By Brando Sencion Program Coordinator of Santa Cruz Community Ventures
“This land is your land, this land is my land.” I sing these words in my head as I think about employee owned business models. Employee ownership is a model which workers own a majority of their company’s stock and are able to say, “I am an owner of this company.” Benefits of this business model include improved company performance and employee wellbeing. Furthermore, a culture of democracy is created among employees to participate in company decisions.
Employee-owned companies help keep businesses locally owned and build community wealth. The economic impact for families participating in one of these companies is higher wages, asset building, and job security. Employee ownership is beneficial to all, but can particularly have positive effect on women financially. The Los Angeles Times reported, Latina women make 43 cents to the dollar compared to white men. Their ability to earn higher living wages as employee owners is higher due to increased company performance and fair distribution of wages. Higher pay means families have the ability to save, invest, and obtain financial security.
Apart from individual benefits, employee owned businesses are beneficial because they allow communities to build their own local economies within larger economies. According to Project Equity, small businesses provide 48% of jobs nationally and locally circulate three times more money back into the local economy compared to large firms and chain businesses. Keeping money locally is needed in communities because it allows small businesses to flourish, which in return creates jobs and personalized services.
As an employee this is the coolest idea you’ve heard in a long time. However, as an owner it may be difficult to like this business model. In my opinion, running an employee-owned company as an owner is difficult because you must give up a portion of your profits to share the wealth with employees. Maybe it is not the right route for you now, but for small business owners ready to retire, this may be a solution. Due to large amounts of baby boomer business owners ready to retire within the next few years, many local businesses can potentially close. This is because over 85% of business owners do not have a succession plan in place for their business. The reason may vary on why they do not have a succession plan but, converting towards employee-ownership can be the solution. This would allow the employees to become owners of the business and continue to serve the community, while at the same time keep their jobs and become owners.