Employee Ownership and the Company of the Future

so hi uh I'm Joseph blasey and this is a panel in which we're going to look at employee ownership and the company of the future we're kind of you know push uh the Looking Glass forward and uh see what we think about really the future of the corporation and we're going to start with two of the Rutgers Institute research fellows to give us some some perspective on some issues that they've been studied in Empirical research and first I'd like to introduce Marshall Vance who is associate professor of accounting at Virginia Tech and then we'll talk uh with Felice Klein who's assistant professor of management from Boise State University Marshall oh this has been a really fun and unique conference so far so yesterday we got to hear from U.S senators and representatives those are some really Heavy Hitters but I think that the conference organizers wanted to add just a little bit more Sizzle to the program and so today on day two you get to hear from an accounting professor foreign and I know you guys are thinking I really hope he gets sent to Double Entry accounting bookkeeping the joys of debits and credits but actually I'm going to go a different direction we'll talk after if you want to hear that stuff but I come at Equity compensation or employee ownership from the perspective of what we in management accounting call Control Systems which are the things that we put in place to try to encourage certain behaviors among our employees how do we get them to do the right things or do things we want them to do and probably the most basic thing that you would behavior that you would like to encourage your employees to do is to not quit right if they quit then you really have no say in what they do after that point and so you really want to try to retain employees that's one of the key things that that practitioners struggle with it's also one of the key things that has been argued for one of the reasons why companies use equity compensations for retention purposes but it turns out that it's actually a little bit difficult to really nail down in a rigorous way the relationship between equity compensation and employee retention the reason for that is because we typically lack data especially below the top levels within firms but also we don't usually observe really clean settings where you have a control group and a treatment group so uh I started kind of with this um this issue I was talking to the director of compensation at a large retail chain that uses an ESOP and as he described the ESOP to me I hadn't really been familiar to that point with broad-based Equity really anything below the executive level and I said well that's interesting you're giving this to the people who are at work in the cash register and stock in shelves what does it do and he sheepishly admitted he said I hope that it's helping us retain our employees our Frontline employees and keep in mind this is an industry where 50 to 100 percent turnover is the standard I hope it's helping us retain employees but I have no idea and I don't think that's even testable well it turned out that because of erisa laws there's actually a cool way that you can get at this that's because eligibility to participate in the ESOP is based on whether you work a thousand hours if you work 1 000 hours or more you participate in the ESOP if you work 999 hours you don't and so I use this setting to try to compare people right around that cut off who are otherwise very similar to each other and you can actually then control kind of flexibly for the actual number of hours that they work and so in doing that analysis I found my result was that participation or eligibility for the ESOP improved retention or a decreased turnover rates by about 35 percent which is pretty dramatic um so that I think helps establish or at least contributes you know going back to Joseph's uh repeated point about you know fresh bread and we keep coming back to this issue I don't think the case is closed I don't think that's the last study on on employer attention it certainly won't be um but it helps at least establish with a little bit of rigor kind of a causal relationship between equity Compensation Plan and employee turnover but I want to talk very briefly on two other issues that I think are really interesting but also I think there are opportunities to explore much further the first so in this study I very briefly and kind of tangentially just examined and saw that different types of employees at different levels in the organization um by age and by gender responded differently to the plan in terms of the effect on their turnover rates but but more broadly there's this issue in Academia we call selection effects so if you give somebody Equity compensation how they value that is going to be subjectively determined what is it worth to them and that can vary across different employees so I have subsequently done some research that shows that depending on employees risk aversion they value these plans differently depending on kind of cultural features and especially the trust that they have in management it can make an impact on these the plans the effect that they have on retention so I think just thinking about this question what kinds of employees are most likely to be attracted what kinds of characteristics are likely to be attracted to a company that uses an ESOP that promotes an ownership culture what kinds of employees are likely to stay at that same company I think that's a really interesting issue and I think that's something that we can explore further the second going back to the the study that I just mentioned I sort of suspect so 35 seems like a really large effect but it may actually understate the impact of a plan in that particular kind of a setting and this is something that came up a lot earlier but I suspect and I have reason to believe that a lot of employees simply don't understand the plans that they were participating in and let me just share one anecdote because it was very dramatic and eye-opening to me so I in addition to looking at the data I tried to get out in the field and talk to Frontline employees and ask them what do these plans mean to you and oftentimes they would say I don't really know what that plan is but they would often say things along the lines of you know it's really nice it's a great gesture I like to be an owner I feel like Warren Buffett when I'm an owner and you'd hear things like that but one particular woman I had a conversation with her she'd been working there about 15 years was making not much above minimum wage and I I asked her what did she think she said it's really nice it helps to contribute to this family feeling and I said well how much what is the value how much do you have in this plan and she thought she's like I'm not sure but I think it's probably a couple thousand dollars two or three thousand and when I retire you know it's a retirement plan so I can't access it now but when I retire I hope I'll use that to maybe go to Disneyland or go on a vacation I said no that's really nice right that's a nice thing for a company to give you uh go to Disneyland in in 30 more years or something like that but I was like I said right so I went back to the data when I got back to my office and I looked and she had over fifty thousand dollars in this plan and so she appreciated that she owned something but she was off by an order of magnitude and so if we're trying to get at retention incentives or a