The Drumbeat

Capital Accounts and Profit Sharing: The Two Ways Employee-Owners Build Wealth

April 27, 2022

Employee-owned companies are great at building wealth for working people. Take WinCo Foods. After roughly 40 years as an ESOP, the 130 workers at a single store in Corvallis, Oregon had a combined $100M in ownership wealth and across the company, over 400 front-line employees were “millionaire grocery clerks”. Or consider Springfield Remanufacturing Company (SRC). From 1983 through 2017, the company paid nearly $100M in distributions to its employee-owners. CEO Jack Stack highlights one person who, “started here in 1983 making $7.50 an hour [and] has now got $1.2 million.” While not every employee-owner will become a millionaire, research shows that these remarkable examples highlight broader trends. The National Center for Employee Ownership found that, on average, employee-owners have nearly double the retirement wealth compared to non-employee-owners ($170,326 versus $80,339). At Certified Employee-Owned, we used data from the Federal Reserve to show that if every American business became employee-owned, wealth inequality would be reduced to historic lows and the wealth of the median household would increase from $121,760 to $230,076. How are employee-owned companies helping people build this much wealth? While there are many ways to create and run an employee-owned company, there are only two ways that these businesses put money in the pockets of their workers: capital accounts and profit sharing. Capital Accounts Capital accounts are distinct accounts that track the ownership value held by individual employees. Capital accounts can hold company stock directly or they can hold derivatives such as stock options. Employee Stock Ownership Plans (ESOPs), Employee Stock Purchase Plans (ESPPs), stock options or even direct share ownership are all forms of capital accounts. An individual’s capital account is typically funded through an initial grant or annual contributions, either made by the company as in an ESOP, or funded by the employee-owner, as in an ESPP. Today there are over 5,100 employee-owned companies using capital accounts. The key feature of capital accounts is compound growth.The value of an employee’s capital account is tied to the performance of the company through the share price. Assuming the business is performing well, the company’s share price will increase and the value of the capital account will go up. Importantly, the increase in value from share price growth applies both to contributions as well as prior share price growth, a process known as compounding. Compound growth is how employee-owners build potentially life-changing wealth over time. Specifics vary widely, but many reasonable scenarios that reflect real-world practice lead to six-figure wealth building, and, as we saw with WinCo and SRC, companies that are employee-owned for 25+ years usually have front-line millionaires. While compound growth has tremendous wealth-building potential, the key ingredient is time. Drawing the account down will erase the compounding, and building substantial wealth typically requires the capital account is untouched for 20 years or more. Eventually the employee-owner must be able to turn the capital account back into cash. Because employee-owned companies are private, there are generally two options: the company buys the share back or the accounts are cashed out when the company is sold. Due to the nature of business valuation, companies almost never will have enough cash on hand to buy back all shares at any given point in time. This leads to a situation at mature capital account companies called “share recycling” where shares are bought from selling owners and recycled back to new owners. For example, at ESOPs shares are bought back from employee-owners who have left the company, maybe because they retired. This is a time-tested practice that can continue for a long time so long as both the employee ownership plan and the company are managed well. Profit Sharing Profit sharing is when a company distributes some portion of profits back to employees as cash on a regular cadence. Profit sharing is a flexible concept that is implemented in a variety of ways and not all forms of profit sharing can be considered ownership. For example, a plan that exists solely at the discretion of management can provide a nice benefit, but it is not ownership because it can be taken away by management without any sort of monetary compensation to the employees. In line with our certification standards, to be considered ownership a profit sharing plan must have a legal claim on part or all of the business and it must have codified distribution rules that are inclusive and not overly concentrated. Formal profit-sharing benefit plans that own shares of company stock meet these criteria, but in our experience these plans rarely own enough of the company for it to qualify as “employee-owned”. Currently we see just two types of employee-owned companies where the primary wealth building mechanism is profit sharing and enough of the company is owned by the profit-sharing structure to qualify as employee-owned: Worker Cooperatives and Employee Ownership Trusts (EOTs). We know of roughly 350 companies operating through these two vehicles today. The key feature of profit sharing is liquidity. Profit sharing is typically done on a quarterly or annual basis, and once the profits are in and the benefit is calculated a check is cut to qualifying employee-owners within a few weeks. Profit sharing is immediately useful to employee-owners. Tradeoffs Between Capital Accounts and Profit Sharing The basic structure of capital accounts and profit sharing leads to a tradeoff between timing and wealth creation that impacts people and has implications for investing in growth. Wealth Building Due to compound growth, capital accounts help employee-owners build more wealth than profit sharing. Specifics vary, but typically after 30 years compound growth is responsible for at least 80% of the value of a capital account. If the account owner had instead received their annual allocations of stock as cash payments, for example through profit sharing, they would have received just one fifth of the value of the capital account over time. I doubt that any employee-owner has ever built a million dollars in wealth through profit sharing alone. Liquidity (Timing of Payments) While capital accounts have greater wealth-building potential, profit sharing provides money to employee-owners sooner. Most capital account structures at employee-owned companies simply don’t give people the option to withdraw value before retirement because it would not be feasible for the business. On top of that, regularly withdrawing a portion of your capital account will diminish or even completely offset the benefits of compounding. Delayed gratification is inherent in the concept of capital accounts just as liquidity is inherent in the concept of profit sharing. The ultimate point of employee ownership is to create better lives for working people and if people have immediate needs, it simply might not be feasible to wait. While profit sharing has lower total wealth building potential, it provides greater liquidity and that tradeoff might be well-worth it for employee-owners, especially for those making a lower income. Investing in Growth The difference in payment timing between profit sharing and capital accounts has implications for how a company invests in its growth. Theoretically, the immediacy of profit sharing disincentives investing in the business, since investments reduce profit now in exchange for profit later. For example, consider a company thinking about using some excess cash this year to buy a piece of equipment that would increase profitability multiple years in the future. If employee-owners have a strong need for money now, what are they likely to choose? Capital accounts are fundamentally long-term and therefore can be much better for long-term alignment. Of course, the specific fit will likely depend quite a bit on industry. If the company is involved in a people-oriented business that involves little capital, for example consulting, profit sharing might do better in terms of aligning incentives. But if a lumpy investment is required, shares might be better. Why Not Both? Considering the advantages of both capital accounts and profit sharing it’s tempting to ask: why not do both? In theory you could split the ownership of a company in any way between capital accounts and profit sharing. In practice, we find that companies tend to do one or the other. We haven’t counted exactly, but I would estimate that over 95% of employee-owned companies either have capital accounts or they have a formal profit sharing structure, and if they are owned by a profit sharing structure, such as an EOT or Worker Cooperative, it almost always owns 100% of the company. There is a major exception: discretionary profit sharing. While not technically ownership, profit sharing that exists at the discretion of management shares the positive characteristics described above, specifically the immediacy of payment and the attendant culture-building benefits. For this reason, we see many companies that use capital accounts for their ownership while implementing a discretionary profit sharing plan as well. Typically it has a quarterly or annual cadence and the primary focus is to strengthen the connection between the success of the company and the success of the employee-owner. Wealth building for working people is the common thread running through all corners of the employee ownership community. Different companies in different industries employing different people will all find their own balance in the tradeoff between capital accounts and profit sharing. What’s important is to consider what’s right for your company and your people. Special thanks to Jon Shell of Social Capital Partners who read an early version of this post and suggested the point about “Investing in Growth”. That section is adapted from his email.

