By Mitchell Miller
A recent Conscious Capitalism event in La Jolla left this author thinking about whether employee ownership fits within the Conscious Capitalism credo.
Conscious Capitalism starts with a commonly heard counterintuitive idea: you should first give before you receive. Conscious Capitalism applies that idea to the role of business in society. The organization was founded in 2010 on the observation that businesses acting according to a system of values manage to make positive differences while making a profit.
A number of books have been written on the subject. A few examples are: Strategic Management: A Stakeholder Approach by R. Edward Freeman; Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems by Michael Strong; and Conscious Capitalism: Liberating the Heroic Spirit of Business by John Mackey and Raj Sisodia.
Conscious Capitalism is a lot more than just a collection of a few good reads and lofty ideas. It is a collection of business leaders, thought leaders, and student leaders, who aim to promote social or environmental change through business. Conscious Capitalism is a large web. It spans from Conscious Capitalism International to the many regional chapters across the globe.
A small crowd was buzzing with idealism at a modern community office space during a recent Conscious Capitalism event in La Jolla. The presenters provided a walk-through of Conscious Capitalism’s core principles, and they discussed how they conducted business consciously. The group discussed examples of conscious businesses, such as B-Corps and conscious initiatives. Few people, if any, knew about spreading broad-based employee ownership. This was surprising because, at first glance, Conscious Capitalism and broad-based employee ownership appear to be compatible concepts.
Conscious Capitalism relies on four principles as the foundation for its mission: 1) conscious leadership; 2) stakeholder orientation; 3) conscious culture; and 4) higher purpose. Employee ownership fits squarely within these four principles.
Conscious leaders inspire loyalty and motivate their teams to outperform expectations. Good leaders are the kind of people that individuals want to follow. Conscious Capitalism starts with leaders, whether they are business leaders, thought leaders, or student leaders.
The decision to share ownership with employees mostly starts at the top, with the owners of a company. These leaders know the best way to motivate employees is by giving them a stake in the company’s success. Doing so also motivates the workforce to outperform expectations. It takes a conscious leader to make employee ownership happen.
Conscious leaders take into account all stakeholders, not just the obvious ones. Stakeholders are not only shareholders; they are employees, customers, communities, and anyone else that might be affected by a business decision.
Selling business owners are commonly faced with a difficult decision about to whom to sell, with few options at their disposal. Traditionally, they may either sell to a competitor or liquidate the business. Both of those options has the potential to be devastating to employees and the communities in which these businesses operate. In the case of a liquidation, the community loses not only a business, it loses a tax base and has higher unemployment. Instead of liquidating or selling to a competitor, if the business leader decides to sell to the employees, employees and the community will benefit from redistribution of capital wealth and continued employment.
Employee ownership turns a company’s most important stakeholder -- the employees, into shareholders. Furthermore, by putting ownership in employees’ hands, communities benefit, too. Employee-owned companies are oriented toward many stakeholders.
Conscious Capitalism observes that identifying and defining core values is key to success. A business culture with a defined set of values allow the business to be proactive about how people act and perform.
Employee-owned enterprises often are informed by employee values, which in turn often reflect the values of the community. These companies are frequently industry leaders when it comes to supporting altruistic efforts, and they define values according to many, not just a few.
A conscious company should be in business to do more than just make money. Moreover, when businesses have a higher purpose, they often find they can be successful and promote positive social or environmental change.
Employee stock ownership plans (ESOPs) not only make successful companies, they promote a positive social change. ESOPs are qualified retirement plans in which stock is held for the benefit of employees. As a qualified plan, it is eligible for extremely favorable tax treatment. The tax savings allow employee-owned businesses to offset the costs associated with the administration of the ESOP, and they often see a net boost in profits from the tax savings. Furthermore, spreading capital wealth to employees decreases the inequality gap between owners and employees. A wide body of research shows how employees and communities benefit from broad-based employee ownership.
From conscious leadership to higher purpose, broad-based employee ownership is a great way to promote Conscious Capitalism. As more capitalists become conscious, the hope is they learn about spreading broad-based employee ownership, too.
Mitchell Miller, consultant, Beyster Institute