feeling like you actually have a stake in the business again this is the theme that was touched on but I really think there's a lot more to be done on engagement and actually understanding of the plan it's not just are you in the plan but do you know that you're in the plan and do you know what that means and so I think there is a lot of evidence on this relationship between employee ownership and retention I think we've established a baseline I think we have some good reasons to believe that it might be a causal relationship but I think two important issues that we can continue to look at are the selection effects what kinds of employees does this bring into and does it keep into our companies as well as thinking about what are the impacts of retention how do we or of Engagement and knowledge how do we get these people especially on the front lines where education and other factors of of Engagement might be low how do we get them to really understand and buy into this so I love this conference and these kinds of conferences because it brings together academics and practitioners and I think that when we work together and collaborate we're in a great position to be able to tackle some of these really interesting research issues going forward thank you thank you thank you very much Marshall the next Rutgers Institute fellow will be Felice Klein Felice is an assistant professor of management at Boise State University and she's going to give us another dimension on this thank you Felice hi everyone can everyone hear me okay it's great to be here um I'm going to talk about something a little different than I think most people talked about um during this conference I'm going to talk about stock and stock options that employers give and particularly I'm going to talk about the gender gap in equity-based towards stock and stock options so we know that women tend to earn less right that's probably not shocking to anyone at this conference we've seen this in a large literature but most of this research focuses on more traditional forms of pay salary as well as bonuses and so in the recent paper that I published with some co-authors we sought to understand does a gender gap exist in equity-based Awards and you know probably speaking to the choir here equity-based Awards can be a substantial portion of employees total compensation in in some firms like Tech firms some startups it also can have huge implications on employees wealth so it's really important to understand stand doesn't Gap exist so in this paper we sought to understand two main questions does a gender gap exist in equity-based Awards and if so why does it exist and to do this we we obtain data from two Tech firms a large publicly traded Tech firm and a small startup as well as we looked at executive pay and we ran an experiment to understand the the mechanism and what did we find we found even after accounting for the traditional reasons women are less that they're in lower paid occupations they may have less experience than men we found that the Gap women receive 15 to 20 percent fewer Equity grants in their organizations than men and the value was 20 to 30 percent lower than men and so why why Equity is given out to employees its retention is the most common reason we heard when we spoke to Executives in many firms and this is supported in previous research also how Equity is given out to employees so why Equity is given out why does that cause um issues or inequities well first retention risk right that is a very subjective reason managers tend to give it out based on who's most likely to leave who's most valuable to retain when there is subjectivity that leads to managerial discretion and that could lead to biases in addition how Equity is given out so many organizations particularly the large ones and I'm not saying every organization I think we all know some organizations aren't doing this but many organizations are seeking to address gaps in the traditional forms of pay right salary and bonuses they're running audits to make sure there are no gaps in fixing them they're formalizing the payout but many firms are not doing these same things for equity-based awards and so what are the implications what do we suggest of how do we solve these issues one organization should should reduce or stop providing Equity based on very subjective reasons provide them based on more objective reasons how long were you at the firm giving it to everybody who are in certain roles in addition they should be auditing this is something that is common in many organizations they should be auditing the equity grants and if they see gaps they can't explain they should be fixing them by giving more Equity to employees in addition um additional research not my own has found that pay transparency is a great way to solve compensation gaps so organizations can provide the ranges or even the the means or the medians for Equity like they are doing for some for some forms of pay like salary and given we've talked about policy I kind of want to bring this back to policy a number of cities and states are actually adopting and enacting paid transparency laws Colorado Washington these are even being considered in Georgia West Virginia Kentucky but most of these laws focus on salary and very few there are a few exceptions Washington and Colorado focus on equity and so if we really are serious about making Equity more inclusive then these laws that are being passed and considered should focus on all forms of pay so that's all I have for you thank you very much [Applause] thank you very much Felice and you'll be hearing more about felisa's research in the coming months so I'd like to call up our panel uh to be seated up front Eric Foreman co-founder co-founder of the drivers Cooperative you can come up as I call your name Chris Fredericks president and CEO of empowered Ventures anna-lysa Miller executive director of ownership works and Robin shutack managing director of infinite equity and uh do we have microphones up here for everybody we do and we have a chair for me and uh see if I can get it right this time okay well first of all thank you to all of our panelists for coming to the conference and I'd like to start with just a brief presentation from each of you about two minutes just introducing your biography a little bit and your organization and what you do and why you're interested in this so we'll start here with Chris Fredericks and we'll go to the right thank you Joseph and thank you everyone for having us um I think this has been an amazing conference I think you know the energy around the employee ownership movement in general is just getting really exciting um all the different ways people are approaching it and um the creative ways and this is I guess a panel about Innovation and kind of the future but I I don't think this represents everything that's going on at all it's just maybe a few really interesting hopefully interesting examples so I'm a recovered recovering CPA I guess that's you know as many of you are and I had the opportunity in 2010 to I was the CFO of a small business near Indianapolis a fabric Distribution Company the founder of the business classic ESOP story founder needed a succession plan didn't have any family in the business I was skeptical of some of the typical options um and he asked me to help him figure out his succession plan so working with our accounting firm as advisors and and then eventually finding some other terrific ESOP advisors uh we executed a 100 esot buyout and I ended up stepping into the the president role and basically during the 2010s we had just a nice a really nice run you know as an employee-owned company both financially and in a lot of the other ways that many esops you know experience and talk about really the impact it had on the people was pretty incredible it's been life-changing I think for so many of them financially um it's you know just been a lot of fun to see so many people come alive in that kind of a culture and environment where you know some traditional you know corporate environments can feel stifling a really great ESOP ownership culture can really you know bring people alive in my experience so I personally this has I wasn't even familiar with esops before all of this and now it's kind of I'm just so grateful to be part of you know something that can have such a big impact on people um briefly sorry I know I'm going long um we ended up transitioning to a hold code model so in 2020 we launched a holding company and now we're intending to continue to grow through acquisition in a holding company model we've since added a couple businesses and we're seeking to continue to grow in that fashion and we're going to get to some of those structural elements in the next part of the discussion but thank you very much Chris our next panelist is Annalisa Miller who is executive director of ownership works and Lisa give us an idea of what ownership works is trying to do and what ownership works is in your biography and we'd like to get other questions to you later on sounds good hi everybody um so a little bit about me I started my career in law in corporate finance and then Public Finance practice for five years then moved to the nonprofit sector where I was broadly focused on Rural Economic Development and that's where I was first exposed to cooperatives I was living in Hawaii at the time and then I moved back east and was just really taken with the concept of shared ownership and latched on to employee ownership went to project equity and worked with amazing colleagues in this room and then went on to ownership works and so ownership works is a non-profit organization that was founded in 2021 to like all of us in the room expand employee ownership across Corporate America we've set a goal of creating at least 20 billion dollars of wealth for workers through broad-based employee ownership by 2030 and we have two main strategies to get there the first we call movement building which is about generating a Groundswell of interest in employee ownership across the private public and non-profit sectors and the second is providing investors and companies with Hands-On guidance on how to implement home holistic shared ownership programs and the movement that we're building as a lot of you know we work closely with private Equity firms we have now 25 private Equity firms that we work with that have committed to implementing broad-based employee ownership programs in their portfolios as well as partners among Professional Services firms Pension funds financial institutions so we're up and running off to a good start there's 66 portfolio companies with programs in place reaching 95 000 employees and over 360 million dollars that's been shared to date so off to a good start but a lot more to do thank you anna-lysa Robin shutack at infinite Equity how infinite is this going to become tell us about it equity and thank you for having me today Dr blasey I'm so pleased to be here so and also Felice we must talk I just came off a conversation about the very topic that you were covering and there's some other really great research out there and there's so much to be done so hats off to you anyway Robin schuttec with infinite Equity I'm a managing director at the firm I have over 20 years of experience in this space infinite Equity is a completely employee owned company and our focus is on end-to-end Equity compensation Solutions so from plan design to Administration and everything in between Communications participant education and I I probably held every single role within this industry as a actual corporate practitioner is you were managing stock programs for large publicly traded companies in the San Diego area I've also been a trainer educator membership director for two of the leading associations in this industry or in the equity compensation industry and then more recently as a practice leader for computer chair of financial services firm and now with infinite equity and then in terms of infinite equities work what we do is we our goal is to convert employees into owners of the companies that they work work for through our Equity compensation design and education and participant communication so my focus at infinite Equity is to help with Equity design strategy and also communication and I love it because I have seen the benefits of these programs by participating in them and then designing them and I'll talk about a few of our clients who have done some really incredible and Innovative things so I I'm just so passionate about this topic and I think just Dr blasey to me what we're here to talk about is how can we get more large publicly traded companies to be more employee owned it's so important okay thank you very much and Eric Foreman uh Eric is co-founder of the drivers Cooperative tell us a little bit about the driver's cooperative and how it got created well thanks so much Joe and I just wanted to take a moment to thank Joe Maureen and on the teams at Rutgers and the Aspen Institute it's uh this is an incredible room to be in and I have to say particular things because so many people in this room have been part of the success we've been able to achieve with the drivers Cooperative which I'll talk a little bit more about um so who are who what is the driver's Cooperative back in 2019 and began building this organization we've grown now to over 9 000 drivers including 1800 owners in our first full year of operation we generated about 5.9 million in sales and paid out 5.2 million to drivers and wages I know these are probably small numbers for a lot of folks in the room who are playing around with billions but for going to zero to 5.9 million was an accomplishment for us and maybe what we're most proud of is we've been able to establish 30 an hour minimum wage in the gig economy which is it sadly I think Remains the only minimum wage in the gig economy um and maybe that's a topic for some of the conversation here about how to inspire some of the bigger players to to do better um but just introduce myself a bit um I 20 I my background is in labor organizing um about 20 years ago I began trying to unionize the jobs that I had in college which were in the fast food industry it was maybe tragically ahead of its time um but uh I will say that as of last summer the shop that I had gotten fired for unionizing well maybe I'll talk about that later was you was unionized 18 years later by a different group of completely different group of workers but anyway um I I I supposed to keep this two minutes but I guess what I'll just leave it at is that I spent 15 years building labor unions and through a lot of Blood Sweat and Tears got I got fired many times all my friends got fired uh kept the nlrb in a way more business than it ever wanted to be in you can look up all these Case Files if you want and what I realized after a certain period of time is as I started to understand capitalism better was that it would not be Out Of Reach for workers to start their