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Employee-Owned Spotlight: Venturity

April 18, 2022

Certified EO is excited to spotlight Venturity Financial Partners, a Dallas-based firm providing outsourced accounting and CFO services to small and growing companies. Since establishing its Employee Stock Ownership Plan (ESOP) in 2020, Venturity has embraced the long-term endeavor of building an ownership culture by practicing open management and aligning the success of the company with the well-being of its newly-appointed employee-owners. While the company’s ESOP is relatively new, Venturity’s leadership team has taken key steps in establishing early momentum towards the sustained success of its employee ownership program, both in terms of company culture and wealth building potential for its team members. As a practitioner of The Great Game of Business, Venturity has implemented open-book management and offers ongoing accounting training to its staff, all with the goal of improving the company’s performance and deepening employee engagement (Certified EO previously spotlighted the pioneer of The Great of Business’s practices, SRC Holdings Corporation). Venturity launched in 2001 after the company’s founders identified a critical need among a potential base of clients for outsourced accounting services, especially for smaller, dynamic teams where functions like bookkeeping, reporting, and forward-looking financial planning can be difficult to perform internally at a high level. Having grown significantly over the next 20 years, Venturity took its first step into the community of employee-owned companies by transferring 20% ownership of the company’s shares to its newly-formed ESOP with the goal of moving to 100% employee ownership over the next 10 years. Now with over 45 team members eligible and enrolling in the ESOP, the company’s growth will stand to benefit each individual’s retirement savings, rather than accumulate to a more concentrated group of owners or a third-party ownership group. With a growing demand for outsourced financial services, Venturity offers its clients ongoing support for financial management, as well as more time-bound projects. The company is part of an increasing trend to offer fractional CFO services, where a qualified CFO may be engaged on a part-time or retainer basis as needed. A fractional CFO can offer flexible support to small companies for key decision making areas, including long-term growth planning, strategic troubleshooting, and overseeing an audit or financial reporting process. Beyond the day-to-day work, Venturity’s team is also frequently involved in volunteering time to local schools and charities. The Venturity Cares Committee organizes these efforts, similar to how a communications or cultural committee might organize educational, social, and other programming to build engagement with and understanding of employee ownership topics. The Venturity team has logged nearly 2,600 volunteer hours since 2016, and team members have made nearly $25,000 in charitable contributions over the past five years. Venturity has received additional recognitions for its workplace culture, performance, mission, and impact, including Best and Brightest Companies to Work For, the Dallas Business Journal’s Best Places to Work, and Forbes Small Giants. Venturity became a member of Certified EO in 2021, soon after it launched its employee ownership program. To learn more about the company, visit their website or find them on LinkedIn.

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Employee-Owned Spotlight: Mountain Hardware and Sports

March 22, 2022

Certified EO is excited to spotlight Mountain Hardware and Sports, a 100% employee-owned hardware store that offers clothing, home decor, sporting goods, fishing gear, rental machinery equipment, and just about anything to fit a mountain lifestyle. Mountain Hardware has four locations tucked in the Sierra Nevada mountains of Northeast California, including two hardware stores and a small equipment rental store in Truckee, just north of Lake Tahoe, and a hardware store in Blairsden, on the southeast edge of Plumas National Forest. Three long-time friends opened the first Mountain Hardware and Sports at the old Gateway center in Truckee in 1977, and in 1991 the store’s owners moved to open a store at one of its current locations right along Donner Lake. In 2001, Mountain Hardware began its transition to becoming employee-owned. Initially 49% employee-owned following the establishment of its Employee Stock Ownership Plan (ESOP), the company became majority-EO in 2005, a few years after it opened its Blairsden location. By 2013, the company had acquired Truckee Rents, its equipment rental business, and it had achieved 100% employee ownership. Now with over 100 employee-owners, Mountain Hardware and Sports ties its core values to its shared ownership structure. The company encourages employees to think and act like owners, understanding that daily and weekly contributions can positively impact the company’s performance and the growth of individual ESOP accounts. Last June, Mountain Hardware and Sports celebrated the 8th anniversary of becoming 100% employee-owned (and the 18th anniversary of the team’s first entrants into the ESOP). The company created a video acknowledging the benefits and impact of the ESOP, which won the team an award at The ESOP Association’s 2022 Annual Awards for Communications Excellence. “I think the thing I appreciate the most about being an employee-owned company is now after 18 years of being an ESOP, we’re starting to see accounts mature, and we’re starting to see balances that really are going to have a positive effect on people’s lives,” said one employee-owner in the video. “And that’s the whole concept, that it’s really a redistribution of wealth.” On its blog and YouTube channel, Mountain Hardware and Sports posts about everything from DIY home and garden tips, to camping and hiking guides, and even installing tire cables for snowy terrain. The company remains active in volunteer and charity efforts in Truckee, including an annual memorial golf event held in honor of one of the company’s founders, Dane Skutt. Mountain Hardware and Sports became a Certified EO member in 2017. To learn more about the company, visit its website.

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Defining “Employee-Owned”: How We Set Our Certification Standards

March 21, 2022

At Certified Employee-Owned, our mission is to build an employee-owned economy by creating national recognition for employee ownership. When starting Certified EO, in 2016, my co-founder Kramer Sharp and I were inspired by the success of programs like Fair Trade and Great Place to Work. We saw certification as a way to amplify the voices of employee-owned companies with a unified brand that would make it easy for job seekers, consumers and businesses to find and support employee-owned companies.As we have grown to over 400 Members, we have started to see our vision come to pass. But, we have also seen how employee ownership is an idea that takes different forms at different companies. Given all the nuance, what exactly do we mean when we certify a company as “employee-owned”? This article walks through how we created our certification standards, including:Why did we need to define “employee-owned”?Common threads from community conversationsFocusing on wealth buildingA specific and simple definition of employee-ownedWhy Did We Need to Define “Employee-Owned”?The idea to create a certification program for employee-owned companies came out of work I was doing as a PhD student at Stanford Business School. I joined the Organizational Behavior department in 2013 with an interest in understanding alternative business structures. In my first year, my advisor pointed me in the direction of the academic work on employee-owned companies. I was excited to see that a group of scholars had spent years studying this model and thrilled that their findings demonstrated increased firm performance and better outcomes for employees. While absorbing this large body of work, I had frequent conversations about what I was learning with a long-time friend, Kramer Sharp. The more we talked about employee ownership the more excited we became about this unique business model. But we kept coming back to the same question: Why have we never heard of this before?As we explored employee ownership, we noticed that, much to our surprise, many companies we already knew and loved were employee-owned. We also started to get to know the amazing community of companies and service providers powering this transformative model and were struck by their passion and commitment. But being new to the space we were confronted with the difficulty of finding employee-owned companies. Getting a rough list of companies required digging through government filings, and even that list was incomplete. It became clear to us that a major obstacle preventing more people from joining and supporting the EO Community was lack of visibility.Thinking about ways to build awareness of employee ownership, we were inspired by the success of certification programs like Fair Trade and Great Place to Work. They demonstrated that certification is a proven model that combines the reach of companies with a common trait to create national recognition. We thought that increasing the visibility of employee-owned companies would make them the employer of choice for millions of job seekers and make being employee-owned a major differentiator with clients and consumers. But creating a certification requires making a yes/no decision about who is eligible to join, so before we could start building towards our vision we had to set down concrete certification standards. In other words, we had to define “employee-owned”.Common Threads From Community ConversationsIn 2016 when we set out to create our certification standards, the ESOP model was already over 40 years old. Shining light on the employee ownership community was the entire point of the certification, so we knew that we had to ground our definition of “employee-owned” in community input.We started by connecting with the major trade associations including the National Center for Employee Ownership, The ESOP Association, Employee-Owned S-Corporations of America, and the US Federation of Worker Cooperatives. We attended conferences to speak with service providers including lawyers, accountants, bankers, and consultants who create and administer employee ownership plans. And of course we contacted as many employee-owned companies as possible. Over the course of the year we had over 250 conversations about what it means to be employee-owned. It’s no surprise that we heard a variety of perspectives. For some companies employee ownership is about giving everyone a financial stake in the success of the business. Take WinCo Foods as an example. They have had broad-based employee ownership for over 30 years and in the process they have created many millionaire grocery clerks. Some companies see employee ownership as encompassing both share ownership and employee involvement in operational decision making, for example open-book management. A few companies even see employee ownership as including employee-owners having a say in important governance issues. For example, Worker Cooperatives give their worker-owners equal votes in electing the board of directors. These three aspects of ownership - money, operational decision making and governance - were the common threads running through what we heard from the EO Community. Focusing on Wealth BuildingIt only took a few conversations for us to see that it would be impossible to come up with a single definition of “employee-owned” that would include everything that everyone saw as important. While money, operational decision making and governance were the common threads, everyone we spoke to had a different opinion on their relative importance. Instead, we started looking for a baseline. What were the aspects of employee ownership that would be broadly seen as necessary? If a company did everything BUT one particular practice would they still be viewed as employee-owned? With this shift in perspective, one element stood out: wealth building for working people. A focus on wealth building also aligned with the notion advanced by many Founding Fathers, and articulated best by Thomas Jefferson, that a healthy democracy depends on broad-based property ownership. While in Jefferson’s time this meant ownership of agricultural land, employee ownership updates this notion for our modern world where the largest asset held by the wealthiest households is the ownership of business. While operational decision making and employee involvement in governance can be positive, the broad-based ownership of wealth stands apart in importance for individuals as well as our country. A Specific and Simple Definition of Employee-OwnedWith our direction focused on wealth building, we distilled the community input down into a common set of standards we could use to certify a company as “employee-owned”:Ownership: At least 30% of the company must be owned by employees. Shares held by company founders do not count towards this threshold.Access: Reasonable access to ownership must be open to every employee at the company.Concentration: The ownership held in line with #1 and #2 must not be over-concentrated. This is controlled either through a cap on the maximum distribution or a maximum ratio between maximum and median distribution.It’s important to acknowledge that our standards are not perfect. For example, we’ve spoken with a company where employees hold a 10% stake that meets the access and concentration components of our standards. They were quick to point out that it could be much better to own 10% of a successful company than 100% of a failing business. There is merit to that point, but at the same time, 10% is not enough to call a company “employee-owned”. Others have told us that our standards are too low. Why not set the bar at a majority ownership stake? There are actually a few strategic reasons for an employee-owned company to keep ownership below a majority that benefit the company and by extension the employee-owners, for example maintaining government purchasing preferences. The 30% threshold is also aligned with historical legislation, for example Section 1042 of the Internal Revenue Code. But the biggest reason is that 30% employee-owned is actually a high bar. According to the U.S. Census Bureau there are roughly 1.3 million firms in America with at least 10 employees. We estimate there are approximately 6,000 companies that meet our certification standards. That means fewer than 1 in 200 businesses met our definition of employee-owned - less than half of one percent! Ultimately we made peace with setting imperfect standards because the mission of Certified Employee-Owned is to build an employee-owned economy. We are not trying to be the arbiters of who is a “good” company and who is a “bad” company. We see certification as a means to an end, and creating a certification program requires a definition of who does and does not qualify. No single definition of employee-owned will ever be perfect, but there is tremendous benefit to the employee ownership community if we can create national recognition. Uniting our voices will help millions of Americans see the value of this model, create a resource that benefits our community, and increase the number of employee-owned companies.

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The Difference Between “ESOP” and “Employee-Owned”

February 16, 2022

If you’ve spent time learning about employee ownership, then you’ve certainly heard of Employee Stock Ownership Plans, or ESOPs. In fact, ESOPs are so common among employee-owned companies that many people use these terms interchangeably. You might be surprised to learn that, while ESOPs are certainly the most common type of plan used by employee-owned companies, there is actually quite a bit of daylight between the two concepts. Not all ESOPs are employee-owned, and not all employee-owned companies have an ESOP. This article walks through the differences between “ESOP” and “employee-owned” including:Quick Background on ESOPsNot all ESOPs are Employee-OwnedMany Employee-Owned Companies Don’t Have an ESOPDefining “Employee-Owned”Quick Background on ESOPsGiven their importance to employee ownership, it makes sense to start with a bit of background information on ESOPs. Since their creation in 1974 as part of the Employee Retirement Income Security Act (ERISA), ESOPs have grown dramatically. According to the National Center for Employee Ownership, there are currently around 6,300 companies with an ESOP. They range in size from dozens of employees to hundreds of thousands and operate in every industry imaginable. The ESOP’s popularity is due to a number of factors, including nearly 50 years of proven success, strong tax benefits, and a fantastic community of advocates and service providers.By law, ESOPs are extremely inclusive. The basic idea behind an ESOP is that it is a trust that owns a portion or all of a company on behalf of a broad-based group of employees. Shares are usually allocated to eligible employees annually, and the eligibility criteria employees must meet to receive a share allocation are very open. Typically employees need to work 1,000 hours in a year to participate, an average of only 20 hours per week. Additionally, ESOP shares are paid out of company profits and are allocated to employees at no cost. These simple and open criteria drive high levels of participation in the plan and ensure that workers at ESOP companies benefit when their business is successful. Not all ESOPs are Employee-OwnedWhile all ESOPs are broad-based, the percentage of total outstanding stock owned by the ESOP varies dramatically from company to company. There is no minimum, and in practice we’ve seen this range anywhere from a fraction of a percent to 100%. Of course, an ESOP that owns even just a tiny piece of a large and successful company can provide a great benefit to employees, especially since employees are not paying for the shares out of their wages or benefits. However, there is a categorical distinction between a company operating a small ESOP as an employee benefit versus a company where the plan owns a substantial portion of the company, perhaps even 100%. In other words, there is a difference between having an ESOP and being employee-owned. Further clarity can be gained by looking at a specific example. When downloading the publicly available Form 5500 data from the Department of Labor and filtering for all companies that indicate they have an ESOP, we see the largest such company by number of active participants is Walmart. Their ESOP is probably a nice benefit for some of the company's employees. However, it is not having the same impact on people as the ESOP at 100% employee-owned WinCo Foods, which has made many front line employees into millionaires. That’s why it’s important to remember that having an ESOPs doesn't always mean a company is employee-owned.Many Employee-Owned Companies Don’t Have an ESOPWhile the ESOP model is the most popular and successful structure used by employee-owned companies, it is not the only option. There are a number of alternatives that companies can use to implement significant and broad-based employee ownership, including worker cooperatives, employee ownership trusts (EOTs), employee stock purchase programs, and equity compensation plans like stock options. We describe each in more detail here. Companies can even implement employee ownership through direct share ownership, though often there are advantages to a more formal structure. Alternative structures play an important role in building an employee-owned economy because not every company is a good fit for an ESOP. The setup and administrative costs of an ESOP can be prohibitive for companies under 40 people. Companies that want to ensure employees have a strong voice in governance might find the worker cooperative to be a better fit. Perhaps the most promising use case for alternative structures is helping smaller companies become employee-owned. For example, in recent years we’ve seen a growing number of EOTs implemented at companies that are too small for an ESOP, an encouraging trend that could greatly expand the employee ownership community. Defining “Employee-Owned”If not all ESOPs are employee-owned and many employee-owned companies don’t have an ESOP, then it begs the question: What does “employee-owned” mean? Answering this question was priority number one when we started Certified Employee-Owned. Our vision from the very beginning has been to create national recognition for employee ownership by making it simple and easy for Americans to find and support employee-owned companies. We quickly realized that, while companies leveraging different ownership structures certainly have distinct administrative and legal concerns, everyone in the employee ownership community would benefit from increased visibility and awareness . With this big-tent vision in mind, we set out to create specific and verifiable criteria to define “employee-owned” that could be applied to any underlying ownership structure. We searched extensively for historical precedent and had over 200 conversations with companies and advocates. Ultimately, we identified financial ownership as a common thread running through legislation and views of advocates from across the space. After accumulating feedback and input, we created a definition of what it means for a company to be employee-owned that focuses on three main concepts:Ownership: At least 30% of the company must be owned by employees (excluding founders)Access: Reasonable access to ownership must be open to every employeeConcentration: Ownership among employees cannot be too concentratedWe have specific practices that we verify under each of these headings, and while we will provide details on both our certification standards and the development process in a future post, it’s important to emphasize that our goal is not to determine who is a “good” or “bad” employee-owned company. There are businesses doing great things with broad-based ownership below our 30% threshold, and there are other companies that would view our standards as too low. It only took about five conversations to realize no definition would ever satisfy everyone, and that’s not the point. The point is to grow the employee-owned economy. Think about what Organic, Fair Trade, and B Corporation have done in terms of awareness and imagine if we could create that for employee-owned companies. A necessary part of having a certification program is a specific and clear delineation between who does and does not meet the standards. Our standards also allow us to create resources that benefit the entire community, for example our Directory of Employee-Owned Companies, which is an up-to-date list of every company that, to the best of our knowledge, meets the above definition of employee-owned. Our approach has the potential to change the game for the employee ownership community, including the ESOP space, and that’s why it’s important to understand the difference between “ESOP” and “employee-owned”.

