
No, I think Ginny covered it really well.
Joel (19:48):
Very grateful to be here, joe, for the work that you all
are doing.
Can you once again say the nameof the blog that you guys have,
where you're publishingeverything here and where people
can find you to learn moreabout how they can you know how
they can make their workplacemore democratic?
Mark (20:06):
Happy to.
So we've got a weeklynewsletter that we send out from
the website EOWDorg, whichstands for employee ownership
and workplace democracy.
So that's EOWDorg, which standsfor Employee Ownership and
Workplace Democracy.
So that's EOWDorg, and ourweekly newsletter takes fewer
than six minutes to read everyweek.
Joel (20:20):
Awesome.
I'm going to subscribe rightnow and we're going to put that
website in the show notes foreverybody so they can get there.
Make sure to subscribe on allthe different platforms that,
wherever you get your podcastwhether it's YouTube, itunes,
spotify, iheartradio, stitcher,buzzsprout and make sure to
subscribe.
Leave us a like and a commentand, until next time, remember
(20:42):
we are each other.
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