American Values and the Competitive Advantage of Employee Ownership

we have some really great speakers um and and a really good closeout conversation so what we've come is that been um the benefits that workers and firms receive over the last few days and we're really going to kind of think about so what does that mean for us big picture what does that mean for us as a society who we say we are what we value what we want to be what does it mean for our economy as a whole um in a lot of conversations today we kind of get stuck in this um sort of false trade-offs right we get stuck in what's good for workers and communities is maybe not good for business or not you know going to maximize GDP and profits and we kind of make this false trade-off and and and it can be hard to break out of that um and you know many ways our divided times that we live in kind of mirror this we live in very divided times we're on Capitol Hill yesterday we kind of know about the divisions between Republicans and Democrats right many times those you know we sort of um have uh rural versus Urban conversations uh Rich versus Poor Labor versus management old versus Young there's lots of ways we have divisions in our society but the thing is is in the midst of all this division we really do have a common Destiny and Economic Opportunity economic employee ownership is a path to a positive shared economic Destiny which we all have a stake we all have a responsibility to kind of um work towards economic success but we all get to share in the fruits of that economic effort um employment ownership offers a chance to sort of get past some of the false trade-offs and divisions and to get closer to sort of the ideals of an Amer of the American dream that sort of are in our national discourse or ideology but you know which kind of so many people feel uh is not really their American reality um so that we feel like is really kind of the promise of employee ownership in many ways um and so we're gonna we're gonna talk about that a little bit in this in this panel but as start with a brief uh talk from two Rutgers fellows so first we'll have Eric Olson Eric is an associate professor of economics and chair of the Department of Economics at the University of Missouri Kansas City and Senior fellow at The Institute for employee ownership and profit sharing at the Rutgers University he has published widely and made contributions in several fields of Economics currently he's engaged in research on the effect of broad-based or cooperative employee ownership and participatory Management on employee Behavior firm structure performance and survival other active areas of research include the creation and growth dynamics of employee owned and operated firms after Eric I'm just going to do you both at once here after Eric we're going to hear from Paige we met Paige is a professor of Finance at the Keenan flag Flagler business school at the University of North Carolina she's also associate dean of the PHD program and the research director of the Kenan Institute her research agenda is concentrated at the juncture of finance and labor economics she's interested in how decisions studied in finance impact employee stakeholders specifically how those effects are reflected in firm performance and hence Corporate Finance decisions so thank you both for being with us and Eric let me welcome you to the podium all right good afternoon everybody we have the uh advantage of going excuse me of going last so uh we'll try to make the best out of that um so Matt asked me to talk a little bit about the topic of this panel which was is American values the competitive advantage of employee ownership and rather than talking about my individual research I want to talk about some themes that have sort of motivated my research more generally kind of a broader overview and one of the things that I want to talk about is the conventional wisdom in economics which is in fact the opposite of what it is that we're talking about today there's a conventional wisdom in economics which really again has motivated a lot of my own research around the idea that that employee ownership must be a had a competitive disadvantage right that we look out into the world and we see a world comprised of conventionally owned businesses their own in a particular way that is not employee ownership and I want you to think about it for a minute why it is that that would be the case which is why is it that most of the world we see of the economy or at least a large part of it GDP producing economy is conventionally owned businesses and I think if we went around this room we have we'd probably come up with a number of different very good explanations for why that is the case for why businesses are owned you know in a the way that we're familiar with economists know only one though condos have only one explanation is that they must be at a competitive disadvantage and that's why we see the world the way that exists the way that it is and I think that that is conceptually and empirically wrong and I and part of my agenda has been because we know that the research that I was familiar with before we started this larger group that that I've now been involved with for some time was that my conception was that that answer was wrong and now it's become reinforced over and over again we have we have extensive Empirical research that shows that convention that employee-owned businesses have both competitive advantages and survival advantages productivity advantages and survival advantages so the conventional wisdom in economics is manifestly wrong and so from that um that sort of motivated a lot of the work that I've wanted to do which is the to understand um if we know that employee ownership brings tremendous advantages for workers and their families and their communities income and wealth creation employment stability better work experience economic Mobility if all of those things are possible why is it that we remain stuck in this sort of equilibrium where we we're not realizing those things in fact we're realizing the opposite and I think the answer is is that employee ownership rarely spontaneously emerges in an economy that depends on self-interested entrepreneurial activity a self-interested entrepreneur is rarely as interesting as Eric was on this panel before was the the exception that proves the rule of entrepreneurial activity not self-interested entrepreneurial activity we rarely see that it's unusual because of that we rarely see employee-owned businesses created in uh in an economy that relies on the self-interested entrepreneurial activity which for economists is really the basis of how an economy works that self-interested activity would lead to these outcomes what I want to argue is that it doesn't point to the employee ownership is somehow intrinsically flawed right that there's some intrinsic problem with it because self-interested behavior is not going to lead to this becoming predominant what it points to is in fact that we need the institutions and policies that are going to bring it about that that is the way that this is going to happen and this is not unusual right if you look at American history the reason we have police and fire Services is not because of self-interested entrepreneurial Behavior the reason we have public education the reason we we have National Defense this is not self-interested entrepreneurial behavior that created these things these are the conscious creations of policies and institutions and what we're talking about here for the last two days is how do we create those institutions and those policies to move us forward in a way to achieve those things that we need to achieve in the economy to try to deal with these issues of income and wealth inequality of economic stagnation of of people who are stuck in place and communities that are stuck in place because we're relying on something that isn't going to solve the problem and we're just building those things that we need in order to solve this problem and that's what I find really encouraging about this work right it's it's how we're going to get to an economy that is going to work more equitably and more efficiently for people even though my colleagues in the economic uh uh field of economics believe that that in fact this is not the way to achieve it but I I'm fully convinced and I think that anybody who's been working in this field long enough knows that that's the wrong answer um so with that and in fact I think um to get to the point of thinking about this is American values um I think that achieving more broad-based employee ownership is not just uh desirable but necessary in order to preserve our Democratic institutions I think that the income and wealth inequalities Inc inequalities of wealth income and power that we see in the U.S economy and that are driving a whole range of different arguments or range of different uh political problems that are that are I think really imperiling some of our of our Democratic institutions are rooted in these economic phenomena and I think that it's not necessarily just consistent with our American values but it's necessary to preserve our American Democratic institutions to try to find a way to address those economic issues and for me employee ownership is the obvious and most achievable way of trying to address those in a reasonable time frame in our in our lifetime so those are some of the bigger issues that have motivated me and I think that if you talk to an economist who says well you know employee ownership yeah it's a great idea and we maybe will have a few like a Cooperative corner store and so forth something like that because it's really some inefficient institutional uh organization they're wrong and you can tell them that they're wrong and that you've learned that from uh coming to this to the Aspen Institute to hear people talk about it because I've really dedicated a large part of my career to researching this and thanks to Joseph blazzie and Doug Cruz who have made that work possible for a number of us so that's where I'm going to finish [Applause] well I want to start by thanking the organizers for including me I think we need more of these types of conferences where we're bringing together practitioners and policy makers and activists and academics because I know we can learn so much from talking to each other and I certainly have over the last two days um so I'm the last academic speaker [Music] start even at the risk of being repetitive by saying that the state-of-the-art research tells us that with more employee ownership firms become more productive and so specifically looking at my work I'm looking at public firms and I observe them adopting employee ownership plans and doing so thoughtfully so in the this idea bringing up this ownership culture and what I find afterwards is the value of the firm expands and this benefits workers so workers see their wages increase above and beyond the value of the ESOP shares that they're being granted and I also observe that shareholder stock prices increase so shareholders are gaining as well and so why well I think this is mainly what we've been talking about over these last two days you know the way I think about it simply is that for the vast majority of firms their employers are their employees excuse me are the key drivers of their value and most firms do a horrible job of acknowledging this and employee ownership can change that by elevating your employees to employee owners you make them part of your firm you make them clearly as the central part of your firm and employees respond as employee owners they're going to work harder they're going to care more about the firm and that's how we see these productivity gains now having said that the academic in me has to give you two caveats and here are the two issues with this research is first all of our economics research is based on observational studies so what I do is I observe firms that have already voluntarily decided to adopt esops and so what that means is these are the firms that are anticipating the greatest benefits when they adopt them and so I do think we need to have some sort of grain of salt when we think about the estimates and the magnitudes that we're observing now if we were to try to apply them to a broader sample of firms it's not clear we'll see as big of a gains the second issue is that firms that adopt esops they tend to be more employee focused and so there's always a difficulty and sort of teasing out how much of this effect that you're observing is it driven by the ESOP itself or is it driven by the selection that these were just unique firms that were already employee focused but having said that we have a lot of creative ways to kind of get around these concerns and as the last speaker I promise I won't bore you with how I do that in my research um but I think what this says is that we also have a lot more questions that we would love to see answered and so current state of the art research says that employee ownership appears to be increasing firm productivity but I am excited to see where the research is going to be in the next few years as we continue to address some of these questions [Applause] thank you both that was terrific and also incredibly on time no the panel panel on stage unfortunately Marjorie Kelly who was originally on the program was unable to to join us today for personal reasons she shares her regrets and well wishes for to everyone at this event and we're looking forward to marjorie's new book wealth Supremacy how the extractive economy and the biased rules of capitalism Drive today's crises set to be released in September and hopefully we can welcome her for a book talk or something then so um she regrets she can't be here but we have terrific expertise in the audience and we have terrific expertise on our next panel so let me welcome them now to uh to the stage Margot Brandenburg senior program officer of mission Investments at the Ford Foundation Julius Klein editor of American Affairs and Jerome Brown senior vice president and director of quality at HDR thank you all right great so thank you all so much for for joining us today and I'm just going to jump on in uh so um Jerome we're gonna sort of start with our opening introductory uh questions so maybe Jerome you can start um tell us a little about yourself uh introduce HDR um and give give us maybe a quick history of how and why the company became employee owned and also um I love hearing you talk about how you have like an accidental uh history at HDR so maybe tell us what compelled you to stay yes uh so my name is Jerome Brown uh based here in in DC I oversee our Global quality and risk management strategies for our organization I've been in HDR for about 21 years as was mentioned it is purely accidental uh I never even thought I would be in this industry so HDR is architectural and engineering design consulting firm uh and I just say anything above the ground and anything below the ground that you can imagine we probably have a hand in designing designing it um we produce nothing except ideas so our people are purely creative in June in intellectuals um but it's it's civil heavy civil I'm mechanical by background I started my career in oil and gas uh in the R D field I work for one of the the large firms there and then I moved into Automotive Research and and development and I just happened to stumble across some folks that said hey just come talk to our people and I took took a risk I wanted to learn about project management and I thought I was going to stay one year in this firm because I had no interest really in being in the industry and now 21 years later uh you can see that that plan did not not work out um when I started HDR we had just bought ourselves back I think I was four years after the buyback so HDR started in 1917 it was principal owned um we were we we sold ourselves to to wig in the 80s that relationship really didn't work out it was Troublesome and we found out that we were going to be sold again so 40 people in the organization decided to pull their capital and repurchase the firm and there were a lot of stipulations and conditions so we had a buyback period where we had a funded loan guaranteed and as soon as that was paid off they immediately sent all the ownership out to the employees um so when I started I think as I was the employee 1856 I believe in the organization uh we're 12 500 plus strong now when I started we were only in 36 offices and now we're in 210 across the world um so it's been a great experience uh and I'm sure we'll get into more discussion about why yeah I'm sure we will thank you um Margo I'm going to come to you next um you've had a terrific career in Impact investing and in philanthropy and um so maybe you can talk a little bit about that career and how that intersects with today's conversation on employee ownership be glad to um and first thank you for including me I was saying not jokingly to someone that I know less about this topic than basically anyone in the room and have much more to learn than insights to share but it's a privilege um and I have spent the past like 20 some odd years working at this intersection of capital markets and social change and I would say no that's a pretty big like almost sexy kind of mature space but 20 plus years ago where everyone assumed that the only entrepreneurial activity was like singularly self-interested it was a weird and a kind of a lonely