Rebuilding the Middle Class through Employee Ownership

all right well I'm just gonna start and talk and eventually people will come come on in uh I'm Maureen Conway I am a vice president here at the Aspen Institute and executive director of the economic opportunities program and as I said it is my delight to welcome you to day two of the employee ownership ideas Forum a wonderful place to meet other people and chat as we're already seeing this morning and share a common interests pleasure to to thank my colleagues at the Rutgers Institute for the study of employee ownership and profit sharing for their partnership on this event um and and I do uh I I want to take a moment before I sort of launch in to also uh thank my team who has been um you know it's so helpful in pulling this all together we wouldn't have an event without them so I really want to thank Matt Helmer sining young Joy Moore Tony mastria Francis Almodovar Maxwell Johnson Amanda fins Merritt Steuben Brynn Morgan Maya Smith Nora Heffernan Joyce Klein and Lauren Starks for their help in putting this event on takes a lot of folks so um so really just want to give them a round of applause so um um so I hope that you uh for those of you who are able to be with us in person or or virtually I hope you enjoyed yesterday's conversation and I hope you enjoyed today's as well um I also want to thank um our supporters for this event the Bicester foundation for Enterprise development the J Robert byister endowment at Rutgers School of Management and Labor Relations Prudential Financial and JPMorgan Chase and Company we have an amazing day in front of us we're going to start this morning with two panels one that's going to really look at sort of the potential for employee ownership to strengthen the middle class and then we'll follow that with one looking at race and gender Equity um for those of you who are here today we're then going to have some private breakout conversations because we really do want to engage you all in this conversation um and so we're gonna you have a handout um so but I'd like you to be thinking about some of these questions this morning as we go through so you can be thinking about what you want to bring to those conversations when we get there so we're going to be talking about what is missing from the discourse and narrative on employee ownership what additional information research topics issues or public conversations such as the one today would be helpful what new audiences and stakeholders we should be engaging and the role you see them playing and and ideas maybe for reaching them for those of you joining us virtually we'd love your thoughts on this on these questions as well and I think we've dropped the handout in the chat so you can see these questions and there's many ways you can get in touch with us to share your thoughts including just putting your thoughts in the chat after lunch we're going to wrap up with two more panels of exceptional leaders and speakers we'll discuss Innovations and employee ownership early this afternoon and then close out the day with a conversation on employee ownership and how it aligns with our American Spirit and values and how it can be a stronger Force for really driving our economic competitiveness and Innovation but also for really helping us you know kind of live with the values we sort of aspire to as as a nation so that's kind of how we'll close and then we'll celebrate uh so then we get through it all and we celebrate with a reception on the seventh floor so I hope everybody stays through for that to celebrate with a a glass of wine and a some more time to to chat informally at the end of the day um our panels today have a little different feel to them we're fortunate to have a number of research fellows from Rutgers Institute for the study of employee ownership and profit sharing joining us so we're going to have a couple of them open with their perspectives on their research uh um before each of the panel discussions um again we'll try to include some q a in the panel discussions because we really do want to include everybody in the conversation um okay last thing before I hand it over to Joseph I need to go through a few logistical items for our our virtual audience um so everyone in the virtual audience is muted but you can use the Q a button at the bottom of your screen to submit and upvote questions we'd love to hear from you we also encourage you to share your views in the chat if you have ideas examples of work that you're doing related today's discussion please introduce yourself and share them we encourage everybody in the room online to tweet about the event our hashtag is talk ownership if you have technical issues during the webinar you can message in the chat or email us at eop.program aspeninstitute.org the event is being recorded and will be shared via email and posted on our website and closed captions are available please click the CC button at the bottom of your screen if you would like to use them and that is my opening announcement so Joseph now I will hand it over to you thank you Maureen and again I'd like to express my appreciation to to Aspen Aspen has been a fantastic collaborator and to the bister family and Prudential and JPMorgan Chase for your support I'd also like to specifically thank the members of the Rutgers team we've had a team of 10 made up of Rutgers and Aspen of workers I'm working on this for four uh four months Jack Moriarty Bethany Dennis Chris Michael Adria Scharf and Douglas Cruz who worked on the research research brief um so we're kind of featuring the research fellows from the institute's fellowship program over the last 15 years Rutgers has appointed 15 to 30 research fellows every year to try to develop this this field and you'll get to meet a lot of them during the day um it's my pleasure to introduce uh Abba bhatarai from the uh Washington Post she's an economics correspondent at the Washington Post I have read many of her fantastic pieces and she will lead the panel today which we made up of Richard Freeman from Harvard fadon cartulus from the University of Massachusetts Tomas Duran from concern Capital Tomas would you please come up uh Stephen Smith from Amstead industry Stephen would you please join us and Steve storken from the employee ownership expansion Network our colleague Doug Cruz is running a little late and he will just join the panel when he arrives Abba I'm turning it over to you your capable hands thank you very much so Richard if you want to come up here and kick us off that'd be great okay hi everybody I had prepared an extraordinary PowerPoint about employee ownership just wait to hear the rest in calabi Yao space which is part of the Multiverse of physics unfortunately people said no that would not do for this group um so I'll give a little a different talk um first I I think it was a great idea of having yesterday's session before the research session because seeing practitioners learning the problems they're having in the field learning what goals they have really is something that every research person should should respond to we should be doing things originally Joseph had said to me oh talk about all the good that we find in the research there's no point to my saying that you heard that from every single person the interesting part of it I think is the mixture between the statistical data that allows them to generalize and the individual uh qualitative things about this company did this that company did that and that is a tough business and research to combine those two together and this is one of the places I think that's being done a best um Joseph also made another comment last yesterday he said Gee every five years people want us to reproduce the same results and uh I think actually there's great virtue to that the social world is not like the physics world the electrons are always electrons they've been electrons forever we are people things can work in a society with one technology they can work in one society and not in another Society um and and so it is it is actually important to continually be reassessing with new data uh uh of things that uh stand up in this field if this Joseph was absolutely right the results are they're stronger there's more statistics there's more of this and that but they stick they they've lasted the other comment I want to make about the research activities we always are talking about averages so it's a two percent productivity that increase that we see in some of the data it is always a dispersion there's always around that number the really positive part of the research that's been done in employee ownership is that in that dispersion it turns out to be reasonably balanced in the following sense in some research areas people are incredibly wanted and we do want to see good results but that often means that you can't publish bad results uh referees will go over here there's got to be something wrong if you if you did not find the positive outcome and so they normally ask for in the research is that be a reasonably normal distribution there's the mean the average and this should be some negatives and there should be some positives if all there are are positives it can be a bit suspicious that there's been some sort of selectivity of which research appears here there's been none of that the the the you see you can go look at the here's the average effects here's the the range of effects so it's a very in that sense very trustworthy uh uh uh uh uh set of results make another comment that comes from that yesterday that uh gee what does it mean that this employee ownership has been raised basically 10 percent of private sector workers had an item and here's an area I don't think we've done enough research on uh because the the the person from the banking in the last sector she said well um we've we've been succeeding in getting things going in and so we've got to put into the equations of the analysis who's going out and it's got to be done in a more of an I would say demographic way so we study inflows outflows and growth of people in The Who Remain and we really haven't done that so I took that as a very useful uh guide that we should do with us a study that that that that that does that um okay um now I want to make a comment about what we might begin to expect as we Analyze This the new law that we think well isn't the new law yet but perspective new law and if you think about who should get employee ownership and there's a Divergence some companies will will benefit a lot some will benefit not so much that you'd think the people who have it now are good are the best beneficiaries we're trying to extend the margin it's likely to be people of lower uh benefits if if there was a 10 productivity gain we'd see two-thirds of the companies would jump over and it would be like this Italy uh example that was that was was mentioned just yesterday oh the marginal people who are coming in are worse it's a theoretical expectation if the if the people who benefit the most come in first as you begin extending the number of people you'd see a decline but we have no evidence of that and that's an interesting testable kind of thing in researchers can uh uh you know can can look at the before actually before I I I I came here I have a neighbor it was a Management Consultant of sorts and I and I said oh I'm going to this conference not that employee ownership ESOP and he says well they better not own their own company because that's too risky everybody has heard this and that's one of the places where the research has been incredibly powerful to say no they're more likely to have 401k plants and and the people leave with the with the with the assets see that's the case it's a reasonable expectation that it's going to be more risky and many um economists and and Business Consultants my neighbor are very you know sure that that's going to be the situation and it's not so that the research can can in this case it came up with positive results for the employee ownership but it could have come up with with net net negative I have two more comments and then I'll sit down the one thing that we as researchers lack in this area is a very clear optimizing model for our employee ownership operates the the max demand for typical firm that we can live with they're all economists live with is it's maximizing profits if it doesn't meet the profit goal it dies eventually that's that's the essential model for employee ownership this came up yesterday in many different ways you're obviously maximizing something that has not only the profits in it but the well-being of workers in it and then the of of of of should it survive well imagine a firm's employee owned and the workers are better off and the uh there are social benefits that that flow as well from the way the firm is operating some externalities positive externalities well it shouldn't be that that firm is operating you know the profit maximizing we're not quite sure how to to sort of represent in a very simple way okay fine um one last comment um thinking about how one's going to look at this law as it proceeds or pursuing its past I I'm very I was deeply concerned about what happens if it adds very few workers what should we be looking at as a goal to go back to the Congress or the or the people and say this succeed succeed I think it'd be very nice to have a research program which where we can actually set down a bunch of analyzes it says this is what we expect I'll tell you my expectation first I talked to Dick Vegas says sitting here someplace uh and I said what do you expect because you're very important in this process and thinking about things and he said well first thing you better think remember is if we have 13 million people today in esops only 3 million are in the Pro non-public uh publicly owned they're in the the private ownership things that's where this is targeted at largely so we should not be thinking about will the 13 million grow to 15 million or 14 million in a period of time and say oh that's not very much in fact we should be thinking of we're targeting small firms and then the the the growth of those firms which will not be adding as many employees as if one large firm shifts and he's going to run me out of here by one one less sentence um because I thought Jim Bonham's discussion of the the five things was really very good yesterday and I told him this I said this is really laid out a research agenda for looking at things and I'll get to one more one he's not he's not raising it uh if you had a hook you see that's what you said my expectation would be there will be a bigger increase in the number of employee-owned Enterprises then there will be of workers and that reflects the being small Etc that now I'm done thank you [Applause] okay so uh I've been told that I'm introducing the first few fellows uh and then Abba will take control of the panel uh I'd like to introduce my colleague uh Douglas Cruz who is a distinguished professor at Rutgers and associate director of The Institute for the study of employee ownership and profit sharing Doug very glad to be here I uh Joseph told me I had five minutes and I I timed myself out at four minutes 30 seconds so I think I'm okay although I just spent 10 seconds telling you all that um I I've been studying employee ownership for uh several decades now when I started my hair was brown and now my hair is gray so the only logical conclusion is that studying employee ownership turns your hair gray I think that's obvious um I did a I updated a summary a policy brief for Iza on what we know about employ ownership well what does all the research evidence tell us it's just an eight page pretty reader-friendly uh thing that anyone is welcome to look at it uh um it has an honest-to-god elevator pitch they told me put an elevator pitch up front labeled elevator pitch so it's I think a pretty uh reader friendly thing um just briefly here where I I outlined four categories of reasons that we're interested in play ownership one is uh the effects on firms and firm performance uh Rick Richard referred to that actually he did note that uh we would expect theoretically we'd expect early adopters to be the ones who would benefit most and later doctors not to benefit as much a meta-analysis of over 102 studies found that over the past several decades found that if anything the effects are growing more positive over time which is really interesting that we don't see this uh this tail off um the second category is worker outcomes pay quality work life and so forth third category of reasons we're interested in employment ship is uh for the overall economy economic stability and layoffs fadon and I have done done some work on this and that's really interesting because there may be some as Alex Brill was saying yesterday positive externalities in Economist language to uh greater greater employment stability uh positive benefits for the entire economy and finally societal outcomes in particular income and wealth distribution and uh rebuilding the middle class that's what we're talking about this morning um I want to uh just kick off the session on rebuilding the middle class with uh three quick facts one informed prediction and one logical conclusion the fact number one is that inequality has been going up that's not controversial I think we all know that from a variety of it's been going up in a variety of ways fact number two there's been a shift from labor to Capital Income the uh the there's a greater share of national income now going to owners of capital than there was several decades ago um Joseph and I found the capital income for the middle quintile of households people in the middle dropped over the past three decades fact number three capital income is distributed more unequally than labor income the top 20 percent receives ninety percent of all all capital income so those are pretty I think uncontroversial facts the informed prediction is that the shift to Capital Income is likely to continue that's what Thomas paquetty tells us technology is becoming increasingly productive and important in our lives I think we all recognize how much technology dominates our lives and how anguished we are when our computer is not working well sometimes relieved it's like oh I don't have to respond to those emails now um okay so that's the three facts in informed prediction The Logical conclusion from all that I think is to increase the economic well-being of the middle and lower classes workers need increased access to Capital Income through employee ownership profit sharing other sharing arrangements and that was a key motivation for Senator Russell long who put esops into the 1940 1974 erisa law foreign my notes here um and and Richards made a nice argument that uh he who owns the robots rules the world by robots he's referring to technology in general workers need to own the robots that that may be taking their jobs in order to keep economic progress broadly shared and avoid a two-tiered society employee ownership is not going to help economic well-being if it just substitutes for other pay and wealth but evidence from a variety of sources points toward employment ship generally coming on top of other pay and wealth functioning like an efficiency wage we we did a study with a survey of consumer finances by the Federal Reserve and found that it certainly seems to come on top of other pay in wealth among the 10.1 million active ESOP participants every ESOP assets are 180 000 dollars employees have been with their employer 10 years or longer have an average of over 300 000 in ESOP wealth and those large average Stakes exist both in publicly traded firms where workers esops typically own only one to three percent of the shares outstanding but also in the major the uh closely held companies majority or 100 East top owned um if we do see an expansion of employeeship doesn't that mean more Financial Risk for workers uh Richard is talking about this not necessarily in fact risk might even be reduced and I'm a very risk-averse person myself so I'm very concerned about this excessive Financial Risk is a danger but we found even among the most risk-averse of 40 000 employees that we surveyed two-thirds of them want at least some ownership profit sharing or stock options in their pay package these plans generally come on top of Market level paying benefits as we said so that greatly uh greatly reduces the risk also the biggest Financial Risk faced by most workers is job loss and as fadon and I and others have found that there seems to be a greater greater economic stability finally Harry Markowitz the Nobel Prize winner for portfolio Theory worked with us a bit on this he explicitly rejects the idea the risk aversion condemns employee ownership his theory concludes workers can prudently have 10 to 15 percent of their of their assets their their own household Assets in employee ownership if the rest of their household wealth portfolio is is well Diversified there's just some quick thoughts um I think a play ownership can play an important role in rebuilding the middle class and look forward to hearing what others have to say about this [Applause] okay so I'm going to invite Richard and Doug to return back to the audience as we prepare for the panel and fidan kertulis from the University of Massachusetts at Amherst will give our third and last research presentation thank you fidan and then Abba will take control of the panel it's supposed to be a professor acts confused so I'm sticking with the image for Don good morning everybody it's so nice to be here today on this beautiful sunny Washington DC day my name is fidan kertulis I'm a professor of Economics at University of Massachusetts Amherst I'm also the co-director of the UMass Center for employment equity I've been part of this employee ownership Scholars group for about a decade now and um it's been a real honor to be a part of it and I learn new things every time I meet with these with these wonderful group of Scholars so one thing that so before I start my comments I wanted to mention that yesterday's day one meetings at the U.S Senate were very important it was a very important interface between Scholars practitioners and government policy makers and I was very delighted to hear about the employee ownership investment act that is being put forward in Congress I was also very delighted to see representatives from various government agencies including the Department of Labor the some of the leadership from the Department of Labor was there and I got to pick their brain about what data they are thinking of collecting Beyond The Form 5500 employee ownership in pension plans that pretty much you know all academic researchers in this area have been using now for decades we need more employee ownership nationally representative employee ownership data and he was very interested in this and so that was also a very nice outcome of the meetings yesterday in Congress so I wanted to make a couple of comments about what research has to say about employee ownership and wealth inequality income inequality that was what I was asked to talk about today and based on some of my own research with other co-authors so an important Channel through which employee ownership can strengthen the middle class is by strengthening workers employment stability during economic downturns so in some of my work with Doug We examined employment preservation at employee ownership firms versus firms without employee ownership using the famous Department of Labor Form 5500 data and we asked whether firms with employee ownership programs exhibit greater employment stability in the face of Economic downturns and recessions [Music] um and we specifically looked at the Great Recession that employee ownership firms provided greater employment stability and job preservation um to their workers uh in particular uh when the unemployment rate in the overall economy went up by one percent firms without employee ownership reduced their employment by three percent as opposed to firms with esops that reduce their employment by only 1.7 percent so that's a big difference we also found that firms were more likely to survive through economic downturns and these results are important for a variety of reasons and sort of highlight the strong positive externalities that employee ownership can have on the overall economy including it from a broad perspective reducing unemployment and thereby reducing um the harmful effects on communities reducing crime reduce increasing family stability the sort of improving the tax base when people get to keep their jobs all of these positive externalities happen also boosting consumer purchasing power so there's a clear justification for widespread government support to broaden the prevalence of employee ownership in our society which is why I was very delighted to hear about the new employee ownership investment act that is going through Congress at the moment so I wanted to close my remarks with just some good news about new research that we are doing using U.S census data we're going to be in working on this for probably the next several years basically using census data on all firms all workers and linking it to various data sets on employee ownership so that we can actually look at longitudinal relationships over time between employee ownership and things like income and wealth inequality things like whether the benefits of employee ownership are growing over time which is something that Doug mentioned so I wanted to close out on that optimistic and positive research note thank you very much foreign so uh thank you very much I'm going to call Veronica Ortiz to the panel and again introduce Abba bhatarai from The Washington Post and uh APA will now take control of the panel and banish me forever okay thank you Alba really appreciate your joining us all right good morning everybody and thank you so much for joining us you know the pandemic really forced a reckoning among both workers and employers and since then we've heard a lot about the the continued erosion of the middle class and also about the importance of sort of rethinking the future of work and I'm really excited to discuss ways in these two Challenge and ways that we can bring tackle these two challenges together and with that I'd like to start this morning's conversation as we get started I'd like to ask each panelist to introduce themselves and maybe comment on their opening remarks and we'll go from there Veronica let's start with you tell us a little bit about yourself and your experience at what web Industries which is a hundred percent employee-owned company in Massachusetts um and for those of us who have never been a part of an employee-owned company tell us what that's like good morning everyone first let me say I'm really honored to be among you all and have learned a lot these past day plus so thanks for having me again my name is Veronica Ortiz I'm with web Industries headquartered in Marlborough Massachusetts there I actually work in I.T as the business systems analyst manager and our team basically helps design tests train Implement software systems and support the onboarding of new business so it's it's a lot of fun it's hard work a lot of fun again the web Industries is a Precision contractor and sorry Precision converting and contract manufacturing company uh we actually started or were founded in 1969 in a small East Boston Warehouse and have grown now to nine sites in three countries and I'm really proud to be part of Webb and we'll talk more as the day goes thank you perfect Steve Smith I'd like to turn to you we have two Steves on this panel so Steve is president and CEO of Amstead Industries Incorporated which is also 100 employee owned and thank you first of the Aspen Institute and to Rutgers and Joseph blasey for the opportunity to be here and talk about one of my favorite subjects how employee ownership can work in a rather large corporation over over 35 years now so Amstead Industries has been around since 1902 one of our businesses dates back to the 1870s actually we're in four businesses we're in the supply of rail parts and then the supply of truck parts and the supply of automobile parts and then also cooling systems as well we're four and a half billion of revenues now 65 plants around the world headquartered in Chicago um we I am proud to say uh since we became an ESOP we became an esap in 1985 when a hundred percent in 1998 so this is a 38-year test run here which seems to be working out pretty well I'm proud to say we've created over 2 500 millionaires during that time many people working on the floor if someone starts at a very modest level of 50 000 dollars a year annual income by the time they stick around for 27 28 years they will be a millionaire if they started a hundred thousand they could be several times over a millionaire I used to be embarrassed to say that but with life expectancies what they are and people retiring at 60 or 65 many will live into their 90s right that's sort of the sum you need to have a comfortable retirement and Studies have shown in fact that ninety percent of ESOP participants feel secure about their retirements and and that's the reason why one of my favorite stories I I have to let in is uh at our Baltimore air coil business one day we had just announced our quarterly stock price as we always do and one of the workers his supervisor came up in the worker on the assembly line was just beaming he was happy as could be and and he says to his supervisor Joe I'm really happy today and and the supervisor says I can see that but you know uh why and he says today I'm a millionaire and it's stories like that that absolutely keep you going and make it work people talked about the you know it's a competitive Advantage people talked about the great resignation we had 50 people who started in a cohort of our up-and-coming leaders around the world that we brought together at University of Chicago business school for three years of training during covert they came in quarterly so these are obviously key people that are building our future we didn't lose any of those people during the supposed great resignation because they are engaged it's a competitive advantage that our employees are engaged because they own the company it makes a difference but it also affects how management behaves as well too because esops are trust are structured as a trust from a legal standpoint but it's more than just a legal relationship it is a relationship with your employees and it affects how management views risk and you don't do things for your ego you do them for your family that scattered around you so it's a powerful structure and uh I'm proud and always glad to talk about it so thank you [Music] Tomas Duran is president of concerned Capital Tomas tell us a bit more about yourself about concerned capital and how it fits into the larger picture here all right good morning everybody thank you for having me Maureen it's great to see you um and uh I'm real excited to share our story and our approach um it's kind of hard to follow Stephen I mean from from the heights of creative millionaires to where we operate is really the Grassroots we use employee ownership to fight gentrification we use employee ownership to create the shortest path to the middle class in the Southern California area I'm an urban planner by trainee and what I've do is look at systems and how they interact with each other and found that we have this enormous concentration of manufacturing in Southern California but it's job shops there's 8 500 job shops in the supply chain in Southern California almost 90 of them are owned by people who are past retirement but more importantly they're people who are relying on the sale that business to fund their retirement and they've been through three major economic events that have impacted how they look at the world and so when we come into this space and we talk with the workers and we talk with people about employee ownership and that path forward or that exit for the owner it's a real complicated space but it ends up being something that's a viable option for those retiring owners but moreover puts those employees in the driver's seat and it energizes those companies in a way that it's really hard to do beyond that and the last thing I'll mention is that if we love and play ownership because it's the fastest way to sidestep the institutional racism and barriers that keep entrepreneurs of color from starting their own businesses if the path to wealth in this country is business ownership and home ownership but it's continually blocked by think by things have been institutionalized whether they're on purpose or not it's a real nice way to sidestep that when you go into a bank and you're the owner of the company and you're trading on that company's track record you are asking for debt based on how that company is performing not necessarily who you are as a person and that's been a really good way for us to sidestep a lot of those things and shortcut of that process foreign you are executive director of the employee ownership expansion Network and have been involved with esops for more than 25 years tell us a bit about yourself and uh what what esops can do to strengthen the middle class and Forge these connections well thank you very much hard to follow these three with getting you know Applause and all the great things but I'll do my best thanks for having me I really appreciate the Aspen Institute Rutgers and everybody involved I thought yesterday was a great day for those of you that were not there yesterday one of the speakers that resonated with me the most was David hinkapee who runs the small business administration district office here and he stopped and he said to us imagine something imagine if two-thirds of your city or two-thirds of your state or your county think of your region if two-thirds of that place had workers worker owners what would that Community look like what would our society feel like what would change well that's why I get up every day that's why the people that work with me get up every day eox is a national non-profit that creates sustains and helps a network of State Centers for employee ownership we are the boots in the ground honest in a state that tell everybody about employee ownership I say whether we can get an audience of five or five thousand Whoever has an audience we will go and we will speak we're going to talk more about how that works and how we do that in a little bit but this was started inside of the national Center for employee ownership and around 2014 or 15 we became an official non-profit organization in 2019 at that time there were eight State Centers for employee ownership there are now 21 State Centers for employee ownership and the staff of those like I said are the boots in the ground helping business owners their advisors Community leaders again anybody and everybody that we can to tell them to help them imagine what it would look like because we also heard yesterday Jim Bonham and others had all of these you know the five things that are barriers to entry and we talked a lot about all of them except for one that kept coming up which was awareness and knowledge and education and that's what I'm about so I'm happy to be here and happy to share some more thank you [Applause] employee ownership we tend to think about the outcomes for businesses as separate from the outcomes for workers but obviously those things are very connected and I was wondering if you could talk a bit about how those two pieces come together at Amstead in terms of worker success business success and also overall culture well as I said it is a competitive advantage that your employees own the company they are engaged at a level and they are they are benefiting from the fruits not only of their labor but the capital as well and it just brings an attitude that therefore when we're dealing with customers they sense it they understand that they're dealing with an owner they're not dealing with just someone doing a job and so it propels the company and the attitude of your worker and the satisfaction level of your workers makes you a better company and them being a better company is a very productive Loop there it makes the workers happier too as well so the two come together very naturally for us actually and you touched on this little bit earlier but can you talk a bit more about how this played out during the pandemic and the period that we now know as the great resignation what did things look like internally for your company then you know there I have to say they it really proved itself during the pandemic we're in critical Industries we didn't get to sit at home we had people having to work from day one on the line and we had to do it in very different ways we had to really alter the layout of our factories and do a lot of things to keep people safe but there would not have been trains running in the United States or trucks running or cars being built or buildings being cooled where we still not working and our people stepped up without fear with courage and um and I always felt that we couldn't have a two-class system either we talk about divides in our society right now we weren't going to have a world where the office workers were hiding at home and everyone else was laying it out on the line all the time and the attitude throughout the company of stepping up and staying engaged doing so in a safe manner but staying engaged it really played out during the pandemic and frankly we're a better company for it our people learn that they can adapt to any set of circumstances and as an owner that's what you do and it was just reflected throughout the company so it was a powerful test of our structure I'm I'm glad to say we were highly successful and and we're a better company for it now start working with businesses how does this all work in practice and can you give us some examples of what this transition to employee ownership looks like on the ground sure I'd love talking about myself I mentioned earlier we kind of come into that Grassroots it's when these little job shops they're 49 because Obama Care kicks them at 50 kicks them into Obamacare gets more expensive to operate but at 49 they can grow and operate and have a nice um operation level of operation but at some point there's a there's a life event that's when we usually get called my business partner Bruce Dobb and I have been working with manufacturers in this space in Southern California for 30 some odd years and usually we get called by a banker or an accountant or one of the Local Economic Development groups saying hey this person had a life event this place is in danger of closing so it's a sudden and severe event that triggers us coming in and going okay let's figure out how to keep this ongoing concern so moving forward capture that Good Will in those jobs and maintain that ability or maintain that capacity for the local supply chain so we'll come in early and figure out what that path forward is the goal is always 100 ownership of these businesses but if we need to save the job by doing a transition that that are creating a ownership model that creates a path to ownership for everybody but maybe concentrated in a few people at first or creates a profit share or creates a a shared government's model so that the employees feel feel that they own it and want to stick around that's how it always starts and then we create the space to develop that culture of ownership that allows for co-ops or esops to come in but with the time that they need to be implemented well um and I think that that's the the key part of it it's being ready and being able to access tools like layout forversion be able to access different programs that are out there to support these businesses to get them past that rough time because that life event is triggered a crisis in that business and so when you are coming in during a crisis what are some of the biggest obstacles and challenges that you guys face and where are the where are the tunities how can you sort of transition from one to the next a lot of times what happens if the owner doesn't have a succession plan it it triggers to a trust then you have a lawyer who's managing the trust making decisions about the business and oftentimes because the risk averse the easiest thing for them to do is shutter shut the business down and so you have a very small window of time to demonstrate to the family into the to the owner into that space hey there's another option here and realistically when you have someone who's near retirement age they're kind of absentee owners already anyway and so the the company can run run itself so we come in and just kind of help package that idea in a different way because most of the time when you're telling an owner that you want to sell the business to their employees the first thought is there's no way those are workers they can't do what I do they don't understand payroll they don't understand you know what it's like to have to carry insurance they don't understand time uh wage and hour lawsuits so but it's getting past those initial things that kind of create the the space for something like this to work perfect talk to us a bit more about these State Centers and why that local approach is important here is this a model that works for everybody you know how do you how do you fit this to the companies that you're working with yeah so I think you know pigging backing picking back off what you said employee ownership has been around since well ASAP has been around since 1974 and we heard from Joseph yesterday that employee ownership has brown since you know Washington George Washington's days but um with esops and employee ownership and specifically esops esops have been sold and I'll use the word sold because I used to be a practitioner I never thought I was selling a product and I know you don't feel like you're selling a product but what I've learned is I've switched over to this non-profit side the business owners look at us as selling a product and so the state Center's role is to be a safe place for a business owner a community leader an advisor that doesn't want to look dumb because they don't know what you're talking about it's a safe place to learn about employee ownership and we're agnostic on what types of employee ownership worker co-ops employee ownership trusts csaps but it's a place for them to come with unbiased advice and to learn and to not feel like they're being sold the product and we've seen that work the more we create these centers the more we do the storytelling the less they feel that they're being sold the product because it is too good to be true I'm a business owner I've never heard about this how could I never hear about this of course this isn't true and so that's the main purpose of a state center is to be that safe place to share that information we do that through storytelling the number one way that we can do that is to not bring someone like me who has all of this knowledge about esops and pretend like I'm speaking at their level or making it as easy to hear as possible what I need to do is I need to bring Steve I need to bring Veronica to the role to the room and tell their story and when I have a business owner in front of a group or one-on-one and tell their story they now listen and we are now in the room where it ha is going to happen according to the Hamilton song we just want to be in the room where it happened we know it's not best for everybody but right now we're not even outside of the building we might not even be within three blocks we just want to be in the room that it happens and so that's what the state centers are doing with the very limited staff right now very limited capacity but they're trying across the country to tell that story perfect um and that's a great transition to Veronica Veronica can you tell us in terms of culture and just being involved in day-to-day decision making what does that look like for you and I'm also interested in what working for an employee-owned company means for you and your co-workers uh co-owners in terms of both your work life and your personal life thank you well at Webb really the leadership insists requires engagement from all employees and we're actually all employee owners and we're happy to do so so and we do so in practical ways right we do things like book clubs where we learn together and share ideas together and collaborate and then we actually had one particular book club that turned into an implemented program that book was ideas of free we read it as an organization it's by I'm going to remember Alan Robinson and Dean Schroeder um and this was actually an amazing Catalyst to to Really uh promoting continuous Improvement throughout web Industries it engages everyone at all levels and small teams the investment in time is very small the teams are actually given the gift of being empowered to make the change if the team agrees on it and a budget to do so as well so that's something that really has facilitated a lot of positive change at Webb and certainly a lot of buy-in from all our employee owners overall throughout the years we've also done a lot of brainstorming again involving everyone at every level at the company on how to achieve the company's objectives for the year it's a really powerful tool when you gather someone everyone from the operator on the floor to your plant manager and sometimes also the c-suite participates in in this as well where you're really together figuring out how you're going to be involved in increasing 50 percent of profits by 50 percent you know it's really something that I don't think your regular company would do and some of our employee owners truly appreciate so working at Webb that definitely impacts the kind of culture we have it's very much a family I know you hear that over and over again from a lot of employee-owned companies most of us are just happy to go to work happy to work together and happy to grow the company and it really has a monetary impact as well so we've seen over the last 12 years a steady increase in in stock value of about 14 to 15 percent and that includes a significant dip that occurred back in 2020 as you can imagine when when covet hit us and we serve one of the industries we serve as the Aerospace industry so you can imagine that the aircraft companies were not purchasing parts to make new airplanes our employee owners actually uh really really came to task and we had people come from all of our sites including our European sites to assist in what was a pivot in business so instead of serving the Aerospace business we concentrated on the medical Market we expanded the one of our sites in in Massachusetts actually to make a lateral fluidic immunoacic devices or strip tests in other words like you would use for diabetes but now we're making covet tests right and this effort this all hands on deck effort we had the CEO the CFO an operator customer service all in one line packing covert tests to be shipped out and it's it's one of those Milestones within the company and we knew that we were helping the company survive our company survive and really the plans for our wealth in retirement fabulous [Applause] Steve storken State Centers are poised to grow especially with the recently passed work act I was wondering if you could offer your final Reflections on where that work is headed and sort of what the future looks like looking for me yeah which Steve we got Steve S right all right well before I get there I do want to say I had the pleasure of visiting uh web Industries with Congressman Courtney um and one thing I never thought of is as we all open those covid tests over and over and over again every single time we had a sniffle um every single that was in that covid test came from a different manufacturer and here at web Industries there were six lines in a clean room and each one of those pieces was put into that box by an employee owner that blew my mind that we're opening these things thinking you know it's just excuse me that it I don't know I didn't know what I thought but I had no idea so every time I opened it I thought of web Industries but as far as and so it was just great to see that an aerospace company is now I mean the pivot that doesn't happen and that's employee ownership it worked as far as the work act goes for those of you that don't know the work Act was passed in December of 2022 as part of the Omnibus spending Bill and it authorized 50 million dollars for the spending on education and Outreach at the state level specifically on employee ownership offers technical assistance grants other things it'll be housed in the Department of Labor and so starting in 2025 that 50 million dollars will be passed on to the states through a grant making process Now 50 million dollars when I first started to hear that and I heard that it got passed we definitely celebrated because what else could help a state center what else could help many of our partners in this room who do Outreach and education with us and then I started to look at the numbers and the numbers show that if every state were to try to access the maximum Grant on your number one of three hundred thousand that gives us 13 states that have the ability to receive federal dollars to do this Outreach and education and if we all try to play nice and share you know the 21 state center so far and the other partners across the country we will be able to do a little bit so we are part of a movement we are part of a movement that's going to change the way business is done I sometimes wonder whether or not the movement is here only and people are not hearing us but we're going to take those dollars and try to increase that movement but what we really need help with is increased capacity at all levels we hope that these conversations that we're having with the state governments about housing State Centers getting some State buy-in maybe a state center or office for employee ownership inside a state that that will help create these conversations to say there is more funding that needs to be needed needs knee is needed we're seeing a lot of impact investing we heard a lot about impact investing yesterday I'm so excited about the eia bill all the things that Jack and the ESOP Association and others are doing to bring Capital to the table and we're seeing a lot of capital come but are we going to be able to fund the pipeline and the activity that's needed for people to invest in these jobs into these companies because of covid we're seeing business owners coming out of the world war woodwork saying I don't ever want to go through that again my wife said to me you know I saw a business owner who said my wife said to me you're an absentee owner but you're really not an absentee owner and you will sell the business we need to retire and he was happy that he found employee ownership and so all of that being said we're trying to come together to get that capacity so that we can have the Outreach and education and I'm super excited at where it's going but I'm just a little bit hopeful also that we can bring more people to the table because right now I think it's the table is too small for the panel about how you've been at web Industries for 19 year these days a lot of younger workers move around a lot more often than that and I'm wondering if you could talk to us about you know as we look to younger workers as the next generation of employee owners what are some of the things we need to be considering and need to be talking about thanks Abba we definitely have a Workforce at Webb where we have many people with longevity right we tend not to want to leave but the newer generation coming in may not see it this the same way and so we've definitely had to think of ways to to make Webb a compelling place to be certainly a culture is one of those through doing things like engaging them in day-to-day decisions and empowering them to make changes to make their work life better but also there's more tangible things that are needed right and then you just have certificate that isn't although it's awesome to look at I appreciate mine every year um it's it's not something they can always relate to when it's 40 years out right so what's what can I get sooner so certainly we heard some talk about profit sharing Webb does that as well and that's definitely a helpful tool I think for that creating that compelling environment to retain younger employee owners but we had to also turn to education and not just educating about ESOP and hey here's an employee who's been here 10 years look at what their certificate of course without names and such what their certificate looks like and how much you could be earning if you were to stay here for this amount of time but also incentivize with education we have some people entering that maybe have some college or maybe couldn't afford to pursue a masters and always wanted to and so yes a lot of companies offer tuition reimbursement but can we do it a little bit better than most companies do so Webb's education assistance program actually prepays tuition fees and books 100 for every employee who has an approved you know curriculum at a college of course there are some limitations like we won't pay for for Yale or Harvard you know the the monetary assistant is is basically limited to an in-state State University tuition which is great you know we have UMass in our backyard if we're in Massachusetts which is an awesome institution and there are many great state institutions so that's definitely those are definitely some of the ways that we're working on holding on to our to our younger Workforce and so far we're having a pretty good track record so Tomas excuse me there's been an increase in community development financial institutions that are working with employee-owned companies how important are these Partnerships and how do you get concern to Capital help Forge these connections oh they're super duper important to use a technical term concern capital is small it's small and Scrappy in order to have impact we need to have Mission aligned partners that can help us amplify what we're doing and so we look around and find people who are going in the same direction but may not have the desired outcome that we have and we kind of ride with them along as long as we can to get that desired outcome one of those was actually the Aspen foundation and the Aspen Institute and that's why I became a job quality fellow amplify that impact we're actually doing a program funded by JP Morgan in conjunction with common future and their Urban manufacturing alliance called tools for Equitable acquisition and Manufacturing team and what it does is train cdfis and how to identify potential businesses that there are there that are already the borrowers that are ready for a transition in ownership how to use a technical assistance funding that they have from the federal government to provide the the programming for the employees that want to buy the business but also to connect to exit planners to help that owner really make that decision to leave the business right and so by working with those cdfis who are already positioned in local economies who care about the local living economy and wanting to recirculate those dollars there it's it's a perfect match for that before I like let go of the floor I want to mention one thing cyber security a few years ago I worked at the University of Southern California in their Center for economic development on a DOD funded program to strengthen the competitiveness of the defense supply chain in Southern California cyber security is the biggest issue it's one of the reasons why people are selling their businesses they don't want to investigate or they don't have the money to invest to create new processes to create new policies to buy new servers right so it creates a real it's a real threat cdfis are there to help bridge that and in terms of the monetary but there needs to be someone who can help them understand or has a desire to learn that new trick which is oftentimes the employees now this is I'm bringing this up here because it's not too far off not too far in the future that insurance business insurance premiums are going to be based on how cyber secure you are the ability to get Federal contracts or be in the defense supply chain will depend on whether or not you're compliant with the federal government cyber security now it's going to hit defense first but it's going to go to the hospitals and everybody else later I'm bringing this up again because happy employees are more careful about how they do things and the number one breach in cyber security the number one problem is employer someone picking something up someone leaving something open it's it's doing things that can be totally avoided but that happy employees or more content or more involved employees owners would be a little more careful about because they don't want that their own company to go up into that risk so as we start talking about public policy we start talking about how different ways to encourage this understand that cyber security is going to be huge employee ownership can be the thing that gives that company a competitive Advantage but also not only in federal contracts but in in the defense supply chain and of the supply chains perfect um and one final question before we open this up to the audience but Steve Smith I'm wondering you know we've discussed already employee ownership has a lot of bipartisan support which can be very rare these days I'm wondering if you can walk us through that why does it have this bipartisan support and where should the conversation go from here it does have great bypass bipartisan support I'm always pleased that I see that on both sides of the aisle Chuck Schumer has always said how come there's not more of these you know um for for the Republicans it's the ownership society and for the Democrats it's almost socialism right uh in a certain sense so um and I always say to members of Congress you don't get credit often but this is something that you did quite a while back and it's worked really well and it's proven itself and it needs to stay strong I I appreciate all the comments from my panelists though people who are thinking about what to do in the transition of their business next often don't even think about this structure and so what you're doing Steve I think is so crucial to make sure that there's broader awareness out there and there also our impediments the lawyers Tomas mentioned and I'm a lawyer by training I have to admit um but uh it's complicated sometimes and people can come and say ah I can get you a sale right now it's easy you'll get your cash right away it's a little more complicated and and the Department of Labor you know their job under erisa is to protect retirement plans and esops are a retirement plan and but that's another layer of complication people have to complicate there were deals done right before the 2008 crash which were then reviewed after that crash and under that prism sometimes those could be challenged and so someone considering whether or not to do an esap that's something they had to consider that there were those kinds of complications and finally right now maybe something thing that hasn't been talked about at this conference is the oecd some of you are aware of pillar one and pillar two and pillar two would impose a 15 minimum tax on companies worldwide at the entity level well the the one thing that Congress did so well was provide a very beneficial tax structure that helps these ESOP survive in the United States and if that under oecd if those companies then became subject to that 15 percent tax that would be very bad for esops going forward I think Department of Treasury is aware of this I know eska is working with them on that issue and that's an issue that over time we want to make sure gets resolved appropriately with the oecd as well too so all those things come together but it's been an incredibly successful model and I'll add on cyber security too you're exactly right Thomas we have 20 people who full-time just spend 24 7 doing nothing more than monitoring our company there are State actors out there right now we were in Russia before the War Began we do a lot in China and there are State actors out there right now who are often attacking and you need to have robust and we spend millions of dollars on that just having robust defense it's a crucial competitive consideration so thank you thank you and if you have a question in the audience please raise your hand and we'll get a microphone to you [Laughter] yeah we this one here okay I visited 592 companies in my career in the ESOP world I will tell you I send tribute to the Aspen people and to the Rutgers people for having Amstead and web Industries you can imagine 592 companies some were wonderful some were average some were great disappointments I also understand why so many members of Congress no matter what their politics are on the big picture are impressed when they're around ESOP employees I thank Aspen I thank Rutgers for having Amstead and Webb speaking to this group today thank you all right thing that I think comes up a lot that we don't know the answer to when we try and figure out why there's not more employee ownership and what the barriers are or whether we have a challenge with our product you know complexity cost lawyers regulation litigation Department of Labor all of the you know lack of lack of capital uh to make substantially all cash transactions or whether our problem is a marketing problem awareness knowledge of the idea of any stop and what and how to accomplish it and thirdly of course misinformation which is incorrect knowledge about what esops do and don't do I'm wondering whether there is and where how can we have some research into the marketplace to