Two explanations for the message of JMK-Way Blog 3. 

         First, my views were developed by visiting 596 U.S. corporations with broad based employee ownership via the employee stock ownership model, or ESOP.  Let me make it clear, not all 596 were wonderful, with a spirit of “we are in this together; we are the key to our success; we respect one another; we are listened to, etc”.  But the vast majority did have excellent, from top to bottom, commitment to her/his job, and company.  And a smaller number of companies were not excellent, but good examples of positive aspects of broad-based ownership. An even smaller number were no better than companies with no shared ownership. And yes, a few were just plain—well, as a former “lobbyist” for ESOPs, I wished that they were not ESOP companies.

         And let me make it clear, even in the wonderful, amazing companies, there were some employees who were skeptical that management cared about what he/she thought.  Plus, in a few, employees conveyed a view that management was only interested in fattening their pocketbooks, and/or making sure most of the extra money—i.e. profit—was not shared either directly by putting stock in a retirement savings trust, the ESOP.

         So in reading below, do not assume I saw only perfection in every employee owned company.

         Second explanation:       

         The management practices I mention as not to be limited to ESOP companies in order to maximize employee dedication, and productive work. I do feel, however, either compensating all eligible employees with some sort of ownership stake—via ESOP, via straight stock compensation, via stock options, via stock purchased at a discount, or sharing of the profit, either in cash, or in stock, is essential to having a company with high performance and employee satisfaction.  In other words, to gain what I have called the “soft” side, or the “human” side of the benefits of broad-based ownership, it is essential to having a highly productive, dedicated, engaged work force that overwhelmingly will result in employees’ expressing the view that where s/he works is a great place to work.

         So here are my thoughts as to what makes for an excellent company with an engaged, satisfied work force:

1.  Obviously, I believe that there needs to be financial “value” added to full-time employees’ compensation when the company meets its financial goals.
2. Employee leaders and management have to have a strong commitment, which is time consuming, to educate the work force about the free enterprise system, with candor about its about “risks” and “rewards”.  (Without this commitment, employee input often morphs to shouting matches with management.  Finger pointing reins, little is accomplished, and people, no matter what their role is in the company, have little respect, if any, for other’s opinions or thoughts.
3. No matter what is a company’s ownership structure, a silk purse cannot be made out of a cow’s ear.  In other words, even with the best managers, most committed employees, a company cannot alter an environment of alterations in demand for the product or service the company sells.  For example, even the best managed employee-owned company that consists of restaurants cannot avoid the impact of government ordered no indoors dining during the current pandemic.
4. When times are difficult, for whatever reason, lower pay, lower benefits, and other so-called “wage concessions” in exchange for ownership does not alter an external environment that has triggered less for the company’s products or services.

                  It is also essential that points 1 though 4 depend on respect, telling it like it is, from top to bottom.

                  I close with a real-life example I saw once in my career.  On a visit to an ESOP company, the HR leader of the company invited me to sit in on the company’s average pay, employee owners’ “communications committee”, which, and this is common, takes the lead in educating, discussing, or learning about how the company can create more understanding of the company’s future needs an open, full education, about free enterprise, and risks and rewards of ownership.

         Like most employee, or company, special committees devoted to certain activities, the committee had on its agenda how to spend some of the budget that management had allocated to the committee’s activities for spending—such as going to meetings with employee owners from other companies, and to learn how other companies with broad-based ownership handled communication about important company issues. 

         One item on the agenda the day I visited was whether to continue buying ad time on a local radio station’s weekly program that on the companies, and economic situation in the counties where the station’s signal was accessible.  The chair of the committee said he had been told that instead of paying, $500 for each program for its ads, the station was adopting a policy that for $800 for two weeks the program would run its ads on four programs for $1600 compared to current ad costs for four programs at totally $2000 a month. The condition was the commitment had to be for two weeks of ads, not paying for one week only. The chair after explaining the radio station’s new policy, asked the committee members “what do you think?”

         The members of the committee, all average pay employees, felt that the new policy was better than the current ad pricing, and voiced without objection that the employee communications committee should continue its ads on the weekly radio program, with a commitment to pay for two weeks for ads, not one week.

           Then a man sitting not at the table, but against the wall, said, “no, I do not think it a good idea, and it means more money pledged, fewer options.”.  The committee chair then said, “okay, we will let the radio station know that we will not agree to its new policy.”.

         Immediately, the chair said, “the next item on the agenda is….”

         After the meeting, I asked the HR person, who the man was that had the power to veto all the employees’ view? 

         He said, “Oh, he is the CEO.”

         The company is no longer an ESOP company, and does not exist as an independent company.

         From experience, I can assure the reader that there were only a few, companies that touted how great they were because they were ESOPs but were led not by the four traits I mentioned above, but by in essence, hypocrisy, as that CEO had touted to me before I ended my visit how the company had “empowered” the company’s employee owners.

         My blog 3 just shares some thoughts for readers that the next time they see news stories about how broad-based owned companies, in whatever form, go under, bankrupt, and the news stories then quote cynics, who always exist, declare, “see employee ownership is a flim-flam scheme to reward the current owners.”.

         Remember, nothing guaranteed, but my four points are essential to creating the foundation for a broad-based owned company that creates a sustainable, successful company for all.