Since 2008, many funders have pivoted to economic questions: how to create good jobs, how to build wealth in vulnerable communities, and how—ultimately—to reduce today's historic levels of inequality. Most of those efforts operate within today's current reality, which is that corporations and financial entities own the lion's share of the nation's capital. Whether they're employees or contractors, workers have little control over how resources are allocated—and the owners of capital see few incentives to look after their interests.
One way to change this basic relationship between labor and capital is by promoting worker ownership. Whether this takes the form of an employee stock ownership plan (ESOP) or the more radical worker-run co-op business, giving employees a stake in their company is a promising way to help ordinary people build more wealth and feel more economically empowered.
But can this approach make for competitive businesses? And how can funders contribute?
A report released this spring by the Surdna Foundation explores these questions. For starters, it suggests that ESOP firms enjoy significant advantages over their traditionally structured peers, including low turnover, higher survival rates during economic downturns, and equal (if not better) overall productivity.
Meanwhile, worker-managed and worker-owned co-ops also do well despite their low national profile. Surdna’s report suggests that the formation rate of worker co-ops has steadily grown since 2007, especially in disadvantaged communities and among women workers.
If these trends hold, and if fledgling co-ops and worker ownership plans get the support they need, this could be a viable way to counter structural inequalities in the workplace—not to mention in the bank. And while worker ownership sounds like a leftie idea (see: Karl Marx), it can also appeal to conservatives (see: “ownership society”).
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So far, only a small cadre of funders are directly supporting worker ownership efforts. Surdna is a key player in the space. Its Strong Local Economies program supports alternative business models, emphasizing the "triple bottom line" common in discussions about corporate social responsibility (that is, profit, social equity, and environmental sustainability). Recent grants have backed the Democracy at Work Institute, a San Francisco federation of worker-owned cooperative businesses, and the Democracy Collaborative, which does similar work through its community wealth program.
Surdna is keen to draw more players into this area.
Its report emphasizes how funders can undertake innovative grantmaking that supports "organizations that help to incubate worker-owned firms, including law firms, university-based clinics, consultancies, government agencies, social service organization, and member associations."
One notable success via the incubation model occurred in 2008, when the Cleveland Foundation partnered with local funders to provide capital for Evergreen Cooperatives, a network of worker-owned businesses. Nonprofits in this area include the National Center for Employee Ownership and the Foundation for Enterprise Development, both of which have promoted ESOPs. The U.S. Federation of Worker Cooperatives (of which the Democracy at Work Institute is an offshoot) is the national membership organization for co-ops. We’ve also covered how the Chorus Foundation has supported worker-led businesses in the past.
While the jury’s still out on whether worker ownership can compete with traditional corporate hierarchies, this is an interesting field to watch. With a good support network in place, who knows how many workers might be willing to try their hand at cooperative management?