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Employee-Owned Spotlight: SRC Holdings Corporation

January 31, 2022

Certified EO is excited to spotlight SRC Holdings Corporation, a 100% employee-owned remanufacturing company with 10 subsidiaries and operations based across Missouri, Kentucky, and Illinois. SRC has shared company ownership since its founding in 1983, and in 2011 the company became 100% employee-owned. SRC also works to popularize its open-book management practices, known as The Great Game of Business, which promote transparency, integrity, and business literacy among the company’s 1,800 associates. In the early 1980’s, SRC’s first team of managers, including founder and CEO Jack Stack, were at risk of finding themselves out of work when their original parent company, International Harvester, began laying off employees and selling off company assets. SRC’s management made a last-ditch effort to save the operation by buying out their plant, Springfield ReManufacturing, from International Harvester with a bank loan, a transaction that left them dangerously leveraged and still at risk of closing down. But this also opened the door to revamping the ownership and management structure, including introducing an employee ownership program and open-book management practices that focused on sharing financial information with all staff and training them to understand how to read the company’s books. This pivot helped build the company’s ownership culture and tie the contributions of each employee-owner to the financial success of the plant. The company’s stock price had rebounded from $0.10 in 1983 to $13 only five years later, and by 2017 it had paid over $100 million in distributions to employee-owners retiring or leaving the company. SRC serves clients that produce machinery for agricultural, industrial, construction, truck, marine and automotive markets. The core of SRC’s business—remanufacturing, or “reman”—is an industrial process that involves improving previously used, worn, or non-functional equipment into like-new or better-than-new condition. This helps extend a product’s lifecycle, and it diverts valuable and salvageable materials from landfills. The environmental benefits of remanufacturing versus traditional manufacturing processes are significant. The remanufacturing process uses up to 85% less energy, water, and raw materials compared to traditional manufacturing, resulting in SRC’s companies diverting about 70 million pounds of material from landfills each year. SRC continues to expand its lines of business, and a flatter organizational hierarchy helps maintain an entrepreneurial culture that leads to new ventures and innovations in production each year. In February 2021, the company announced $100 million in planned real estate development over the next 10 years, which is expected to bring its manufacturing and warehousing footprint to over 3.5 million square feet. In October 2021, the National Center for Employee Ownership (NCEO) announced SRC as a member of its Employee Ownership 100, a list of the largest majority employee-owned companies in the country. Learn more about SRC Holdings, a Certified EO member since 2018, on the company’s website.

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10 Reasons Business Owners Have Transitioned to Employee Ownership

January 20, 2022

Since launching Certified Employee-Owned in 2017, I’ve spoken to over 1,000 employee-owned companies. These conversations are the highlight of my day. I love hearing stories about entrepreneurs starting companies and I'm always curious to learn how founders have come across employee ownership. Spending so much time talking to entrepreneurs and leaders in the employee ownership space has shown me a few interesting trends. Most notably, the vast majority of companies I have spoken with did not start out as employee-owned, but transitioned after many years in business. I haven’t kept exact numbers, but I would estimate this is the case with over 95% of the companies I know. While there are as many reasons for conversion as there are founders, there are a few trends that stick out. Here are 10 reasons that stand out as to why business owners have made the transition to employee ownership, along with a paraphrased story for each one that captures the essence of the journey: 1. Keeping it in the family‍“ Starting this company was my dad’s greatest accomplishment and growing the business has been my life’s work. But none of my kids were interested in taking the reins. I know what can happen when a company is taken over by a strategic or private equity and I didn’t have the heart to do that to people I’ve known my entire life. Transitioning to 100% employee-owned was my way of keeping the company in the family.” 2. Giving our owners partial liquidity‍“ To me going 30% employee-owned was a no-brainer. I got some liquidity, and now my people have a direct stake in the action, so the company is doing even better. As a bonus I have a built in succession plan. I don’t have any plans to step back, but you never know what will happen and it’s great to have that option.” 3. Continuity through succession‍“ This company was her baby, she wasn't going to sell it. She really liked the idea of leaving the company in the hands of the employees, because the alternative was going the way of other companies that she had seen bought out and changed completely.” 4. Staying an anchor in our community‍ “Our founder was deeply concerned with what would happen to the local economy. He knew that if he sold to a strategic buyer, they would move the headquarters and maybe even the factory. We’re the biggest employer in the area so that would have devastated the town. By transitioning to EO our founder kept us local and kept the town alive.” 5. Start-up business sharing equity‍ “A lot of start-ups share equity with talented employees in exchange for under-market wages, but my vision for sharing equity in the company was different. I wanted all my dedicated employees to have skin in the game from the beginning. The set formulas for sharing equity with only early employees didn’t work for me.” 6. Aligning employees at a time of growth‍ “After years of start-up hustle, we were finally poised to take our company to the next level, and employees were going to be critical to our growth. We wanted to align the interests of owners and employees by giving employees a stake and a better understanding of what makes our company tick.” 7. Finding alternatives to private equity‍“ Private equity started knocking at our door and it made us think critically about the future of our company. We believe in our mission, our people, and the services we provide and are not willing to compromise those to get the highest dollar. Some of our shareholders were pressuring us for liquidity, and we needed to figure out how to provide that without overburdening the company with debt.” 8. Mission-driven at our core‍ “We have been mission-first since day one. I started the business to help us transition to a sustainable future. Growing the company and making money has always been an outcome of our success, not a goal. I transitioned us to employee-owned to lock that mission-focus into our DNA. I want everyone here to have a stake in our future and to feel as bought-in as I feel as the founder.” 9. Feeling alone at the top‍ “I did not expect to become a solo entrepreneur running a company by myself. I always wanted to do this as a team. I don’t have a co-founder anymore, and I want everyone to be more bought in and engaged as co-owners of this business.” 10. Democracy at work‍“ We wanted to be a worker cooperative from the start. It is the only corporate structure that aligns with our values - that each worker should have equal say in the governance of the company. We are in this together and that should be reflected in every aspect of our structure and culture. ”Are you a business owner looking to learn more about employee ownership? A great place to start is our overview.

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Employee-Owned Spotlight: Superior Farms

October 15, 2021

Certified EO is excited to spotlight Superior Farms, a 100% employee-owned processor, marketer and wholesaler of lamb. Founded in 1964, Superior Farms partners with family ranchers, many of whom have been raising sheep for generations, to bring to market sustainably-raised and antibiotic-free lamb products. Superior Farms operates three brands of lamb products, including Cascade Creek Lamb Company [], a premium brand that raises all of its sheep on pastures in open rangelands on the West Coast. The company employs nearly 400 employee-owners throughout its processing plants and offices across California, Colorado, Illinois, Iowa and Massachusetts. Through its Employee Stock Ownership Plan (ESOP), 401(k) matching contributions, and long-term contracts with suppliers, Superior Farms aims to help build generational wealth from grazing pastures to facility plants. Sustainable Lamb, from Farm to Table Many of Superior Farms’ over 1,000 ranchers spread across the western U.S. practice regenerative grazing with their lambs. This involves partnering with crop farmers to bring sheep herds onto fields after crops have been harvested, which helps boost the amount of organic matter in the soil, improve fertility, and reduce greenhouse gas emissions by reducing the need for tractors to operate on fields. Lambs grazing on these pastures also receive nutritional benefits, help manage soil erosion and runoff, and even contribute to wildfire suppression. Many ranchers in the company’s network raise herds on “marginal” land, meaning the land is not suitable for growing crops but is optimal for sheep to roam and graze. As undeveloped land becomes more scarce or expensive throughout the West, integrating grazing herds into croplands will provide an increasingly important option for ranchers. In addition to soil benefits, Superior Farms has made strides in sourcing clean energy, reducing emissions in its transportation, and cutting down on plastic waste. The company’s processing plant in Dixon, CA receives up to 95% of its total energy use from wind and solar sources, and efficiency gains made in recent years have helped the company reduce its overall energy use by 28% and its natural gas usage by 54%. By sourcing all of its lamb domestically, the company significantly shortens its supply chain compared to imported lamb from Australia or New Zealand. And by shifting its packaging practices, Superior Farms was able to reduce its use of plastics by a third while also extending the shelf life of its products, helping to reduce food waste. Steven Osguthorpe, the owner of a family farm that grazes thousands of sheep in Park City, Utah, takes pride in the family’s conservation practices and stewardship of their herds. “We look at ourselves as the stewards of the land, and if we take care of it, it’ll take care of us. And if we abuse that land, we’re not going to be in business next year,” he previously told Superior Farms. “If I had my druthers, I would be out here herding sheep every day. I don’t think there really is a better life. It’s everything to me.”