own companies and then I began learning about the history of unions doing co-op housing development of worker cooperatives and so about now half a decade ago I made a little bit of a pivot to entrepreneurship and began building workaround companies I thought it would be good to diversify so I started two at the same time and unfortunately they both achieved substantial one one is the driver's Cooperative the other is a internet service provider started by workers who are on strike against Spectrum Unfortunately they both sort of I shouldn't say it that way that's I don't want to that's tempting bad luck but um yeah then they're both doing well so I'm busy and uh but excited about the enormous potential that worker ownership has to fix some of the foundational wrongs of this country and I gotta say I love your enthusiasm about being fired yeah these were not good jobs okay so I'd like to ask a question that would go right now from the you know very introductory and general level to a very specific level uh maybe for you a subsidiary for anna-lysa one of the companies that you've transformed hearing the story same thing for for Robin and I I think would be very good to understand the process of the creation of uh of one of these one of the drivers cooperative and really get it down to the nitty-gritty level so uh we'll start with Chris and we'll still keep going to the right um so yeah I think an instructive story about kind of what we're doing so in 2010 2020 we founded the holding company we started looking for businesses to add to our group um the first one we came across uh that we ended up you know being serious about uh was a precision machine shop difficult to say that sometimes um near Cleveland Ohio and it it was interesting in the way that a lot of the issues that have been talked about over the last couple days kind of all could be seen in this one situation so uh it was on you know not a huge business but a very successful uh business the owner had founded the company needed it to sell um soon and um he was concerned also similar to my original story about kind of his options and interestingly he was very familiar with employee ownership in esops his wife actually had been an employee owner of the year in that in the state of Ohio like 20 years before so it was very much something he was aware of but he was given advice that they were not big enough and that you know it just wasn't a good fit and I don't know that that was 100 accurate advice and the other thing that was going on that we've talked some about is you know some of the the question about succession in terms of leadership and management and he had I would say he had real a lot of confidence in his people he cares a lot about his people but wasn't sure that the business didn't need more support from a leadership you know perspective especially in pulling off like an actual succession process um so he was pretty far down the road of finding you know a buyer for the business and then we got involved and he was excited to learn about a holding company that's already employee owned that could do a more traditional transaction in terms of acquiring the business as part of our group and it being an employee ownership outcome so when we think about businesses that are below say 50 to 100 employees I think we might have an opportunity to really focus on current employee-owned companies really focusing on m a um to grow employee ownership there's a lot of businesses out there that just the owner's not comfortable going through that whole process for a Litany of reasons I think this could be an underappreciated you know way to to devote some attention and resources around the the 5 000 privately owned you know esops that already exists today and have built up a lot of capabilities around esops and and running an ESOP company thank you so Annalisa can you bring us inside one of your your interesting cases please yeah generation they are a portfolio company of KKR and Leonard green two of our partners and they launched a shared ownership program in 2021 extending ownership to all 2100 employees across 15 facilities so to our next generation is a manufacturer of specialty films used in food and medical packaging and it's run by this fantastic CEO Kathy Bolthouse she's been at the company since 2010 if not earlier and the company has performed so well under her leadership so it went from a valuation of 58 million to 4.5 billion 58 million in 2010 to 4.5 billion in 2021. so she is very very passionate about her workers and had actually advocated she's been private Equity owned four times and really wanted KKR to acquire the firm because she knew of the broad-based ownership program she missed that the last time around and now KKR is the investor so she's really excited to launch this program and I'll tell you a little bit about the structure and the approach it Charter Next Generation because that's representative of the approach across the board so the first phase is structuring and sizing the broad-based plan and so these are these are not esops these are um you know broad-based stock option programs stock appreciation right restricted stock units the parameters are that all full-time employees need to have a pathway to ownership there can be eligibility requirements like you have to be at the company for a year or something like that and then the sizing of the grants the target are 6 to 12 months of salary for full-time employees at the exit when the companies sell private Equity Firm exits the investment assuming that investor hits their base case so that's how the program was structured at Charter Next Generation and she was super excited to launch she launched the program and it fell and before the launch we said to her do an employee engagement survey and she pushed back really hard and she said oh my my employees are great like we're fine and she didn't want to do it but we said you know this is one of the requirements of an ownership Works program is that you do a pre-launch engagement survey so she did it and she got the survey results back and she wouldn't mind me sharing that she's told the story publicly she cried because her Employee Engagement scores were in the 18th percentile and so she launched the program and to No Surprise it like fell flat because the employees are like okay so in five years I might get this payout and and you're not really paying attention to what's happening at the company today and they tried a few things and after a year Kathy really understood I have to go talk to the employees at all 15 plants and understand why is engagement so low and why is everyone quitting and she did that and she finally got to the root of it and you know a year later her engagement scores are up 23 percent so not where they should be but they're moving in the right direction her quit rate is down voluntary quit rate is down 23 percent and the financial performance is improving um and so what Kathy and we just had a conference for CEOs and what Kathy shared this story and what she was trying to tell the other CEOs over 60 CEOs mainly of PE backed companies in the room and she was trying to say to them you know it's not enough to sign size and structure this plan you've got to build a culture of ownership and to do that you have to start with Employee Engagement that's not all you need to do but it's a starting point to understand that you're signaling to your employees that we're listening to you and that we're actually going to start to change the culture so we've been working on like so many of the folks in the room and learning from you on how you build a culture of ownership we've built a Playbook we're going to be testing it but so much of what we're trying to do is is beyond sizing and structuring the plan it's great news it's in 66 companies but I think we all know it's not going to stick if the culture of ownership isn't there where the employees feel think and act like owners are really seen as true value creators in the journey and then get to share in that upside along the way so chart next generation is just at the beginning it's only been since 2021 but that's a little bit about the approach that we're taking and hoping to replicate across a number of companies thank you anna-lysa okay so so Robin you have a different kind of company to take us inside yeah absolutely and I three and I'm going going to pick the one that I love the best this is a great story in my mind Global foundries so all publicly publicly traded companies and all their plans have been publicly filed but uh Global foundries is a Multinational Semiconductor Company not very common with semiconductors but multinational is important in the context of what I'm going to describe and in their case they were going public in 2021 just like probably almost every company and they wanted to infuse a culture of ownership globally making sure that the program was inclusive and so what we did was said okay you have a global organization a tax qualified Employee Stock purchase plan isn't really going to work to achieve that because it would only be beneficial for people in the U.S so we introduced a non-qualified program with a really generous match of 20 percent and that maybe isn't all that special but there are some really special special components to the program because with a non-qualified program oftentimes a barrier to participation is being taxed at purchase and so the company was very passionate about making sure that there were no concerns by the participants in connection with the tax the taxable event at purchase and they introduced a net settlement at a net settlement feature and that really helped employees overcome any sort of fears that they might have had about the tax withholding obligation at purchase and that unified program applied across the board across the world the best part about this program though is is my favorite in connection with the IPO anybody who enrolled in the program also got 50 seed shares and when we say seed chairs I'm talking about effectively rsus so you got 50 seed shares if you enrolled and they vested six months after the per after the initial offering period the initial offering period was six months so all they had to do was basically enroll in the program and then six months later they got 50 vested rsus which amounted to about three thousand dollars and this was offered to almost every employee in the organization so it was a way to encourage people to get in the program and then inertia took in or took over effectively to allow people to just kind of continue to get their uh their savings built through those seed chairs and then remain in the program because they found it so valuable and because this program was so successful any new joiners after that initial IPO also were offered that initial seed share because the company wanted to do right by any sort of new joiners and just help amplify it participation so I think the takeaway here was that this company was really committed to making sure that employees had a really great experience with this program and in getting people in that program at the start so that they could continue on throughout the duration of of the program and and actually the outcome was I think 85 participation and average contributions to the plan were about I think eight to ten percent and what's common in the industry on average participation in these programs are somewhere around 30 percent and average contributions are about six percent so they killed it and the seed share concept really helped get people interested in the program and gave them a little bit of a boost as well so we were really proud of it we won a a global Equity organization award for the program Geo is an industry Association and the program was just recognized for most Innovative and creative plan design so we're really proud of it and I think they have about 15 000 employees worldwide thank you very much and it's it's not a a trifle to manage the legal and accounting issues across multiple countries and treat everybody fairly uh Eric take us into the nitty-gritty of the drivers cooperative and give us some of the feeling of how the employee ownership issues developed and shook out absolutely I think it might help first provide a little bit of context of who our members are and why drivers came together to start this thing so in New York City the four hire vehicle industry which encompasses taxis ridesha companies Green Cabs Etc employs around 100 000 people about 85 000 of whom are driving for two a duopoly uber and Lyft it's a 91 immigrant Workforce almost entirely people of color the and the problems that workers face is that Uber and Lyft have a business model which actually comes from the taxi industry originally so it's not quite fair to pin this on those two companies which classifies workers independent contractors which means they're Exempted from all protections of U.S labor law means there's no social safety net no unemployment benefits there is a workers comp system that was created through Labor advocacy over the years and there's immense pressure on workers wages and so it's a piece rate system where you get paid per trip so it every morning and it's a system where drivers are already putting up most of the capital needed for the industry to function in the form of their vehicles and insurance for their vehicles it's been a long class struggle over who pays the insurance costs and right now workers have lost that struggle anyway so at the beginning of every day a driver starts out below zero they're in the red for the cost that they have to front for their vehicle whether they own it whether they bought it have a note whether they're paying off or if they're renting a vehicle it's even worse and then you have to hope over the course of the day whether you're a yellow cab driver looking out for Street Hills or whether you're an app based driver waiting for your phone to give you an alert that you get enough trips that pay you enough money to keep you busy enough to make to at least break even and come out ahead and so the consequence of this is a sweatshop on Wheels system where drivers work longer where there's drives work longer and longer hours in order to make their minimums when work dries up this is not a conventionally employed Workforce normally like for example in the pandemic where there's a ma essentially a mass layoff because trip volume is plummeted because people weren't leaving their homes normal only W-2 workers would get dislocated worker assistance unemployment all those things are a fight for for drivers to to win so I began working the sector in 2017 I was hired as education director of a labor organization my background had been labor organizing and teaching so I could check all the boxes and at that point I was already quite interested in co-ops because the experiences I've had and seen where unions weren't able to move the needle in this industry is clearly primed for this kind of structure being an industry of independent contractors is a long history of workers trying to solve their own problems by building co-ops so the idea was in the air any driver you talked to would say a union that'd be great but what we really need is to own our own app and so dutiful Union staffer that I was decided to do what I could to make the dream come true um happened to see an email from Allison Powers at Capital impact Partners who's sitting in the back of the room here looking for uh interest Innovative Co-op ideas and so applied for a grant to create a participatory action research project which is a fancy word for a class about how could worker ownership change this industry and put out a call hundreds of drivers responded we had to have an election for The Limited spots limited seats in the class provided a stipend for drivers to take time off the road to be part of a discussion to vision and dream and figure out the feasibility of starting a co-op so I was working for a labor NGO starting businesses was outside their Lane so the class ended and I've set off on my own with the core group of drivers to to build the company uh the pandemic hit a few months later and this was an interesting moment because a lot of drivers were staying home huge fights with Uber they launched this bogus I won't even go into it but but drivers had time and fortunately were able to get unemployment benefits had time to be on Zoom meetings to discuss to think to reflect a plan and so um together with a Core Group Incorporated the business and began putting pieces together it took about a year to raise the capital to get started we had about as much money as Uber had when they started you might be surprised and guesses how much that was three hundred thousand dollars does that sound like enough to start a Rideshare company in New York it's not uh the I I won't go into all the nitty-gritty details but you you basically need five things to make a transportation company go you need drivers you need Riders you need technology you need people who know how to put those things together or bring those things together to turn it into a going concern and you need Capital to pay those people and to pay for all the costs of assembling the other inputs of those five things we only had one uh which was drivers and so we had to figure it out for everything else so the whole the whole project has been a classic example of bootstrapping we took what we had to figure out how to get what we didn't have we used a lot of social movement strategies like crowdfunding I could go into a lot more detail but I don't want to take up too much time but to make a very long story short we didn't have money for Great Tech so we got an app for ten thousand dollars um that app was a pretty good investment we generated about six million dollars in revenue from that ten thousand dollar app but there are also limits to what it could do we were early on I think a lot of funders were skeptical because it seemed like we were taking on a pretty big fight um and so we we struggled but we managed to we got grants that allowed us down to build our own app which we have released uh as if you can download it's called Co-op ride that's the core piece of infrastructure that will also allow us to replicate this model all across the world and so we're actually looking at franchising as the mechanism for Global growth and I could say a lot more maybe the one last thing I'll say is the The Core Business problem is what they call Network effects which is if you've got a lot of riders who are requesting trips but you know a lot of drivers in the road the Riders will churn and say this thing doesn't work if a lot of drivers that go online and they don't get trip requests they say oh this thing doesn't have a true request so how do you get both of those things the same place at the same time the strategy we've been using has been to build a network through a market Niche called Paratransit which is providing transportation for people with disabilities and medical transportation both of which are billion well multi hundred million dollar markets in New York City and so we've become a leading provider of transportation for people with disabilities in New York um which is another great way to achieve impact it's also a very low road industry with a ton of problems um so our technology has been customized around that use case and we're really proud that we've been able to both make a difference for people who need Mobility the most and provide what you could call social Mobility for drivers who tell us they're making more money than they've ever made in their lives which is like you know I process the 1099s and like that's a beautiful thing to hear but like when people are making forty five thousand dollars a year and this is the most money they mean in their lives it's like this country needs to change you know well thank you very much I'm going to do something a little differently uh and uh open it up for some questions uh from uh from the group right now but I would like to have the questions balanced among the four the four participants so if we get a question for one person we're not going to get a second question for that person until we go through all four everybody has a lot to say important cases and we want everybody to discuss all of the cases so any questions um I'm curious about your governance structure given several thousand members or at least a thousand members yeah we spend a lot of time on Zoom uh the with the large meeting ahead on now to get well we do but uh yeah so we've our structure is similar to a lot of co-ops of this scale where members elect a board of directors our border is a multi-stakeholder uh because you need of course drivers the key stakeholder but staff are also an important constituency and we want them to have a voice and have good jobs too uh so there's a multi-stakeholder board which hires a management team which hires a staff both the staff and drivers vote for representation on the board I will say one of the challenges of co-ops is like who's accountable to who uh everyone is accountable to everybody else but who's accountable who at what moment in time is a ongoing discussion and point of debate and uh difficult thing to negotiate sometimes but it seems to be working um yeah as soon as you're working okay question for one of our other three panelists Graham indeed Chris it's Graham that's all very interested in your Acquisitions model and just wondered if you could say a bit about how you incorporate different brands divisions and the new workers that are coming in and how you get the culture right for everybody yeah thank you Graham um yeah so I think that's one of the interesting things about a holding company model is we can go find great businesses bring them into our family of businesses but we don't have an intention to take over and run the companies we want to empower leadership teams and the employees of those companies to continue to to run them as they have you know been running them with the addition of kind of plussing up the culture adding the employee ownership component so not trying to change cultures just trying to evolve it and that's you know with the holding company approach we've already done that many times now so they don't have to go through the long effort of figuring out how to how to be an employee-owned company on their own so it kind of reduces that risk that so many talk about with Acquisitions of you know integration risk and you know culture risk is the number one reason Acquisitions fail we think and find that especially in a diversified hold code model where each business is kept separate as much as possible it kind of helps with that but you're still creating like a peer group ultimately of company leaders even cross-functional leaders like HR you can create peer groups like with HR marketing whatever so they can feel like they're part of a family or they call each other sister companies or you know or cousins sorry cousin companies is what they call each other so they feel like they're part of something they feel like they're part of something but they don't have to fully integrate those cultures I don't know if that helps okay so a question for uh Annalisa or Robin please well anna-lysa um I guess my question is how easy it is to get other private Equity firms to to buy into the broad-based employee ownership story enough to show them that improve it improves Employee Engagement and performance or do you think the LPS need to step up and provide some pressure on the back end yeah thank you for that um it's it's all of the above it's not easy to convince people to do this at all and when we started back in August of 2021 having these conversations we talked about the social impact the wealth Gap lack of Employee Engagement across the country as an epidemic and we also talked about the potential business case around improving engagement decreasing turnover operational improvements Etc um actually very rapidly built a pension fund Leadership Council so Allison Tucker the CEO of the Washington State investment board heard Pete Stavros our founder present at a forum and she got really interested and she said what can I do to help so she was the first person who came to the table then Calpers then New York Common and that was really influential that sort of changed the conversation a little bit because I think you know some of the GPS felt okay well if our investors are going to start asking us about this then we might want to take it a little bit seriously so I would say that that was a presence from the very beginning we thought we would launch with maybe five or six private Equity firms as partners and the ones that were a little bit more socially minded so we're in conversation with like a private Equity Firm that had former Union leadership but um I think as the movement started to grow and other stakeholders got involved we were able to accelerate and launch with the 19 private Equity firms and now 25 so it's not easy and it does take a lot of different voices um you know talking amongst themselves to say let's give this a right a chance this is the right thing to do and and it can also be good for business thank you very much let's have a question for Robin about the publicly traded company model go ahead Marshall yeah I'm just curious if you could share when companies come to you looking for help what is the main challenge or what are the challenges that they're facing and how you go about helping them with those well currently thank you Marshall and it's good to see you again so I started the day we're seeing companies who are faced with heavy share dilution and they are dealing with low stock prices and having to reel back on eligibility and it's really unfortunate right now and so a fix is potentially introducing an espp an employee stock purchase plan but as we know that often comes with the participant actually having to contribute their own funds so in a world where we have so much excessive executive compensation to me taking away from the broad-based population is not the right answer and introducing an espp is a wonderful addition but I think we could take away from some of the executive ownership and push that down into the broader organization rather than limiting eligibility so today to answer your question what we're seeing is how can we limit eligibility or reel back on the amount of equity that we're granting our broad-based organization at this point because we're we're faced with just a share kind of Crisis low share prices and that that's not the answer in my mind so that's kind of the top the top area of focus today with companies struggling and seeing their stock prices decline after having gone public and high valuations thank you Robin okay so I think we're going to do another round of questions for our panelists and then they know this is coming I'm going to ask them the big question that they've been warned they're going to be asked two weeks ago so let's do another round of questions for our four panelists go ahead there's a question for Eric um it's actually two quick questions one is just do you know about Empower DC which I think is a similar model in DC is it yeah okay and the second is just about the three hundred thousand dollars you said of capital that you raised where did you raise that from and what did the providers of capital receive in in exchange for the capital that they provide okay I'll say the first question first yeah the the company you mentioned um I think if it is the company I'm thinking of uh no not a similar model there it's it's a I don't know if it's venture-backed but it's an entirely privately owned Reicher company which lets drivers set their own prices uh this is an idea that's kind of always bouncing around it's a non-solution of the problems of the gay economy I mean that just essentially incentivizes drivers to go back to haggling with the rider about the fair which is not going to result in earnings I mean essentially it's in everyone for themselves sort of free market model um I not to get too political but like economically speaking that's going to result in potentially downward pressure on wages as drivers try to underbid each other that happened in New York it's why the taxi industry is regulated now in the 30s that's exactly what happened it's why The Medallion system is created which created a whole other set of problems um but yeah no Empower is not a driver and Company and from what I can tell I get notifications I'm constantly saying wait times are decreasing which I think reflects the problem that a lot of Challengers trying to break into Rideshare face which is that they try to go into frontal competition with the big Reicher companies realize that you need to have a gigantic Network they don't and then they usually Retreat into providing pre-scheduled trips and doing B2B we sort of saw that and so we decided to flip it and said okay we're going to do B2B and B to G first use that to build our Network use it as a foundation to build a profitable business and then from there launch into the b2c segment which is much larger um yeah so that I think it's the first question uh the second question was sorry Capital yeah um really really challenging to raise capital for this business I think this is just going taking us back in time to 20 20 29 2020. um the sources of funding Venture Capital they're looking for gotta go faster oh sorry uh so where do you get money to start a business you could go to for tech companies it's Venture Capital who are looking for a specific structure of ownership where they're buying equity and then exiting through a secondary sale somewhere down the road that's not really compatible without a lot of tinkering with what we were trying to do as a co-op also for VCS with other things coming across their desk it's very unlikely that a driver on ridership company is going to be the most is going to kind of fit the profile of what they're