space so I started in microfinance and Community Development finance and then I came to the Rockefeller foundation in 2006. at a time when Rockefeller as a sort of a pioneering philanthropy was really grappling with the limitations of Grant making to effectuate change at scale and at the same time we knew there was an early track record and industries like microfinance and clean tech so a few of us um hosted a set of meetings in Bellagio in this term of impact investing was coined um and I had an opportunity to to help kind of incubate some of the organizations that that formed the ecosystem in that space and then I went on I left Rockefeller I started a company um with 100 worker ownership although not 100 work around um ran that for a number of years and then sold it in 2019 and came to the Ford foundation in 2020 just in time for covid and I can say more about Ford's relationship to this space but maybe I'll just add like an observation that's that's a personal one but both you know when I was at Rockefeller and then running the company that I started and even at Ford I would say like U.S workers generally are just sort of like woefully underrepresented in Impact investing and more broadly in the ESG world and worker ownership being you know a subset of that and it seems crazy to me like we're all workers like it's just it's it's a it's either a blind spot or an Omission or a narrow of commission depending I think on your perspective that is really kind of confounding and so it's exciting uh to see this drum beat of interest and momentum and Innovation and intermediation in the space and yeah just really glad for the chance to be here great thank you so much um Julius I'll come to you next maybe you can just introduce yourself the work that you do at American Affairs and and how you came to this issue why you think employee ownership is is interesting in this moment right thank you um so I'm the editor of American Affairs we're a quarterly Policy Journal we also do a lot of other work on Industrial strategy and actually mobilizing Capital behind strategic sectors um before I also accidentally um more or less started American Affairs uh I was an investment Analyst at a couple private Equity Funds uh and also hedge fund um and I guess the through line that corrects connects throughout my career is a peculiar perhaps interest in the difficulty of making investments in the United States by which I mean Capital Investments and the relatively low amount of of corporate capital investment relative to previous history relative to many other countries and the severe disincentives to that economic theory tells you that firms will invest whenever the returns exceed the cost of capital if you look at the aggregate statistics that clearly does not happen anyone who's been a practitioner in the field knows nobody thinks that way and yet economic theory Marches On oblivious um the foreign from the policy perspective I think you know this has been a major contributor to many of the most severe macroeconomic issues we face as a country from stagnant productivity weak performance also I think indirectly contributing to the inequality issues and more concretely behind some of the problems we've you know been focusing on in more recent years related to National Security and Supply chains and there's uh you know no no single no single solution to all of those problems but perhaps the single most effective thing to change some of those incentives would be an expansion of employee ownership and that's sort of behind my interest in the topic great thank you so much um really appreciate that um so Jerome I'm going to come to you next um many people who are unfamiliar with the idea of employee ownership but then visit an employee-owned company I think many of us have sort of had this experience of they go oh wow that's really different uh that there's like a different feel in an organization and and um and many note that there is indeed a different approach um and and sometimes a different value framework operating in these kinds of organizations so maybe you could talk a little bit about hdr's value and share an example of two of of how the company lives those values yeah so um I I definitely drink the Kool-Aid on employee ownership clearly for how long I've been here um but when I joined the firm I had no concept of what that even meant I I that was not a deciding factor for why I joined HDR but as I learned what the corporate values were and how leadership not just embraced those and live those but it was clearly demonstrated throughout all the the employees I began to get a greater understanding of actually what was going on so I think for those of you that come into an accompany and see the the environment the culture it's much different than when you actually are embedded in the organization so we have a couple core values where um number one is is we do things right period that that's it and it's solely self-interest to the organization we want to be a legacy firm we're a hundred plus year organization and from the Executive Suite down to the next level leadership there is a clear and overly communicated uh interest in passing down the ownership to the next generation of employees so it's continually communicated throughout the organization that our sole interest is to make sure that HDR continues to grow and that the the next generation of employees have an opportunity to participate in that ownership model well how do you do that you do that through the delivery of client service one failed you just made mentioned the focus of quality and the impact of quality I think when everyone understands that they own a stake in the organization personally their commitment to the quality of work the diligence of which they're willing to go above and beyond it in in the production of the work is is astronomical um some may say unhealthy but most people that own their own company work exceedingly hard to make sure that that firm's successful and one of the things we all look back on is we own this company hence why we are all working so hard to make sure the organization's successful and I think our clients experience that as well we're a little unique in that from from the other organizations I've worked in when we have issues of quality or we have issues in delivery even if we suspect that it'll never be known the bridge will still be built factors of safety are fine but there's something that we know we may have made an error on or may have not quite comfortable maybe Regulatory Compliance may be an issue because we missed a code most companies I've been in will will move along there's there's no risk of failure HDR will pull back and say immediately call the client and say hey this is the issue that we're facing this is what we've found probabilities are kind of small that there's going to be an issue here but here's what we're going to do to fix this even if it's at cost that will will put that project in Jeopardy of being profitable our sole interest is to make sure that number one the public is always safe number two our clients are always whole and number three that we're taken care of pretty much in that order and what we've found is that generates what we call a clients for Life model because they see that we've heard from them no other Consultants have that has these conversations with us you could have let this go and we return say no we can't this is our organization and we stand by the values of our firm when I started to get more of those conversations I'm like this is weird like what companies have these conversations like that's not what I knew in publicly traded organizations but it's not not discussed and I and I bought into it and I said this is actually really amazing and really unique and the more you see that the more you protect that and I think that that's one of the things that's unique in our organization when people leave they end up coming back in a couple years because then they see especially folks that start in HDR and they don't quite get what it means they'll go out and then within 18 to 24 months they're back and they're like we had no idea and then they stay we have a lot of very senior tenured folks in our organization and and it's really good um I I deeply appreciate what we've built yeah thank you so much I have to say that just resonates so much with um and the work we've done at the economic opportunities program we talk with all kinds of workers at all kinds of levels and I think you know people really do value feeling like not just that they get paid for their work but that their work is valued and something that is a contribution so you know that just really really resonates with with I feel like with what I've heard so