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Employee-Owned Spotlight: Tech Etch

September 13, 2021

Certified EO is excited to spotlight Tech Etch, a 100% employee-owned company that has over five decades of experience and expertise specializing in manufacturing precision engineered thin metal components, flexible printed circuits, and EMI/RFI (electromagnetic and radio frequency interference) shielding. Their commitment to excellence begins with their employee owners who provide world class services and innovative comprehensive solutions that enhance lives globally. They partner with leading global customers in the aerospace, military, medical, telecommunication, and electronics industries that have highly complex precise designs and demanding regulatory requirements. Their solutions ensure unmatched precision, quality, and attention to detail in every project, every time. Founded in 1964 by George E. Keeler, Tech Etch began as a small engraving company in Boston and helped pioneer the photo chemical etching process, which allows manufacturers to produce highly complex parts with precision in a cost-effective manner. The company’s growth, fueled in part by acquisitions, led to the construction of its three manufacturing plants. Tech Etch’s operations are housed within three facilities totaling nearly 260,000 square feet — two of which are in Massachusetts, the Plymouth headquarters and Fall River, and one in Litchfield, Minnesota. In 1999, Tech Etch established its Employee Stock Ownership Plan (ESOP) program, and the following year George Keeler transferred 30% ownership of the company to the ESOP. In 2018, he sold the remainder of his ownership to the employees, establishing 100% employee-ownership. Today, the company has about 700 employee-owners. In the company’s own words, “When the people who handle the day-to-day work at a company have an investment in the organization, they take pride in the work that they do. They work harder and care more about the products and the clients.” Tech Etch’s manufacturing is highly specialized and cutting edge. Its photo etch materials can be produced in a film as thin as one half of one thousandth of an inch, and its flexible printed circuits can work with conductive layers as thin as five microns (this is very thin). Tech Etch provides customers with products incorporated into implantable devices and diagnostic imaging for healthcare clients; radar and encrypted communications technologies for military clients; and avionics and aircraft equipment for aerospace clients. Tech Etch also offers its customers access to its 3,700 square-foot Innovation Center in its Plymouth headquarters. The Innovation Center allows customers to prototype new designs for products, streamlining the design and development processes to move new products quickly to production. Beyond its day-to-day operations, Tech Etch maintains active involvement in its communities, including extending scholarships to local students pursuing careers in engineering, as well as supporting local charities, hospitals, and military families. Since the onset of the COVID-19 pandemic, Tech Etch has increased its support of healthcare workers and the medical industry, by supplying personal protective equipment. Tech Etch became a Certified EO member in 2020. Visit the company’s website [] or LinkedIn [] to learn more about its products and employee ownership program.

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Employee-Owned Spotlight: HB Global

July 27, 2021

Certified EO is excited to spotlight HB Global, a near-100% employee-owned company based in Harrisburg, PA that provides HVAC, plumbing, and electrical services. HB Global has pursued an aggressive acquisition strategy — which has driven nearly eightfold growth in revenue since the company started its Employee Stock Ownership Plan (ESOP) in 2010 — while making considerable investments in its growing workforce of employee-owners. Herbert Bassett McClure founded HB McClure in 1914, and in 1931 the company established its headquarters in Harrisburg. A year later, two inventors pioneered an individual room air conditioner that could sit on a window ledge, and HB McClure soon after entered the air conditioning business. By the 1980s, the company had expanded to commercial HVAC services. Employee Ownership at HB Global In 2008, with the Great Recession looming, Bob Whalen took over as the company’s new owner from its third generation of family ownership and became President and CEO. Soon after becoming the new owner, Whalen identified ESOPs as an effective tax-advantaged strategy to ensure the company’s long-term stability. After gaining the support of the board of directors, he sold the company back to the employees in 2010 in the ESOP transaction. The company then embarked on a growth strategy that included 19 acquisitions between 2011 and 2020, and it established HB Global, LLC in 2017 as the holding company for the new divisions. “When we started the ESOP, we were all within about 45 miles of Harrisburg,” Whalen said in a recent interview. “Today we have eight divisions spanning nine states and the U.S. Virgin Islands. We are now doing work across the Southeast, Mid-Atlantic, and New England regions as well as Arizona.” Acquisitions have helped the company diversify its clients across industries, including large contracts with government, life sciences, healthcare, and convention centers. Between 2010 and 2020, the company’s revenue surged from $25 million to $275 million, and it plans to become a perennial billion-dollar company within the next decade. But acquisitions of existing companies have not meant cutting staff. “A big part of what private equity does is they find synergies, which is code for reducing headcount. We do none of that,” Whalen said. “Our strategy is to grow these businesses and create value for our employee-owners, it’s not to shrink them.” HB Global employs over 1,700 individuals, most of whom are now employee-owners who become eligible after one year of service. Since it created the ESOP, the company has generated over $87 million in retirement savings for employee-owners. For the average field technician who has been with the company since it became employee-owned a decade ago, their ESOP account has generated more than $203,000 in retirement savings, driven in part by the company’s 12% contribution of annual compensation to ESOP accounts. (The current average U.S. net worth at retirement age is $213,000.) Whalen has a strong belief that every business has an obligation to build wealth for their employees through retirement savings, with employees at all levels sharing in the success or failure of the company. “Our intent is for this structure to go on for multiple generations and to continue to thrive,” Whalen said. “That doesn’t happen in three years or five years. It certainly doesn’t happen on a quarterly basis. Everything we’re doing is really a multi-generational project.” HB Global became a Certified EO member in 2020. Visit the company’s website [] to learn more about its employee ownership program.

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Employee-Owned Spotlight: Scott Insurance

July 2, 2021

Certified Employee-Owned is excited to spotlight Scott Insurance, a Virginia-based insurance company and long-time proponent and participant in employee ownership. Scott Insurance offers a wide variety of products to its customers, including employee benefits, surety bonds, personal insurance, and property and casualty insurance. Captive Insurance Beyond its more traditional insurance products, Scott Insurance has also succeeded in partnering with the National Center for Employee Ownership (NCEO) to design captive insurance products for companies that have an Employee Stock Ownership Plan (ESOP). Captive insurance is a form of self-insuring that allows participants to reduce exposure to volatility in the broader insurance market. In its partnership with NCEO, Scott Insurance has created insurance programs that allow a group of companies with ESOPs to band together and self-insure by forming a new, co-owned insurance company. For employee-owned companies with strong year-over-year performance, this can help reduce the cost of insurance and take ownership of their risk management. According to NCEO, ESOP participants in captive insurance programs can reduce their annual premiums by 10% to 25%. In addition, participants can generate investment income and have claims costs returned to them in years when claims are low. Scott Insurance and NCEO currently offer health insurance, workers compensation, general liability, and automobile coverage through their captive insurance programs. Legacy of EO Scott Insurance was one of the country’s first companies to adopt an ESOP in 1975, a year after the Employment Retirement Income Security Act (ERISA) wrote them into law. The company is now 100% employee-owned through its ESOP, which includes over 315 employee-owners, and it actively markets the advantages of employee ownership to clients and job seekers. In the insurance industry, market pressures from mergers and acquisitions make it rare for a company of Scott Insurance’s size to remain independent. The company maintains its employee ownership has been integral to remaining one of the largest independent insurance agencies in the Southeast, with nine offices across Virginia, Tennessee, North Carolina, and South Carolina. The company’s ownership structure — which helps tenured employees build wealth over the long-term — works hand-in-hand to align the interests of its employee-owners with providing high-quality service. Learn more about NCEO and Scott Insurance’s Captive Insurance Program [] on NCEO’s blog [] , and visit Scott Insurance’s website [] to learn more about the company’s work.

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Employee-Owned Spotlight: Global Prairie

June 7, 2021

Based out of Kansas City, employee-owned Global Prairie [] was founded in 2008 as “a purpose-driven marketing firm that crafts business-building solutions to help their clients drive social impact and cultivate a healthier world.” Their business model is rooted in the belief that businesses should contribute good to the world and so far, they seem to be accomplishing that goal. As a Certified B Corporation [] (B-Corp), Global Prairie is required to assess their business, as well as that of their clients, and the impact that it will have on employees, customers, suppliers, the community, and the environment. “We meet rigorous standards of social and environmental performance, accountability and transparency. And because our business model is designed for social good, it's not just the work we do - but how we work - that creates our impact,” Global Prairie [] says. Global Prairie specializes in marketing, digital, advertising, medical communications, interactive marketing, public relations, branding, direct marketing, media relations, research, and communications for each of their many clients. They work closely [] with organizations such as the Negro Leagues Centennial Logo, FEMA, the Auburn Rec and Wellness Center, the Foundation for the Carolinas, Women Leaders in College Sports, FarmNext, and more – each as dedicated to making a positive impact in the world as the next. Every year, Global Prairie gives back [] at least 10 percent of their profits to their communities. Altogether they have donated over $10 million to organizations around the world that have goals and ideals that are in line with their own. As an employee-owned company, Global Prairie believes that it’s important for their employees have a stake in their company’s efforts. Team members are given about three-weeks of paid time to volunteer for civic and nonprofit organizations that they are personally passionate about. Since 2008, their employees have served on the board of directors for over 275 nonprofits and made an impact on close to 600 philanthropic organizations. Global Prairie was recognized for their efforts in 2019 by B-Corp as a Best For The World: Community honoree and Best For The World: Workers honoree. According to B-Corp [], Best For The World: Community honors those who “work every day to build a shared, sustainable prosperity for all. Their mission-driven cultures embrace social engagement, charitable giving, and strong, diverse communities,” and Best For The World: Workers honors those who “prioritize their workforce through employee-focused efforts, from inclusive hiring practices to employee ownership.” During the time of crisis that was seen around the globe during the coronavirus pandemic, Global Prairie reached out their hand to the community to provide services such as crisis issue & response, leveraging purpose in challenging times, leadership coaching & counsel, as well as offered free recommendations for businesses who need help adjusting to a new kind of work and social environment.

