This link takes you to a 10 minute PBS film about the likely rebirth of a shipyard, through an employee owned start-up, together with a great up-to-date commentary by Chris Mackin, who appears in the film in a flashback to 1987. It makes the case well that properly democratic structures and processes are essential if employee-owned companies are to work well. The fact that the majority of ESOPs in the US do not give the employee-owners the right to vote their shares, while it may have encouraged conservative owners to take the ESOP route, ultimately disappoints the employee-owners and misses the performance gains that democratic ESOPs characteristically experience.
I’ve worked with many employee-owned companies, and have always found that employee-owners, when they are treated and trusted as the partners that they actually are, with full rights to information, influence and a share of the profits, take a highly responsible view of the big strategic questions. In particular, they normally wish to ensure first that enough is invested to keep the company strong, giving it a far higher priority than taking money out in distributions.
By contrast, private equity so-called ‘investors’ characteristically set out to extract as much cash as possible as quickly as possible. So the responsible investors are the employee-owners who set out to build strong businesses, not the private equity people who try to cash out.
For the film and article by Chris Mackin, click here.