looking for other sources you know people go to the SBA we could have done that they require a personal guarantee that was something that we had an adventure with later in our trajectory um not really viable at that we wanted to avoid that because it was pretty high risk um at the very beginning the other main source co-ops get their capital from is Co-op loan funds which are wonderful but most of their lending is oriented towards financing assets which can sort of collateralize themselves like buying a piece of machinery for example or expand or working capital to expand an existing business so they're not really set up to fund startups and don't have the sort of risk return profile on their products that would fit then another source of capital would be Foundation would be grants in 2020 we had a hard time uh sort of getting foundations to understand our story and to understand not just the solution we're proposing they had a hard time believing the solution and thinking that this is going to be successful as a business but they also for a lot of them had a hard time understanding the problem the the myth that Uber and it's ilk are providing great fun flexible gig work that helps people boost their income runs pretty deep and I mean I think that that myth has been successfully fairly successfully debunked at this point but going back in time that was still pretty strong with a lot of folks who to be blunt you would think new better um we got to kind of wrap sorry yeah so we can we eventually we got a loan from shared Capital Cooperative which is a co-op Loan Fund who took a risk on us we also had developed a product line and I can't go into detail which could reasonably project a more stable um business projections and then a couple other Co-op loan funds and crowdfunding okay thank you so I'm uh I'm now told we have five minutes left so I'm going to ask the big question uh thinking about the corporation broadly and the future of the corporation doesn't have to look like what it looks like now and thinking about the five to six thousand companies listed on the NASDAQ the New York Stock Exchange you know what does the model that you are working on and we have four different models bowed for redesigning the future of the corporation especially larger corporations in the United States will take about a minute each and again will go from the right to the left Chris thank you Joseph um I think you know it's I'm not qualified to answer that question so um but I'll do your best um our model you know employee-owned hold Co a lot of the benefits and power and what we're doing is truly just what we've been talking about the last two days all the reasons employee ownership is great and has terrific outcomes for people so thinking about how that scales I really just start to dream about what an employee-owned Berkshire Hathaway would look like I mean can you imagine basically so I'll leave you with that in my wildest dreams we somehow create something like that someday can you have a chocolate subsidiary too go ahead Annalisa um well we'd love to see public companies routinely include meaningful broad-based employee ownership programs and think that that would truly take us from a place of shareholder Primacy to stakeholder capitalism and that these programs are not just part of a benefits package that the employees maybe don't know about or understand but that these companies are really building robust cultures of ownership which is what we all want where the management structures reflect the things that need to be in place for employees to really have delegated decision making and really have a voice in making the workplace better and to maybe they're in a job that didn't you know they wouldn't intend this wasn't like the dream career but they have purpose in their work they have a voice they feel connected to the job because they are interacted in a way where they are treated and able to act like owners so it's a vision we all want but baked into public companies in a more you know sustainable way thank you Annalisa Robin I am very aligned with what you just said and Lisa so for me I think companies really need to put in some thoughtful design levers in their programs that can really amplify participation and get creative with their offerings because the programs that I was planning to talk about today in more depth all or a little bit creative and and had design levers that can really enable and boost participation in their programs and so being doing that I think will ultimately help bring us to another level of employee ownership it's just unfortunate because so many times we're faced with conversations with clients who want to design these really fabulous programs but when all is said and done they don't want to put the right design levers in place to actually make that happen so I think that and then that coupled with just really really important communication education for participants because like Marshall talked about earlier that is such a Miss for companies the two go hand in hand you design a program and that program from end to end should include Communications about how wonderful the program is and it should be ongoing and that just is such a Miss for people they don't want to spend the money on it and and so I think some of that can really help bring us to a better place and gosh don't you think we all behave so much different if we're an owner of something versus a renter I don't care as deeply about something that I rent so I I just think that's my overarching message of like why ownership is so important Eric um it's so funny I had to think of this question a lot and I actually realized I actually did work for a large publicly traded company that did have an employee ownership program it paid around minimum wage uh provided benefits you were 20 hours but strategically scheduled people for 19. and uh arbitrarily fired people I was part of a campaign to unionize that company and got fired for doing so the company's name is Starbucks so it really made me I'm not bringing this up because I want to like smear their name or whatever but the it's because we got to think not just how do you get big college trade companies to embrace ownership but what does it actually mean something I think that I've kind of my eyes have opened to as I've sort of gone from being a radical labor organizer to being a republican um as a someone responsible for I'm not a republican it's a joke uh but the maybe like anyway I'm not gonna go there uh to being responsible for making sure like the payroll gets processed there's enough money in the bank is um that business owners do things for a reason and the reason that Starbucks was making the decisions to run their business in that way it does have to do with the ownership so what does that mean I actually don't know but here's an idea I think I think the answer might be to leverage Labor's pension fund assets to use those to finance work our own businesses I why not you know I don't know if there's yeah or just stop financing really terrible businesses for that bet for that matter well that that's fantastic uh I will remind everyone that in his first State of the Union Address president Theodore Roosevelt II was really a republican called for broad-based employee ownership and profit sharing as did President Reagan during his administration and so with that let me thank this fantastic panel helping us look forward to the future of the corporation thank you so much that was great