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Employee-Owned Spotlight: TDIndustries

May 12, 2021

Certified Employee-Owned is excited to spotlight TDIndustries, a premier construction and facilities service company based out of Dallas, Texas. TDIndustries was founded in 1946 by Jack Lowe. Today, it has grown to be one of the Southwest’s most respected, employee-owned, facilities, maintenance, and mechanical construction companies. Because TDIndustries is employee-owned, their employees are naturally ingrained into the culture of the company. Each person that joins their team is given an equal opportunity to begin as a learner and grow into an educator, a leader. The team of professionals at TDIndustries call themselves Servant Leaders. They have a deep understanding of the services that they provide to the people that they lead; they are teachers and role models who see themselves through the eyes of their followers and act with integrity in everything they do. The things that make TD’s employees different is what makes them strong. “We help our Partners grow by valuing individual differences, talents, and strengths. Our commitment to this philosophy has created an organization and environment of trust,” TD says. They are on a mission to provide career opportunities to all - from students, to women entering the trade or military veterans. TDIndustries is passionate about offering comprehensive solutions for companies from design and construction, to facilities and maintenance. Although their company is large, they treat each one of their clients as though they are family – something that sets them apart from the competition in the southwest. In order to adapt to the quickly changing times, TDIndustries developed their modern facility maintenance tool, Visual Intelligence. It’s a digital reporting system that helps their facility and others to adhere to social distancing regulations while still running an efficient business. With Visual Intelligence, technicians’ reports can be seen from a remote location so facility managers can view maintenance statuses, photos, videos, and documents – as well as sign electronically. By working closely with their clients, they are able to deliver results that fit their unique needs while exceeding expectations. They aren’t afraid to take on projects of any size from mission-critical solutions to ongoing maintenance services. In addition to their recognition by Fortune magazine, TDIndustries was included in the ENR Texas & Louisiana list of 2018 Top Specialty Contractors and awarded the Associated Builders and Contractors [] (ABC) Excellence Pinnacle Award for creating “world-class safety processes and a safety culture where every employee understands that the well-being of those around them is everyone’s responsibility.”

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11 of the 100 Largest Private Companies in America are Employee-Owned

April 13, 2021

Forbes curates a number of interesting lists, among them a list of the largest private companies in America []. Today I was looking through this list and thought: how many of these companies are employee-owned? Using our new Directory [], I found that 11 of the 100 largest private companies on the Forbes list are likely to be employee-owned. Two of them are Certified EO Members: * #23 Wawa * #53 WinCo Foods Nine others have a broad-based ownership program that, to the best of our knowledge, owns at least 30% of the company: * #5 Publix Super Markets * #55 Graybar Electric * #73 Sammons Enterprises * #74 Hensel Phelps Construction * #86 Schreiber Foods * #94 McCarthy Holdings * #96 Swinerton * #97 Kehe Distributors The fact that over 10% of the largest private companies in America are employee-owned is a powerful proof point that employee ownership works! The question for those of us that want to see employee ownership grow is: what would it take to get this number from 11 to 50?

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Employee-Owned Spotlight: NWESI

March 4, 2021

NorthWest Engineering Service, Inc. (NWESI) [] provides engineering services supplemental to design and installation that ensure high-performance building systems become a reality. NWESI was founded in 1958 by long-time friends Allen Crombie and Gene Garoutte after they saw the need for skilled work on heating and ventilation systems. Later, as building designs and mechanical systems became more sophisticated, the firm expanded to provide other building solutions and services. After the founders’ retirement in 1991, the company was inspired by their employees’ dedication to company growth. Thus, the Board decided to form an Employee Stock Ownership Plan to give the employees a voice in the company’s future and further invest in their own well-being. More recently, NWESI formed an ESOP Culture Committee to represent each division and work in tandem with NWESI leadership to continuously create a better work environment. To date, NWESI has 57 employee-owners across three office loca­tions: Portland Metro area, Eugene area, and Boise, ID. Many of their team members have been employed by NWESI for over twenty years, and are fully vested in the company culture, growth, and integrating their core values of Integrity, Teamwork, Professionalism, and Quality into each project. NWESI’s clients have counted on their highly credentialed professionals for Testing, Adjusting, and Balancing (TAB) complex air and water systems, with the same attention to detail that is their hallmark today. NWESI is a leader in devel­oping rigorous Commissioning processes for the building industry, combining the benefits of occupant health and comfort, energy efficiency, and facility maintainability into comprehensive Whole Building Commissioning. Their work spans a variety of sectors and services. This year, NWESI has focused on what they can do to assist facilities in fulfilling Oregon Safety and Health Administration (OSHA) COVID-19 requirements for workplace ventilation [] via Healthy Building Surveys, and what facilities should, and should not do, to meet requirements. Visit NWESI at [] to learn more about their work.

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Employee-Owned Spotlight: Birdseye

February 2, 2021

Certified Employee-Owned is excited to spotlight Birdseye [], an award-winning architectural design and building company from Richmond, Vermont. Birdseye was established [] in the ‘80s as a woodworking company that had a strong interest in design. High-quality work has always been their main focus. Today, it has grown into an all-encompassing, employee-owned architecture and building firm that specializes in carpentry, woodworking, fabrication, interior design, energy solutions, machine operation, and more. Their team of about 50 professionals work diligently every day to produce works of art that can be enjoyed for years to come – in Vermont and Beyond . The architectural designs [] that Birdseye produces perfectly balance innovation and tradition. They are renowned for creating modern, yet timeless [] , architectural designs that both complement and contrast [] their surroundings. In late 2019, the American Institute of Architects Vermont Chapter (AIAVT) presented Birdseye with awards for two of their designs: Vista House and Bank Barn, for which the principal architect Brain Mac said, “We’re truly honored to be recognized for both of these projects.” Bank BarnVista House, the Merit award recipient, is a mountaintop home in Vermont. When presented with the award, AIAVT mentioned that “the design carefully responds to views and solar orientation to offer a thoughtful composition. Rigor and restraint are exercised in the design of the entire project. Beautifully crafted.” Vista HouseBirdseye’s design for Bank Barn, a home in Woodstock, VT, won the Honor award. The home is three stories tall and inspired by traditional bank barns [], which are built into hills so that they can be entered from either the base or the top of a hill. "Utilizing the sloping topography, the support spaces and garage entrance are concealed below grade to create an extended plinth for the floor above,” Birdseye says in their design description. Birdseye was also featured in the New York Times article How to Build a Modern Barn [] by Tim McKeough for their execution of Bank Barn. The design concept came from a Lego model that their client provided them. Birdseye took that Lego model and transformed it into the award-winning architectural design that their clients are now happily settled into. “We were trying to give it more of a regional feel, in terms of how barns relate to the landscapes of Vermont,” Mr. Mac said. When presented with the Honor Award, Jeff McBride, project architect at Birdseye said, “We’re proud of this project. Bank Barn was a real team effort, from our clients to our consultants to the builders at Birdseye, everyone helped make the project a success and we are happy to see the attention it has received.” Vista House

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Employee-Owned Spotlight: Breakside Brewery

October 30, 2020

Certified EO is proud to spotlight Breakside Brewery [], an employee-owned brewpub in Oregon celebrating its 10th anniversary. Breakside started out in 2010 as a small corner pub with a basement brewery in Northeast Portland. The origin story [] begins with founder Scott Lawrence visiting, falling in love with, and moving to Oregon. After Scott met Ben Edmunds, an aspiring young brewer who became Breakside’s first brewer and remains the only brewmaster, the two founded Breakside with the simple goal of “creating a place where you could have a great time eating and drinking with friends [] .” Breakside proudly upholds this ethos in everything they do, recognizing its team of brewers, servers, cooks, accountants, designers, warehousemen, cellarpersons, bartenders, and salespeople as what gives their vision life. In 2019, as a natural extension of their already employee-centered culture, Breakside became one of only a handful of employee-owned breweries [] in the country. Today, Breakside produces 30,000 barrels annually and operates three locations [] throughout the Portland area, each with its own distinct atmosphere. Breakside has earned recognition through many national, international, and regional awards for its beers. This year, the brewery was the big winner in the Oregon Beer Awards [] , leading the competition with 12 medals – four golds – and pulling in the honor of Large Brewery of the Year. Breakside’s creativity and adaptiveness is also helping it navigate the uncertainties of 2020. When in-person dining was temporarily banned in Oregon, the team was able to quickly shift gears to package beer that had originally been bound for its pubs' draft lines. On top of that, in recognition of its ten year anniversary , Breakside has released a series of collaborations with its favorite breweries around the country.

