On April 20, San Diego Regional EDC hosted the second in our Right Recovery Town Hall series underwritten by San Diego Gas & Electric. With a focus on employee ownership as a means of business resilience, EDC partnered with San Diego Workforce Partnership and invited experts and employee-owned companies to offer their perspectives.
Why employee ownership?
As San Diego recovers from the COVID-19 pandemic and subsequent economic downturn, EDC is hosting a series of events that highlight employer-driven, market-based strategies for creating a more resilient economy, deeply rooted in the region’s inclusive growth agenda.
Employee ownership is a business model that takes many forms and can support San Diego firms in getting this recovery right. The transition to employee ownership offers an effective and meaningful way for businesses to retain a dedicated workforce, take advantage of a significant tax benefit, and ensure wealth-building that will lead to more thriving households across the region.
Together with partners, we aim to raise awareness about this option for a wide range of businesses (from restaurants to major corporations, and everything in between). This is especially important as baby boomers own about half of all privately-held businesses in the United States; and as this population reaches retirement age, we will see a massive ownership changeover of locally-held businesses, whether through sale, M&A, IPO, family transition or worse, closure.
Employee ownership benefits all who are involved:
- Owners receive a competitive sale price and can exit the company knowing that their legacy and values will live on through their employees.
- Workers receive better compensation and benefits, and feel the success of the company directly contributes to their own financial success, which oftentimes results in more engaged and harder working employees.
- The business sees higher productivity, largely due to the new sense of responsibility held by the employees.
- The community sees wealth building, reinvestment, and a sense of dependability as businesses remain anchored to the area.
What we learned from a brewer, a staffing agency, and a music staple
At the virtual event on April 20, audience members heard from Mitch Miller, a Senior Consultant at The Beyster Institute who shared the Beyster story along with a data-driven case for employee ownership. A 2019 Rutgers study showed that Americans with part ownership in their company approaching retirement age had ten times more wealth than those who did not have part ownership. Additionally, a National Center for Employee Ownership 2017 study showed that companies with an Employee Stock Ownership Plan (ESOP) were associated with 92 percent higher median household net wealth.
Sandie Taylor, director of people operations at Modern Times Beer, spoke on the employee perspective—describing increased employee engagement and a ‘we’re in this together’ culture as the company strategized ways to keep the lights on during the pandemic. An ESOP since July 2017, Modern Times’ management feels like they can speak more openly with their teams. Sandie shared, “this means a kind of trust and transparency” within our staff. Ultimately, the innovation and commitment of team members helped the company remain above water during the worst of the 2020 economic recession.
Seth Stein, CEO of Eastridge Workforce Solutions, explained how his company has developed digital tools to help employees watch their investment grow, so they can better understand and conceptualize the benefits of employee ownership in real-time. He shared that Eastridge’s voluntary turnover rate is down 57 percent, while involuntary turnover is down 40 percent—a striking decline he attributes to the employee ownership model. Seth also shared that the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was up seven percent in 2020, even amid an economic recession. “[Employee ownership] has been a game changer for our company, and I am really excited to see what happens next,” he said.
Our third employee-owned company is a household name that made history with this business model, becoming the first (reported) multi-national company to offer ownership to ALL employees, domestic and international. Taylor Guitars made waves when it transitioned to an ESOP in January 2021 after much deliberation to ensure that the move would maintain the familial culture that founders Bob Taylor and Kurt Listug had spent decades instilling. CFO Barbara Wight was honest with the audience about the legal and financial legwork that went into making this happen, largely accomplished due to the help of Chartwell Financial Advisors, who she highly recommends to large companies hoping to transition to an ESOP. She also shared that the significant tax benefits that come with employee ownership helped Taylor Guitars make the transition as lucrative as possible.
Finally, our audience heard from Project Equity and San Diego Workforce Partnership on resources available to San Diego companies. The two organizations are currently working together with Mission Driven Finance, Alliance Healthcare Foundation, and BFed to offer flexible capital for businesses transitioning to employee ownership. San Diego Workforce Partnership will be hosting a workshop on June 17 at 10 a.m. to help businesses identify specific needs and access these funds. You can register for that event here. Other resources for transitioning to employee ownership are listed below.
Resources and contacts for your business
Chartwell Financial Advisors
Greg Fresh, Managing Director, Head of Corporate Finance
Email: greg.fresh@chartwellfa.com
Phone: 612.230.3125
Project Equity
Alison Lingane, Co-founder
Email: alison@project-equity.org
Evan Edwards, Director of Strategic Partnerships and Business Engagement
Email: evan@project-equity.org
San Diego Workforce Partnership
Email: business@workforce.org
Phone: 619.28.2900 (press 4)
You can watch the full event here:
