All-American

Moira Herbst writes:

Last week, retiring Minnesota grocery chain owner Joe Lueken did something unusual: he gave his business to his 400 employees. The story received widespread attention as a heartwarming, It's A Wonderful Life-esque act of beneficence. But Lueken's decision was no one-off Christmas fairytale. In fact, Bob Moore, owner of Oregon-based cereal producer Bob's Red Mill Natural Foods, did exactly the same thing two years ago.

Their actions reflect the under-the-radar but growing trend of worker ownership in the United States. The surprising truth is that there are thousands of successful, majority worker-owned businesses in the United States. We're not just talking small-scale hippie co-ops: the largest majority employee-owned business is Florida-based Publix Super Markets, a $27bn company that employs 152,000 people. That's more workers than Costco (COST) and Whole Foods (WFM) combined. At a time of high unemployment, soaring corporate profits and diminishing job quality, employee ownership offers an appealing, viable alternative to mainstream corporate capitalism. It's a way for workers to own "the means of production" without overthrowing the system – and without asking a gridlocked Congress to create a jobs program.

Far from some communist ideal, employee ownership is an all-American third way that both left and right can embrace. Worker advocates can applaud the model's more democratic structure, while free marketeers can admire its entrepreneurial spirit. Workers who directly reap the fruits of their labor – rather than toil for higher returns for anonymous investors – are more motivated, productive, and creative. According to a study by Harvard and Rutgers researchers, companies with substantial employee ownership often outperform those without, because of lower staff turnover and stronger trust relationships at work.

Fortunately, the idea is catching on. Since 1975, the number of companies with partial employee ownership in the US has grown from 1,600 to more than 10,000 – about 10% of the American workforce. We sorely need these alternatives. For a nation fixated on the idea of individual liberty, Americans have a remarkable tolerance for undemocratic, top-down leadership at our workplaces, where, after all, we spend most of our waking hours. In recent decades, the playing field between employers and employees – that is, between capital and labor – has become severely warped. Especially at the lower end of the skills spectrum, workers often face a lack of respect by management, erratic schedules, and punishment for trying to form a union. The vast majority of American workers are "at-will" – meaning, you can be fired for any reason. Perhaps your performance has lagged, or perhaps the boss doesn't like your new shoes.

If more enterprises were employee-owned, fewer workers would face this daily exploitation. Labor's share of the national income – now at its lowest point in recorded history – would rise. The ratio of average of CEO pay to worker pay (currently, an astounding 380:1) would shrink. Inequality, which harms society and hampers economic growth, would lessen. Here's why. In publicly-traded corporations, the board of directors – nominated by a tiny number of outside investors – decides who runs the show and how profits are distributed. In employee-owned companies, workers themselves are the shareholders. Because stock does not trade publicly, the business is insulated from the pressures of the stock market and its obsession with short-term profit. Instead, the worker-owners can focus on long-term growth, sustainability, and fairness.

Part of that focus is executive pay. The base salary of the CEO of Publix, for example, was about $810,000 last year, far lower than than that of his grocery chain CEO counterparts. Publix isn't a slave to Wall Street's tendency to set bloated executive pay packages on expectations that share prices will magically balloon under new leadership. Another focus is creating and maintaining good jobs for the long haul. While publicly-traded firms slash workers in a downturn, for example, an employee-owned company might choose to cut hours or pay for everyone to avoid layoffs.

To be sure, employee ownership is no panacea. Publix, for example, has faced employment lawsuits, including one over overtime pay. That's why proponents call for workplaces to be not only employee-owned, but also employee-directed. This is a more robustly democratic model in which workers become the board of directors of a company, making all decisions about what it produces how the spoils are distributed. Economist Richard Wolff details these kinds of models in his book, Democracy at Work: he often cites Mondragon, a successful Spanish conglomerate, as an example.

And then, there are the worker-owned John Lewis department stores in Britain, a $13bn-plus business. The company grows at a faster rate than competitors as it defies the low-wage retail business model, and offers workers solid compensation and pensions. The company's purpose, according to its constitution, is "the happiness of all its members, through their worthwhile and satisfying employment in a successful business". Sounds utopian … but it's happening every day.

Another example is Der Spiegel, the leading German consumer magazine, which is part-owned and managed by its employees. As print media collapses elsewhere, Spiegel is still going strong. When I did a fellowship there, a writer told me he and his colleagues skimp on travel expenses because they know it's their bottom line, too. Academic studies show they're not alone. When you and your colleagues own the place, you're not going to steal a stapler or pad your hours. Trust and workplace ethics: isn't that what all those company retreats and office birthday celebrations have failed to accomplish?