thank you for that so Julius um so I have to say I just love dear uh contrasting economic theory with uh actual reality um but um it's not hard and uh you know we place a lot of value on shareholders and so I'm just wondering if you could say a little bit more about that you've written a lot about uh the potential consequences of you know in terms of lack of capital investment Etc so if you could just talk a little bit more about those challenges and and and particularly how you think employee ownership offers a solution that better aligns with American values from your perspective um well maybe I'll actually uh stick to Theory a little more on this one and and get even more pedantic but we call it shareholder Primacy but but that in a way is somewhat imprecise um it's not really the underlying beneficial owners who are primary in most cases it's really more asset manager Primacy if we're if we're being really precise and to go back into history you know when capitalism is first theorized in the 18th century or whatever it's theorized around the single entrepreneur the the owner and operator are united in a single person or maybe a single family and then of course you have the rise of the large corporation 19th and 20th centuries and we get all this discussion about the separation of ownership and control and there's an agency problem and really the you know what we call shareholder Primacy or financialized capitalism arises in response to that and is supposed to be a solution to that and some ways it is but effectively what you had is the empowerment of institutional investors institutional asset managers in terms of voting in terms of driving operations and you didn't really reunite um owners and operators per se you actually introduced a number of other uh conflicts you know a financial Market participant can make a lot of money on a firm through activities like asset stripping or over Levering or under investing in quality control and and so on and um they don't necessarily have the same long-term interest of the firm at heart maybe the problem is no longer you know the management is different from the shareholders but the the shareholders are now separated from the long-term concept of the firm in a certain way um and and in a way then employee ownership is is actually the the next step to to correct for for those problems and I think we already heard from Jerome concretely how that you know actually does play out in real life in these companies the other part of it I'll mention um the piece of the theory that you know is very simple yet very influential is the sort of hayekian concept of markets is communication systems or information systems um and and there's something to that but it also means that you know if markets actually work that way that means they also can create a sort of consensus or de facto collusion among firms even without sort of illegal activity collusion and what you see in many cases this is this is often where the disincentives for investment competitive investment come in because every firm in a space likely knows that all of the all of their other competitors are owned by private Equity too or face the same uh pressure from large asset managers in public markets and all of those investors want rational pricing that nobody wants big Investments uh if that you know they want BuyBacks over investment or whatever and if you know that all your competitors are subject to the same ownership structure and pressures it relieves you from having to worry about that but if you all of a sudden had more um employee owned firms who perhaps didn't have that same incentive and might be more likely to say make large competitive Investments or compete on volume over price for example all of a sudden all of the other competitors in that space may also have to respond so even if employee-owned firms never become you know a large percentage of the corporate Universe even even a smaller number could I think have a very outsized impact great thank you I think that was a really interesting way to think about one of these questions that comes up like what's the scale at which this will sort of make a difference in our economy or at large so thank you I appreciate that um Margo uh so the mission of the Ford Foundation is uh at least in part to reduce poverty and Justice and strength and Democratic Values so how do you view these connections between employee ownership and democracy and Civic engagement and the values or beliefs that American hold the Earth that's one of those questions where the answers in the question um but yes so the mission of the Ford Foundation is to address inequality in all its forms we identify as a social justice Foundation we like to say justice begins where inequality ends and when you have the ambition or maybe like the audacity to have um to really want to take on things like inequality and Injustice I think you almost necessarily need to look at systemic Solutions like we just don't have enough Band-Aids right to to approach it that way I think we have to get to root causes and you know broad-based worker ownership is has has been discussed for the past two days is I think a systemic solution to things like wealth inequality and are threats to democracy and the kind of you know anemic if not stagnant wage growth that American workers have seen over the past few decades and what's so great about this is that it's not only the Ford foundation in 2023 that sees this as a systemic solution it's something as I've learned from Joseph blasey that like Americans for a very long time um have resonated with that Americans to the right of Center um and also progressives I'm I have the Good Fortune to be on the board of something called the workers lab which is funded the driver's Co-op and Oberon I see Joseph here and a couple of others like those are all I think pretty Progressive uh individuals and organizations right and everyone from their different sort of World Views and perches gravitating to this solution is not something that we see across a lot of the other work that Ford is engaged in I think we're getting ever more polarized in this I think really the superpower in this idea in part is its appeal to a really broad number of people thank you our industrial policy a little bit like this I feel like is one of these ideas that was very discredited in economics until recently when they said oh well chips like we should really do something about this um so anyway I'm just wondering sort of how um that idea and that of industrial policy how you're thinking about it and how you see employee ownership fitting into and maybe supporting that yes um it I mean in one sense America has always been doing industrial policy it never really went away even if we didn't want to talk about it um but certainly as we've begun now self-consciously uh and intentionally engaging in it um you know we haven't really done that since 1940s probably you know in a certain sense uh and I think what we're finding uh and what you're seeing you know are our models for doing industrial policy are still kind of our premise on the 1940s corporate landscape where you know the government calls up the big big companies and big CEOs in the sector and says we want this and expects it to sort of happen and that could that can work with you know Industries like semiconductors where you just have a few names um you although even there it's it's more complicated than I think people thought maybe it works if you can call JP Morgan and ask them to buy a bank once in a while um but when you get into many other sectors um you find that you know they're not dominated by firms anymore uh big company CEOs don't necessarily call the tune Financial investors and financial markets call the tune and if you're going to have a successful industrial policy you are going to have to be able to get uh Financial you're going to have to attack the investor level and not just the firm level and I think we've seen in a number of instances where efforts that have only targeted kind of the firm level have not really worked and for example there have been efforts in in kind of the Pharma industry there's always we really like to build more Pharma here in the U.S because we have number you know 50 percent of the critical drugs list is in shortage everything from generic Pharma to chemo drugs and you could go to the Pharma companies and say we'll give you lots of money and we'll actually increase your profits and they'll say no thank you we don't want to touch that as soon as we become a quote-unquote commodity manufacturer our multiple crashes and even if our profits go up our value Falls at half CEOs gone and anyway that's just one example but these are the Dynamics at play and I think we'll you know there's lots of different things one has to do but to the extent that employee ownership can become a piece of that and you can go to employee-owned companies who have a different set of incentives that will allow for one a more efficient use of government Capital to get these things going but to a sort of larger participation in in the or you know an ability to really influence a larger number of critical sectors that any successful industrial policy will need to actually mobilize yeah great thank you um so Jerome I'm going to come to you and you know also to talk a little bit about competitive advantages of employee ownership as you see it but you kind of laid some out and I'm wondering if you also you know in terms of how um uh it works for working for the community can work for the company wondering if you want to say a little bit more but also um you know one of the things when we talked earlier really struck me with sort of like decisions of leadership around how they think and how they think about the the company how that influenced sort of the decision to employee ownership how you manage like attracting people even if like maybe at the c-suite level the compensation isn't as high as it might be in another firm so I'm wondering if you could talk about that as well it's a lot of stuff there's a lot of stuff and one question so yeah you get to like pick and choose so for the competitive Advantage piece and then I'll talk a little bit about what we do strategically with our internal Investments and how we see Capital out to the employees um I think we since we don't have quarterly earnings that we are necessarily watching we evaluate once a year where we say today today's the day you can focus on our stock price we say that on our earnings day and then as soon as the meeting's over all right now get back to work and stop worrying about our stock price and go serve our clients simple right it keeps things very simple and we we think if we take care of business throughout the year that next year when we have that special day uh everything will will pan out and what that allows us to do is be very strategic in three areas the clients that we choose to work for which is important the markets that we choose to enter and uh and penetrate especially new penetrations into markets we can be very strategic and have a very long-term goal uh we're not looking for that immediate return and the employees that we choose to bring into our organization which we we are very selective about I think unanimously if you ask anyone that works at HDR they'll complain about the hiring process and how long it takes to get someone into the organization and we're very purposeful about that because it takes we just finished four rounds of interviews by a panel of eight different people throughout our business to hire and someone into my team because what we want to do is make sure that there's a culture fit and understanding that the ownership model will be under careful guard and stewardship I think we do that with most of our hires which is pretty amazing being 12 000 employees that we've still been able to do that it slows things down but we can afford to be slow because we can be very purposeful um I think that is a huge advantage to us one of the things that allows us to do is is not be a higher fire firm when markets get soft or areas get soft we Excel it at work sharing we have that long-term strategic vision and we'll float certain areas saying it's soft now we understand that but these are very good employees so let's retool them so that they can work in other areas and when this picks up in 6 to 12 months they can come back and and be productive I don't necessarily think that our competitors have that luxury um to be that purposeful or intentional about where where we're seeding our investments when it comes to um rewardship which you alluded to it's another thing that is is I I appreciate so it's 100 employee-owned broad-based um you can you can you can purchase shares out of what's in your retirement so our senior Executives can purchase the same shares as our junior staff or administrators that happen to work at the front desk so we have several stories of mail room clerk that's been in the organization for 25 30 years and retires a multi-millionaire because he took his retirement funds and stuck it in the organization the organization performed very well he was employed probably 500. um and and he had a very comfortable retirement and that is an amazing story to tell and we have several dozens of those stories we tell um the other thing we do is now that we've become successful and have significant amounts of of cash Reserve is we can be purposeful in our in our Acquisitions um being more much more selective in in the skills that we acquire but we can also um we have discretionary contributions so if we have a really lucrative year uh we'll say rather than return to all the employees let's say I'm just going to throw out numbers these are not HDR numbers instead of 15 percent will maybe keep it at 12 and then we'll do a discretionary contribution to the employees but that discretionary contribution that goes to all employees so every employee gets additional shares to the organization their lock shares but it's capped so if you make so much you only get so much the intent is that that that share value goes to the junior staff and what we're trying to do is build wealth in that younger generation and investment in that younger generation so that they are incentivized to buy into the ownership model and and and Champion HDR to the future generation we occasionally have senior folks that say well I could have used that two percent and I could have cut a year off my retirement and our our executive leaders are very quick to point out that is not the values of our organization organization is building up a legacy firm that can be handed off to the Next Generation so a little less thinking about yourself and a little more thinking about the generations that follow might behoove you in your future career here in HDR and those types of conversations are fantastic and when you hear those you're like this is a great place to be um and I we talked about it a little bit I I don't I'm Coastal California and and now DC um but we're headquartered in Omaha since the very beginning and I think the midwestern values of just doing things right and the handshake is good as a contract really play through our organization um sometimes that that naivete is is and that wholesomeness is actually a good thing and when you talk about traditional American values what built this country to be what it is I see that play out in our organization and and it's it's fantastic so I hope that yeah that's what I was looking for thanks um great Marco uh in your role you make Mission related Investments um as well as grants and uh so when you think about employee ownership how do you see that maybe fitting in as an investment opportunity and and what might be attractive about that so I got distracted thinking about how I can apply for a job at HDR so I'm sorry I'm gonna Focus now on the question um yes so the part of Ford that I sit in um has three types of capital we have a grant budget and then we have two types of impact investment Capital we have kind of a catalytic Capital portfolio where we can take more risk than an average investor and then we have an allocation from our endowment that we call Mission related Investments which um we really need to earn a kind of a risk-adjusted market rate of return on because we depend on that income to fund our grant making and our operations and so across both the the PRI and the MRI Capital quality jobs is a priority strategy for us and that includes worker ownership so we're a very proud investor in a business Heritage that that came up this morning as well as other managers that have a quality job strategy that isn't necessarily focused on worker ownership it might be gainful jobs there's there's I think different strategies that that are in scope for us and as an investor um and in some cases as an investor that really is kind of exigent on our financial returns I mean there's a huge value proposition here and much of the research has been covered but I remember reading something in Gallup like last month I think that talked about how quiet quitting is now like by some estimates 50 of the American Workforce and so obviously right like productivity lags turnovers High people aren't acting like owners because they're not owners um and as an investor that gives you pause and it creates you know a significant opportunity not only to have an impact but to create Financial value and it's one that we see and we're