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Why Your Employees Should Own Your Business

On the last day of 2012 South Mountain Company (SMC) celebrated the end of its twenty fifth year as a worker cooperative. It was an extraordinary year – rich, demanding, uplifting, and profitable.

In 1987 I re-structured the company from a sole proprietorship to an employee owned cooperative corporation. It was a dramatic hinge point in the history of the company. Ownership became available to all employees, enabling people to own and guide their workplace. The responsibility, the power, and the profits all belong to the group of owners. There are no outside investors and no non-employee owners.

We have been profitable every year since our re-structuring. As we near our 40th anniversary, SMC is a thriving integrated architecture, engineering, building and renewable energy company. As the founders and early employee owners have begun to retire, we are transitioning to the second generation and planning for the next 40 years.

Employee ownership has played a big role in the modest successes we have accumulated over time. Owning our work, and finding meaning there, is as essential to a good life as it is to own our homes. Employee ownership has also proven to be an essential ingredient in building stronger communities and local economies.

Our cooperative ownership structure assigns the wealth we make to those who make it. Our democratic system of decision-making offers everyone a voice. Our employee owners live in the community, raise their children here, and are part of the civic landscape. Therefore, community accountability is woven into the fabric of our system. When the employees are making the decisions, they won’t be moving their jobs overseas. When the decision-makers share in the consequences of the decisions, and share in the rewards as well, better decisions result. It’s that simple.

Cooperative ownership is emerging from beneath the radar. There is an awakening interest in the potential of broadly shared ownership of enterprise, in companies small and large. In the U.S. today cooperatives employ more than 2 million people and generate over $500 billion in revenue and $25 billion in wages and benefits. Globally, there are 1.4 million cooperatives with 1 billion employee-members.

This indicates that we may be in the process of assembling the components of a restorative future - the Next Economy, to replace the one we have now, which is only working for a few, and isn’t working at all for the planet.

We need an economy that alters forever the architecture of ownership. We have choices. We can keep enriching a very few at the expense of the rest of us, or we can change course. As Marjorie Kelly’s new book Owning Our Future: The Emerging Ownership Revolution notes, “Ownership is the gravitational field that holds our economy in its orbit.”

My fellow baby boomers, who now own several million small businesses, are reaching retirement age and considering their legacy. Their businesses will either be shut down, sold (usually outside the community) or they will be passed on. Many of these owners, who have poured heart and soul into these companies for 30 or 40 years, are looking for good alternatives. Selling to employees offers powerful benefits to all parties.

There is also recent congressional activity to support cooperative ownership. U.S. Representative Chaka Fattah’s Creating Jobs Through Cooperatives Act would create a new program within the Department of Housing and Urban Development that provides advice on best practices, grants for nonprofits and universities, and a revolving loan fund that issues seed capital for cooperatives.

Rep. Fattah believes that “Co-ops are their own kind of economic stimulus because they invest in the communities they serve by employing the people they serve.” We need to support this legislation enthusiastically.

Meanwhile, at SMC, nobody’s getting rich, but we are living comfortably doing the work we enjoy in the location of our choice. All of us are able to make good livelihoods because no one of us is getting rich. Our fundamental purpose is to use our business to create good products, good lives, and a strong community, and to profitably employ the economy in the service of well-being.

Maybe your employees should own your business too. I have the best job I can imagine. I still get to own it (partly), I still get to run it (partly), and yet I am freed from full responsibility (partly). It doesn’t get much better.

JOHN ABRAMS is founder and CEO of South Mountain Company, a 39-year-old employee owned architecture, engineering, building, and renewable energy company committed to responsible business practices. John’s book COMPANIES WE KEEP: Employee Ownership and the Business of Community and Place, was published by Chelsea Green Publishing in 2008, and he blogs at