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Expanding Shop EO

October 14, 2020

Two weeks ago we launched Shop EO [], the first-ever tool designed to help people find and shop at employee-owned businesses. The response from members and the employee ownership community has been overwhelmingly positive, with supportive messages emphasizing the major step forward in visibility for employee-owned businesses in America. While our original vision for Shop EO was focused on consumers, the most common piece of feedback we received was from members interested in using the tool to find employee-owned partners. For example, one member shared, “I thought it would be cool to have a place to find EO companies so we could meet contractors, suppliers and vendors that are EO.” Based on this feedback, we are proud to announce that we will expand Shop EO into the only complete directory of all employee-owned companies in America. This will be a major endeavor to identify and code key information on every ESOP, Worker Cooperative, Employee Ownership Trust, and Direct Share Ownership company that meets our standards of significant and broad-based employee ownership. The result will be a valuable resource for our community that will help promote collaboration and partnership among employee-owned businesses. Work will be ongoing, so check Shop EO [] regularly for updates!

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Employee-Owned Spotlight: Evergreen Cooperatives

October 8, 2020

Certified EO is excited to spotlight the Evergreen Cooperatives [], a Cleveland-based network of employee-owned companies, including an industrial-scale ecologically advanced laundry, a large urban greenhouse, a renewable energy company, and a fund to pursue employee ownership conversions of existing businesses. The Evergreen Cooperatives were launched in 2008 by a working group of Cleveland-based institutions, including the Cleveland Foundation, the Cleveland Clinic, University Hospitals, Case Western Reserve University, and the municipal government. Cleveland, a former industrial metropolis, had been wracked by deindustrialisation and depopulation. The Evergreen initiative was part of a regional economic plan to link the community’s economic development with the purchasing power of anchor institutions to expand wealth building opportunities in low-income, high-unemployment communities. The initiative’s strategy focuses on economic inclusion and building a local economy from the ground up, by catalyzing new employee-owned businesses. The approach is to first create the jobs, then recruit and train local residents to fill them. Furthermore, the Evergreen Cooperatives return a percentage of their profits to develop additional worker-owned firms and grow the local economy. The Cleveland Foundation’s President/CEO and Evergreen Board Chairman, Ronn Richard frames this succinctly: “Our goal is equitable wealth creation at scale [].” The Evergreen Cooperatives create quality jobs through employee ownership and democratic management, anchor these jobs and wealth in the local community, and keep money circulating, which is reversing long-term economic decline. Today, this success has developed a reputation as “The Cleveland Model,” proving that “ networked employee-owned businesses can succeed in the market while generating meaningful social impact and much higher quality jobs [].” Nationwide, other cities are replicating and adapting this innovative approach to economic development, green job creation, and neighborhood stabilization.

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Shop EO

September 23, 2020

Certified Employee-Owned (Certified EO) is proud to announce the launch of Shop EO [], the first-ever tool designed to help people find and shop at employee-owned businesses. Shop EO will boost efforts to revitalize the American economy by creating unprecedented visibility for employee ownership. As a one-stop-shop where consumers can browse employee-owned businesses and search by geography, industry, and name, Shop EO will help people vote with their dollars for an economic recovery focused on Main Street. “Employee-owned businesses empower workers and build community wealth,” said Certified EO co-founder and CEO, Thomas Dudley. “As our country begins to re-open, the choices that consumers make today will decide what our economy looks like in the future.” “We are thrilled to launch this tool that makes it easier for people to use their purchasing power to support employee-owned companies,” said Certified EO co-founder and CTO, Kramer Sharp. “Shopping at employee-owned businesses during the recovery is a positive action that anyone can take to stabilize our communities and create broad-based prosperity in America.” The many beneficial impacts of employee ownership are supported by decades of research. Workers build wealth by earning a share in the company’s success. This wealth built through ownership can be substantial. A 2018 survey [] by the National Center for Employee Ownership found that the average employee-owner had $170,326 in retirement savings, nearly twice the average non-employee-owner. In addition, companies see increased performance from engaged and committed employees. Multiple performance studies [] have found that employee-owned companies have higher growth and productivity. Finally, employee-owned companies provide stability for local economies, especially in difficult times. For example, during the 2009 recession employee-owners were five times less likely [] to experience layoffs. The benefits of employee ownership for workers, companies, and communities inspired Thomas Dudley and Kramer Sharp to launch Certified Employee-Owned in 2017 with the mission of creating national recognition for employee-owned business and building an employee-owned economy. Shop EO is a major step in achieving that mission. Today there are over 6,000 companies in America that meet Certified Employee-Owned’s rigorous standards of broad-based employee ownership. These companies range in size from 10 people to over 180,000. They operate in every state and in a diverse set of industries including retail, manufacturing, construction, engineering, and professional services. To check out Shop EO, visit []p. And to learn more about Certified EO visit [].

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Four Messages to Share with Your Employee-Owners

September 1, 2020

Employee ownership is a better way to do business, but it's not always clear to people how to think and act like owners. These four messages can communicate the benefits of being both an employee and an owner. Employee ownership makes us resilient. During the last financial crisis, employee-owners were 5 times less likely to lose their job. During this crisis, employee-owned companies will once again show their resilience. We’re putting our owners first. As an employee-owned company, nothing matters more to us than your health and safety. Companies exist to benefit their owners. Many businesses are reacting to the downturn with layoffs and furloughs, but as an employee-owned company our priorities are different. We’re doing everything we can to keep jobs because that’s what’s best for our owners. We will get through this together. As employee-owners, we’re all in this crisis together. We are one team doing what it takes to withstand this time. Employee-ownership is built for long-term wealth building. We are more apt to handle short-term crisis since we have a long-term mindset. We will get our community back up and running. COVID-19 is a threat to our health, our economy, and our community. As an employee-owned company, we have deep local roots. When things return to normal, we will lead the charge to help our community recover.

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Employee-Owned Spotlight: WinCo Foods

September 1, 2020

Certified Employee-Owned is excited to highlight WinCo Foods [], an employee-owned discount grocery store with over 19,000 employees, 129 stores, and 6 distribution centers, spread across more than 50 cities. WinCo was founded in 1967 [] as a no-frills, low-price, warehouse-style grocery store in Boise, Idaho, then under the name of Waremart. In the 70s, Waremart grew into a small chain of grocery stores that became a regionally famous low-price supermarket. In 1985, after the passing of the founder, dedicated employees joined together to establish an ESOP, which allowed them to buy a controlling stake in the company and take ownership of their stores. Today, Winco has the fourth largest ESOP in the nation. In 1999, Waremart was renamed by employee-owners as WinCo, which stands for “Winning Company,” after a company-wide contest and vote. Recognized this year as 7th best supermarket in America by Food & Wine, WinCo is living up to its name. It’s a fun fact that the letters that make up WinCo are also the first letters of the states of the initial employee-owned stores– Washington, Idaho, N evada, California, Oregon! The company attributes its success to employee ownership, highlighting the “ direct incentive for employees to work hard and take pride in what they do; that is why our stores are cleaner, our prices lower and our smiles are bigger [].” As an employee-owned company, WinCo takes pride in being built from, reflective of, and owned by the local community. As WinCo Foods CEO Grant Haag says, “WinCo’s employee owners are our greatest business asset and our most potent resource for growth []. Even as COVID-19 has disrupted life and business all over the world, WinCo recognizes its role as an essential service and has worked hard to keep stores open, while sending a clear message that “being a part of the community means taking care of each other [].”