continuing to look for having said all that I I mean you know attractive Financial returns is probably unnecessary but maybe not sufficient condition for attracting Capital at scale um I was involved in negotiating a warehouse facility for something it wasn't related to worker ownership but the investment banker joked like for every question I have to ask that's 10 basis points on the rate like which is just to say like if this isn't rinse repeat pattern recognition if this is like weird or there's hair on this like you're gonna pay for that and so I think until there's more of this there's more Norms you know um it may be that just having a sort of an intuitive Financial value proposition isn't quite enough we need conferences like this we need more of the intangibles to kind of work alongside the the financial case yeah thank you that's really helpful and that's really interesting how they pay for that but also I mean you brought up that the Gallup thing I I saw that as well like they're worldwide engaged I was like they're like oh it's up engagement is at 23 I was like oh my goodness so it's just really interesting to hear that and then hear this of employee owned companies but back to that like obvious value proposition right the the huge difference there should be it should be start to be a more obvious value proposition okay going into my last round of questions and then out to you guys so just be ready um so Jerome we've seen a lot of employee owned companies sold off in recent years sustainabilities on people's mind um can you say a little bit more about how HDR is thinking about preparing for a future of employee ownership but also what are some of the lessons that other companies might take from that experience so nothing gives us more pause than we see even in the competitor space it hurts when we see employee-owned firms bigger or smaller be acquired or or lose that opportunity for ownership there's plenty of the pond is Big there's there's plenty of work for our industry uh so so we try to be stewards of the industry and and make sure that we're all successful as a collective um so it hurts like CH was a way up the full name oh no sorry um so that was a very personal story for me because I had a lot of friends there and we really looked up to that organization because they set the gold bar like when you looked at a lot of the employee engagement surveys and a lot of the things that was going on CH was leading and a couple uh why you got us mind the steward of the business and make sure your Investments are solid and avoid um Capital uh infusions from outside people that may not have those same vested interests as an employee-owned firm and you can see how the dominoes kind of fell and that that was that was very painful so when we see those situations we become more guarded how do we protect this model because I don't think anyone wants that on their head that we did great for 106 years until you came along and now look um so we're very cautious about what we do but we do have some growing concerns and I think one of the things that we're recognizing is um the infusion of new Talent may not have the same commitment or desire commitment to to corporate life or corporate work we have uh heard that even professors out in Industry are telling telling young candidates they're coming in that you would be silly to stay in an organization for more than two or three years you have to transition organizations in order to grow and build so those things threaten the model right and when you when you and when they come in also It's A Hard Sell like why should I buy in my Shares are going to be so small to everyone else's and having that conversation of long-term growth building is is a difficult challenge so some of the strategies that we've implemented as being very intentional about communication of culture we do a lot of Outreach to to Young staff not telling them they need to buy but here's the values that we have as an organization and here's some of the key Milestones that we've been able to to overcome through economic downturns and whatnot and you show them the model of how we were able to retain and keep talent and continue to grow our organization so they understand that that culture that comes from ownership is something that's real we spend a lot of time in in very intentional about that and then the just the like when we can when we can send out Share value on very profitable years we make sure that they get that so that the next year when the evaluations come they can see what that growth looks like I think more senior leadership we have enough and I think we all recognize we have enough and then the next thing is making sure that they have enough so that they can start to realize the benefit and then continue it well past we're gone and does that yeah no that's that's great I appreciate the the cautionary tale as well as sort of how you think about you know truly developing that next Generation so that's really helpful um so Julia's coming to you next uh what are the challenges and opportunities that you see in in growing employee ownership particularly in the context of the growth of private equity and an economy that still does kind of incentivize more certainly more short-term thinking than we're hearing from Jerome here so um so wondering how you think about that question uh sure um well when it comes to actually adoption of of these sorts of models I I don't think private Equity is is really your big problem we just heard um from ownership Works uh just private Equity oriented if anything Financial people understand this logic more they get paid based on performance it makes sense um and it has the advantage if you go and tell private Equity we're going to unionize your company um there's nothing in that for them but uh you know employee ownership if if you can actually show Real Results in terms of Employee Engagement and performance again that addresses not just the employee uh bargaining power side but also the productivity and performance side I think that makes it easier if there's a big obstacle um it's uh as Margo mentioned earlier some of the you know building a paradigm a template A playbook that is easily replicable and everybody understands um you know I I joked I did a lot of work in emerging markets and actually Frontier markets as an investor and I I always said that you know in in U.S investing you basically do the thing you did a thousand times before you do it one more time whereas investing in these countries you you were making it up for the first time and I was one of the few who liked that but uh admittedly it wasn't the best way to make money um anyway uh as for the big opportunities um just to expand a little bit on the uh industrial policy uh point you know people dispute the actual number but it's of the industrial policy bills and Appropriations already done it's something like six trillion dollars across infrastructure chips and Ira I think there's likely more to come it's probably the only area where you have real bipartisan uh agreement at least in certain respects right now uh and you know to the extent we can build a framework for more employee ownership I think that will actually be very helpful in implementing industrial policy particularly in a lot of the industries that have been orphaned or abandoned in the United States and where you don't really have any conventional Financial investor interest or corporate interest anymore the other opportunity there kind of going in the other direction is industrial policy there need there needs to be guard rails and it's always a balance if you have too many guard rails you will dissuade all the real investors and participants if you don't have enough they will take the money the subsidies and do things you don't want them to do with it and we had recently a controversy over over chips where you know a sort of laundry list of conditions was put on some of the funding for that and you know I think perhaps rather than looking at it as let's kind of debate what good conditions we want some of which are kind of very tangential to the actual semiconductor firm or whatever thinking of approaches like employee ownership where you know we introduce the good incentives through things like employee ownership rather than kind of uh you know strict conditionality on telling firms specifically what to do might be a better way to go about ensuring that the industrial policy funding we undertake actually achieves the goals we desire great thank you and Mark last question for you um at least last one for me what role do you see for foundations and philanthropy in supporting this push and how do you see connecting to some of these trends thank you I mean foundations