figure out whether our core issues are quote unquote product issues or marketing issues I've tended to believe with my own experience that it is much more of a marketing problem it's much more of an awareness issue because I have not had in my experience of going out and talking to the world about esops and trying to accomplish them I haven't found that things don't happen because people say well there's too much litigation or it's too complicated now I talked to the selected group of people who are aware and have become interested but I'd love to see you both hear comments and ultimately to see some real research about how business owners make decisions and whether esops are part of the considered set and why they don't choose any stop if it is part of the considered set I can I can address what we're seeing just in the four and a half years that we've been out there doing this and their other State Centers have been around for a really long time that say kind of the same thing we would agree that it's aware awareness and knowledge and that if someone comes to us and they are ready to exit their company or change the ownership that they're not coming and saying and then leaving and saying well that was just too much that was just too complex if they come in the door unfortunately right now most of them that are coming in the door are not ready to exit they're simply saying I now have to exit I got to start thinking about this I should have done this a long time ago but if they come in the door and they're starting to get the information they may not take the employee ownership route because there are other things that you know happen but it's not because of the complexity or the misinformation I would love to see whether or not from a study standpoint that proves that but there are no statistics we want to make sure and we're starting to get Baseline data with the people that come through the doors if they don't go employee ownership why and so we're starting that I'd love to have some help on the research side we're doing it anecdotally but I think that's a key a key stat that we have to find out okay hello my Marianne bister thank you all for being here Tomas I'm very excited about hearing your efforts with cdfis if I understand correctly we have about a thousand cdfis serving rural and urban communities across the United States I've had the honor of supporting several of them that have recognized employee ownership and cooperatives as part of their mission I'd like you to comment on how many cdfis understand and offer support to employee owned and cooperatives and through your training how many are you trying to reach two other questions is how can we help spread the word and what research opportunities do you think there might be well thank you for for asking the questions I've been I'm a big fan of my own voice so anytime I get to talk a little bit more about it um look I think we have a challenge in the cdfi space right now because there are some that are very oriented towards profit and towards and and growing and growth and they're directing or or directing their efforts towards partnering with private equity and Adventure Capital to to move things forward and employee ownership doesn't fit in those spaces when you have the the core of the city of eyes which I want to believe is more of them but I it's becoming farther and fewer between a more competitive to raise money so it's a challenge but there are some really core cdfis that are good and who are focused on doing that type of work I think the opportunity for us is to tell this story in a way that makes it compelling to all the city of ice that this is a way to not only increase the number of borrowers that they have available to them but also can help them raise capital or that's concerned about this kind of issue from Mission aligned Capital sources as well as how they can make an impact that's part of their Charter right I think the increased attention on it at the federal level especially from the Department of Treasury and from the different parts of the government are also influencing those kinds kind of things but it's it's messaging and we just got to keep at it because again cdfis I think I think a lot of times in terms of time right when I'm trying to make that case of somebody's like what time frame are you thinking right a cdfr might be thinking quarterly in terms of what are my numbers what bonus am I getting or what what do I have to do in this quarter to figure this out so how do I make that easier for them to hit those quarterly numbers how do we package this in a way that makes it more compelling to them whereas the employee the the owners I'm talking to are usually thinking about the next payroll cycle they're thinking about the next you know if if they're in the strategic planning of you know longer it might be the next quarter but understanding what the different audience's time frames are has been the most helpful thing for us to to get to see the advice we've trained four right now that's part of the first cohort um we'd love to open it up and do additional training for it now that we've developed the curriculum and the programming we're working with like I said common future and Uma on um spreading that out across the country the initial four are CDC small business finance CRF USA up in Minneapolis PCR in Los Angeles and Mountain Biz Works in Asheville North Carolina so we're trying to hit all over and you know and and moving forward and I just real quick I think the state small business credit initiative which the funding for State small business credit initiative ssbci 2.0 is a huge opportunity the state centers are working I can't wait to talk to you more about your program we're trying to do the same thing but the dollars that have come into cdfis from all the different programs but specifically ssbci that says employee ownership is an authorized use we have a huge opportunity so far no one's taken up taking us up on it they it's they're like you said they're too busy it's just not in their wheelhouse right now and we got to change it great we have time for one last question in the back uh my question is for Veronica a successful employee-owned companies that last any amount of time create their ownership culture ultimately face a key challenge of leadership transition whether it's the founder leaves or a long time CEO leaves web Industries recently went through that process can you speak to that how you dealt with it from an internal employee perspective in a general sense of how it went thank you for that question that is definitely a challenging time you are not mistaken there and it's it's um it's difficult for those of us who aren't necessarily on the c-level role to affect that change to indoctrinate if you will the new c-level folks into the culture of web but thankfully because we have those those relationships and I think Jen Briggs mentioned yesterday that the culture happens when you have and I'm paraphrasing but this connection right the the connection of people that we are very comfortable with the sea level suite right we can have challenging conversations and have and you know they may not be able to give us a response right away they're not going to go you know reprimand someone for not fitting into the web culture right away but they will work through through sort of training them and and indoctrinating them into that culture so I talked a little bit before about book clubs right and and just implementing systems to us to Aid in growing that culture that happens on our leadership level as well there's a lot of training there is recognition that we we had some gaps in in really living that culture on a leadership level and so our team is actually our leadership team is working with The Brown Center and going through the advantage and really in an effort to remove politics out of out of their management style and really again embrace the culture that Webb has had for for many years now and um and so far and real and also I should say there is a along with that training that happens to leadership level and on all levels there's like a heightened uh social sensitivity training if you will so that we learn to work well with one another regardless of of roles and titles thank you I'll just add you know CEO succession is something that's near and dear to my heart too and there's a strong bias towards an internal success or if at all possible and I have an entirely independent board which not all these companies do and but you know I work with them assiduously to make sure they understand how important the culture is to our success and so they will understand when dealing with the successorship issue that that has to be a Paramount consideration as well fantastic well thank you all for a fascinating conversation and for joining us this morning foreign