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Employee-Owned Spotlight: Delta Pipeline

August 5, 2020

Certified Employee-Owned is excited to spotlight Delta Pipeline [], an employee-owned construction company based in Long Beach, California. With 30 years of experience, Delta Pipeline has grown into a well-respected and recognized leader in underground wet utility construction. In 1991, Delta Pipeline was launched as a startup business out of a garage. Since then, co-founders Craig Danley and Richard Vance have worked diligently to build connections and develop a reputation in their industry. In 2017, after 25 years of success as a family-owned business, the decision was made to create an Employee Stock Ownership Plan (ESOP) and transition to becoming 100% employee-owned. Today, Delta proudly identifies as “a family of dedicated employee owners committed to opportunity, success and stewardship.” By offering employees a personal stake, Delta seeks to attract, motivate, and retain talented team members. By empowering employees with shared responsibility in the company’s success, Delta fosters a “culture of learning, growing and making a difference [that] never stops.”

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Spotlight on: Modern Times Beer

July 24, 2020

Certified Employee-Owned is delighted to spotlight one of our Founding Members, Modern Time Beer []. Since its inception in 2013 at Point Loma, California, Modern Times has become one of the fastest growing craft breweries in the country, developing a reputation for its beers, coffee and vegan cuisine. In  2017, after only four years in operation, Modern Times became the first employee-owned brewery in the state of California. The company repurchased shares held by outside investors and gifted them to a pool of employees. This equity program was a logical extension of the company's values and culture. The name itself, “Modern Times,” was inspired by a utopian community seeking to create “a less exploitative, more pleasurable world [],” and almost all their beers are named after utopian experiments. At Modern Times, employees are recognized as the company’s single most significant competitive advantage. To motivate, retain, and attract these people, Modern Times offers equity through co-ownership, competitive salaries, and stellar benefits, including high-quality health care, paid sabbatical, and plenty of beer and coffee. As founder, CEO, and majority owner Jacob McKean put it, Modern Times’ “trajectory shows that a company can grow at a meteoric rate while handsomely rewarding all of the people who made that growth possible; in fact, we show that it is necessary [and] point the way forward for other businesses in our industry and beyond. []” After this important milestone, Modern Times continues to aim higher. While 30% of the company is now held in an employee stock ownership plan (ESOP), Modern Times is working towards 100% employee ownership. The company is also focused on building a culture of ownership, where employees are not just owners on paper but also in practice. Stay tuned for Modern Times’ special release of a new beer called “ESOP Collab []” in December 2020!

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Employee-Owned Spotlight: The Davey Tree Expert Company

June 25, 2020

Certified Employee-Owned is delighted to spotlight our new member, The Davey Tree Expert Company [] , which provides diversified tree services, grounds maintenance and environmental services. Headquartered in Kent, Ohio, Davey is the largest employee-owned company in the state and one of the largest in North America. Founded in 1880 as a family-owned company, Davey’s story of employee acquisition [] began in the late 1970s when the Davey family decided to sell the company. Almost immediately, an employee-ownership exploratory committee was formed. In 1979, 114 employees made a financial commitment to directly purchase stock. The company redeemed thousands of shares of stock but reserved some to be sold to the newly created Davey Employee Stock Ownership Plan (ESOP), which attracted the participation of more than 400 employees. Since 1979, Davey has grown considerably, becoming a billion dollar company in 2018 with more than 10,500 employees contributing throughout North America. While celebrating 40 years of employee ownership last year, Davey cracked the nation’s top 10 of the National Center for Employee Ownership's Employee Ownership 100 [] . Today, Davey proudly recognizes employee ownership as what makes them stand out [] . As Pat Covey, the company’s chairman, president and CEO attributed, “Employee ownership has allowed [Davey] to create a culture that has withstood a lot of economic and business challenges over time. [] ” Davey’s success with its conversion to employee ownership offers a model for other companies interested in building resilience and longevity.

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The Satisfaction of Ownership

June 25, 2020

Do you remember the feeling you had when you opened the box that held your first smartphone? Or when you turned into the driveway in your first car? Or when you walked through the doors of your first home? Ownership activates a deeper relationship than renting or borrowing. Our relationship to things we own is longer and more relational, full of stories. You can remember exactly when your phone cracked, and you won’t forget how many hours you spent remodeling your kitchen. The value of stories isn’t as quantifiable as value of the objects we own, but it is seemingly more satisfying. When outsiders look into employee owned companies, they see employees working harder and working at companies longer—enjoying their jobs. Employees are loyal, they assume, for the financial incentives. Economic researchers at Harvard and University College London found [] , however, that individual incentives like merit pay or bonuses don’t inspire the same motivation as group incentives like a company-wide stock plan. Why is this? As an employee owner, you’re not a minor character in the company’s story. You and your fellow employee owners are the storytellers, and every day, your work adds value to our company and unfolds another part of of who we are. Owning the company means that you have a deeper relationship to both our outcomes and our rewards. It’s not surprise that employee owners have higher job satisfaction. They’re not simply chasing a carrot; they own and cultivate the garden.

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Employee Ownership is Good for Local Economies

June 25, 2020

Employee ownership stabilizes the economic base of local communities. Promotes economic security for workers Employee-owned companies create quality jobs that offer living wages and good benefits. By providing employees with a stake in the profits through ownership shares, employee-owned companies directly build individual and family wealth in their local communities. Furthermore, employee owned companies have greater job stability, evidenced by their significantly lower turnover rates. Data []: ESOP employees earn more in wages and retirement income than their counterparts at traditional firms. Data []: Employee-owners have assets (as measured by household net worth) that are nearly twice as high as non-owners in similar industries. Retains jobs in the community Employee-owned companies are more resilient. In past recessions, they outlasted their peers. They are also much less likely to lay off workers. Employee ownership conversions also help to stem the tide of business closures by offering retiring business owners an opportunity to access the wealth they’ve built while also ensuring that their businesses remain financially viable and rooted locally. This version of business succession avoids the asset-stripping and layoffs that often occur during acquisitions, and simultaneously benefits retiring owners by unlocking tax benefits associated with selling a business to your employees. Data []: 12.1% of all working adults in the private sector reported being laid off in the last year compared to just 2.6% of those respondents who say they own stock in their company through some kind of employee ownership plan. Anchors local businesses in place Employee ownership strengthens ties between business, people, and place. Locally-owned businesses serve as anchor institutions that play a key role in creating community wealth. These institutions foster a sense of mutual exchange and interdependence with the community that contributes to the neighborhood’s long-term economic viability. When ownership is vested in workers who have strong ties to the community, company relocations are less likely. Supports community leadership Employee-owned companies provide opportunities for workers to participate in decision-making processes and have a say in their workplace. Employee ownership allows residents to influence investment decisions and economic policy, which promotes greater community control of local assets. Local businesses are also based on local relationships, fostering increased trust and civic engagement in communities. Anchors capital in local economy Employee-owned companies increase the circulation of resources within communities and build more resilient economies. By spending and producing locally, employee-owned companies stop the leakage of dollars, allowing communities to retain the wealth they generate and finance strong public services. Data []: Locally owned businesses circulate three times more money back into the local economy than absentee-owned firms or chain businesses.

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Employee Ownership Addresses U.S. Inequality Head On

June 25, 2020

You may have heard that wealth inequality is on the rise in the U.S. Each November, the Forbes 400 lists the 400 wealthiest individuals. After the list was released in 2017, the Institute for Policy Studies noted [] that the three wealthiest men in the U.S.—Jeff Bezos, Warren Buffett, and Bill Gates—held more wealth together than half of the U.S. population, 160 million people. You can understand, in this context, why so many Americans value home ownership and business ownership, the two most common ways to build wealth. When you own something, you not only have responsibility to care for it, but also the rights to benefit from it. At employee-owned companies like ours, each employee owns part of the business and has an outcome in the stakes. As a result, many households end up with much higher wealth than their non-employee owned counterparts. When the National Center for Employee Ownership polled [] more than 5,000 people ages 28-34, they found that median household net wealth was 92% higher for employee owners than non-employee owners. Median household income was 33% higher as well. What this means is that thanks to our business structure, employees like you can build greater wealth and enjoy greater economic security. Now just imagine what could change if more U.S. businesses were employee-owned like ours!

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