if we're using you know the different Tools in our toolkit I think can be helpful in several different ways narrative mentioned we can actually invest our capital and again even though there is attractive returns I think that intention is quite helpful um and so whether pris or MRIs it's definitely something I hope to see foundations do more of you know research like Paige mentioned there's been great research we need more research obviously something that's well within the philanthropic wheelhouse like policy Innovation right feels really important I know there's been some recent momentum sounds like there could and hopefully will be more those kind of blueprints and ideation like again very much the the domain of philanthropy and just stay you know as someone who's come to this and tried to learn fast but started from a place of relative ignorance like there's a fair few people that know a lot about this topic but there's many more that know almost nothing and that are a bit intimidated by the acronyms and the nuances of like esops and rsus and stock purchase agreements and so having you know opportunities to build Bridges um between those of you who do have really deep expertise and what I believe are the much broader universes of people that focus on economic policy or on workers or on inequality like that's I think really precious um and really necessary so great wonderful thank you um we are ready for your questions so great wonderful yes right well yeah I get the money hey I'm will Jones I work at the Rockefeller Foundation currently um and so I have two questions and I'm really grateful for everything that y'all have said on this panel um my first question is as a funder um from a foundation who has shifted its pretty much entire programmatic mission towards supporting climate and energy you talked about chips earlier and uh I'm curious about ways that the federal landscape of funding be it Ira chips Bill Etc um where do esops fit in where do co-ops fit in I think you talked a little bit about the stipulations um that are put on businesses to try and get some of that funding I'm curious is as a lot of these agencies are trying to figure out their specific policies like what role is there in the folks for the folks in this room or other influencers who are at the table with those agencies to suggest like here's what we should be thinking about here are the sorts of businesses that we think about I asked that as a funder because since we're moving away from supporting bsos in the same way that we have I see that landscape as an opportunity to continue supporting the second question that I have is being a funder and at an institution that largely has not considered employee ownership as part of its main strategy how do you influence um I guess this might be more for you Margot but how do you like really bring that argument to a board or a senior leadership that is more invested in GI or baby bonds or sort of the other really important um but have more popular knowledge base that was a lot so sorry that was a lot but it seemed like a question for you Julia someone for you Margo yeah um so first I don't think um employee ownership is really part of the industrial strategy conversation and you know the policy conversation yet um I think that's you know the role at this point would actually to to make it a part of that because I think it could play a valuable role both in there will be many instances in which you're trying to encourage the development of the sector and there aren't a lot of natural owners or investors who have expertise in that sector who want to be in that sector but where an employee ownership program could actually step in uh and and take the lead on these companies and then as I mentioned it may also have a very useful role to play on the conditionality side of it though again that is not that's not where the policy is right now I think that's that's the work that needs to be done and I'm going to find you at the reception and say like this is a conversation to have over wine um I do when I was a Rockefeller like I um I I think I tried to play some of the translation function you're talking about and was able to fund Evergreen and a couple of other things um and some of that was like bringing one of our vice presidents to see work on the ground uh a little bit of it was the research available at the time and there's much more now but um like personally I do think this topic would benefit from a bit of a PR campaign um because you know as philanthropy and all of us try to be responsive to like the Zeitgeist and you know what's like bubbling up I think it it helps to have this topic be on people's lips and in their minds and again I think some of it does read to those of us that don't know a lot as like a bit esoteric or just daunting and so like what is the tick tock video for worker ownership I heard it come up this morning like I'm gonna start googling what I mean I don't even have Tic Tac so I'm not sure how I'm gonna do this but I'm going to get my niece to show me like what are the the dances that like can actually bring this to life because I feel like we need that right um and that will make all of our jobs I think easier as we have that kind of like push in the zeitgeist great thank you okay over here hi uh Joseph Cureton with O'Brien Cooperative thank you um so response first is like thank you for asking that question because I think at the end of the day the levers that we're pulling are interesting um you talked about GI and things like that where there are programmatic implementations that the conduit of which so like where the money moves could be an ESOP or a co-op like the service providers for philanthropy might be an inroad just just a thought um you know there's an intermediary there and why can't the intermediary be owned by the people just saying um but then the question was actually for ESOP practitioners um like how when you're thinking about like um outside of just Financial value right so uh what other sort of non-financial benefits or non-financial incentives uh are braided into your experience within the ESOP World um or Co-op or whatever right um that may be like uh unique to that situation but is a traditional firm like I'd be curious because of you know my background cooperatives versus ESOP so just be what's the difference you know so I guess I'm the only practitioner yeah look at me um so I there's got to be a motive radio Beyond just strictly Finance right and I think that's where um an alignment to the purpose of the organization becomes key I think what and and all I can talk from is from my organization because that's the perspective I have um we're not Guided by the return it's nice but that's secondary our organization it's a very easy story to tell we build critical infrastructure for communities so when you see what happened to Flint when you see what happened to Jackson when you look at the Pennsylvania bridge that just collapsed those are key events in society that are disrupting communities and our organization has an ability to be very influential in ensuring one that those communities recover quickly so we're the design firm to rebuilt the Penn bridge in 11 months so that's that's an awesome story to tell um we're also uh very keen instrumental in ensuring that the projects that we undergo are not creating like the next Flint so we're very cautious and purposeful about the decisions we make because we're very cognitive that um to build a legacy firm that's well known not just by the client space but by the public space we have an additional um onus to to do good work and I think that higher calling and purposeful work is what allows us to be successful as an ESOP I think most of our employees uh if you were to ask any one of them the value of working in our organization is that that commitment to building a future Society it sounds corny I feel weird saying it but at the end of the day I think everyone is is committed to ensure that we leave Society in a better place than it is today and when you when you can rally a group of people behind a mission whatever that mission is so that's ours each organization needs to find what is that higher calling purpose because that's what people are going to center around that's what they're going to want to take ownership in and that's what they're going to want to help build at the end of the day I I don't I don't want to have a lot of money I want to look at things that we did out in the community and say that Community is better off because our firm engaged here and we had key people helping build infrastructure that's going to be relied on for generations to come that that's huge and I think the more I'm not sure the other the other firms that are considering esops the more they can dial into that that calling especially with this newer generation I think their motivators are different right like they don't want cars they want they're very idealistic they want Transit they want dense communities they want to leave behind something greater which is different than than our generation right so the more that they can tie into that purpose I think they can build that critical mass to have a successful employee-owned Adventure get to the yep okay annalize oh can we get a microphone up here I swear HDR is not like Jones Camp I'm here on my own free volition no I I actually just would love to hear a little bit more about how you guys bring your mission purpose and values to life with employees when they join like what are the reinforcing mechanisms that you use because a lot of times companies want to get straight to employees are thinking and acting like owners and we try to say you've gotta focus on engagement and you have to align people around a common vision and purpose but not a lot of companies do that so how are you actually reinforcing that in the day-to-day of the job okay so say we're not Jones camp but we have these conferences where we fly everybody into Omaha and in all seriousness it's kind of funny we all participate in the same organizations and one of our competitors at we were talking about oh our business group conference is coming up we're going to 5 000 people in Omaha and talk about the great work we do and how that work connects to communities and how the project team felt after delivering the work so those are most of the experiential stories that we tell at these conferences but they're expensive right so you're renting out the entire Omaha Convention Center you're bringing in thousands of employees for three or four days they give up their weekend they're working adults they're willing to share rooms so that's how we keep our costs down different different models with like private firms wouldn't do that you get your own room you could have your own room but you're going to pay half of your your room so those are the things we structure around it and they're all committed and they all come We Tell those stories we have six business groups so we do that every year we do two of these conferences and I was sharing with one of our competitors oh I'm about to fly out to Omaha next week for this conference and then go why would you guys still do that what a colossal waste of money and I said I see where you're coming from because it is expensive and there's no tangible direct result from that investment but when you ask about how you communicate that story and how you get the employees to understand what we're building and what the greater commitment is being among those global practitioners because we're finding people in from the UK from the Middle East from Australia it's a global conference where we're sharing new technologies new ways to deliver work new ways to engage our clients successfully and they go back and they share those stories and now they've built these networks and community and they they we call it filling our tank because it consulting's tough you get burned out but you go to these conferences I go on E and I come back on F and I'm like oh that was great by the time I'm on E again there's another conference and now I'm on F again and I think you could look at it and say that is a waste of money that's bottom line dollars that could go to to revenue and why can't you just do a virtual why do you need to bring all these people together there's something intangible in having that human connectivity and for us I don't see us ever deviating from that you you could say you could add it to the bottom line and you can get an extra four or five percent on your return and I think most of our leadership would say knock yourself out in your own company that's not how we transition our values and maintain who we are as a firm so those types of things that we do and then there's continual we do CEO quarterly updates where most of his stories are aligned with um how we're impacting communities um and and the results are amazing we if I have a couple minutes we we recently started well not recently as 2013 our CEO said hey we think we have a lot of critical mass of people wanting to engage deeper in the communities let's start an employee Foundation we're not going to give any money to it corporally it'll only be funded by whatever they're willing to contribute and they can pick the projects that it goes to there has to be in our core values so Healthcare education or environment but they could pick the project and they submit and we'll give money but only as much as they give so we started to get a day of giving in the first year we did I think we made a half million dollars and we were only like 7 000 employees at the time so fast forward to our most recent cyclists in March I think we 1.8 million in one day from employees it's their own money this is stuff that they just give it to the company and say we want to be known for what we do in our local communities how does that's an amazing culture and I think that culture only happens through the model and similar models that we've been able to build right yeah great wonderful well I want to thank the panel this has been a really fascinating conversation um and I'm just going to say a couple of words now as we sort of close out our day and then welcome Joseph uh to say some some final remarks and um I particularly appreciate your story of um that final remarks of you know bringing everybody together from around the world to sort of that personal connection and how important that is because I feel like I've heard that echoed so many times in talking with people today about you know Paige mentioning how good it is to have not just academics but practitioners and and Advocates and and other experts together to really kind of inform each other's thinking and and it's just been great to see how much Buzz there's been in people connecting with each other and meeting new people and and getting and exchanging new ideas and I really do agree that that bringing people together in person has been really valuable so I that's my way of sort of saying thank you all so much for your full-on participation in the employee ownership by because Forum it has been really wonderful I feel energized by it and and feel like I've gotten a lot out of it and so I just really wanted to to thank you very much for all your participation and and for all the work you do uh in this in the space and um I hope you'll continue to to share your ideas with us to be in touch um and um and I just again want to thank uh the Aspen team the Rutgers team thank Joseph for his partnership it's really been wonderful working together um and and look forward to welcome you all downstairs for a glass of wine so thank you all so much and Joseph let me turn it over to you to close this out thank you so I'll just uh take a minute and obviously uh we're just sort of delighted that all of you participated here uh in person and in live stream this has been a wonderful Cooperative project by Aspen and Rutgers and a team of 10 worked so hard on this and we think we thank each of them and uh my personal partnership with Maureen has been a a great a great joy we've learned so much together and we've been able to build something really I think important I'll just make just a few comments do you hear that quiet wave because listen you're sitting here but Aspen has social media people in the back uh Rutgers has social media people back in New Brunswick retweeting things and doing stuff on Facebook these videos and sound bites are being packaged and repackaged and sent out that's a quiet wave of what Margot talked about of what ideas that we are uh talking about here kind of going out so we hope that wave will continue and increase as we move towards doing this again I think that uh it does not happen that you get members of Congress and think tank people who haven't heard about this idea and excited members of Congress and people hundreds of people listening to these interactions uh between you know academics and thought leaders across different organizations you know informed by in our case uh the Rutgers Institute has has 200 fellows producing research for 15 years and we're just appointing another 30 this year we'll have more new muffins next year uh and and and Aspen's infrastructure will be bigger and stronger and even more thoughtful so um and bringing this to the center of power here in Washington uh is something that was really important for us us to do so I just want to thank everybody for participating and enjoy your wine and God bless [Applause]