Impact Investing And Employee Ownership

Print Friendly

With income inequality in the United States at record high levels, employee ownership is increasingly being lauded as a potential solution to spreading wealth more broadly. Most recently, research from the National Center for Employee Ownership released in May shows that employee owners have a household net worth that is 92 percent higher than non-employee owners. They also make 33 percent higher wages, and are far less likely to be laid off.

But employee ownership requires new investment in order to get to scale. A new report by Mary Ann Beyster, president and trustee of the Foundation for Enterprise Development (FED), published by the Fifty by Fifty initiative of The Democracy Collaborative, examines the investing landscape for potential opportunities in employee ownership. The report, Impact Investing and Employee Ownership, released today, reports on the results from six months of research showing that the opportunities for impact investors to support employee ownership are limited, but that an investing infrastructure is beginning to emerge across asset classes. Among the key leading opportunities for investment are community development financial institutions (CDFIs), private equity funds, and one mutual fund.

“Employee-owned companies ground wealth locally, stabilize communities, and offer impact investors a direct way to benefit their own communities,” Ms. Beyster said. “We found that what is needed is more awareness of the benefits of employee ownership and more attention to building the needed investment infrastructure.”

Among the leading investment opportunities highlighted in the report are:

CDFIs: Among roughly 800 community development financial institutions nationwide, the study found six that focus on financing employee ownership: Capital Impact Partners in Washington, DC; the Commonwealth Revolving Loan Fund run by the Ohio Employee Ownership Center in Kent, OH; Cooperative Fund of New England, which loans to cooperatives throughout New England; Local Enterprise Assistance Fund in Brookline, MA; Shared Capital Cooperative in Minneapolis; and The Working World in New York City.

Private equity: The study also found two private equity funds focused on financing mid-market firms (revenues of $15 million up to $350 million) that are employee-owned or are transitioning into employee ownership. These two funds are Mosaic Capital Partners in Charlotte, NC, which has a $165 million fund; and Long Point Capital, with offices in Royal Oak, MI, and New York City, which has $550 million assets under management. Particularly noteworthy about these two investment options – appropriate primarily for institutional and high net worth investors – are that market-rate private equity returns are likely available. A similar fund is in formation by American Working Capital, headquartered in Chicago.

Mutual funds: Among mutual funds – open to even small investors – no option with an explicit focus on employee ownership was found. But the study did discover one fund, Parnassus Endeavor Fund, which invests in 26 companies identified as great places to work, where Beyster’s research found that all of the companies on the list have some kind of broad-based employee ownership.The fund has returned 32.46 percent over the past year and 15.39 percent over the past three years. It was named in 2016 by US News and World Report as the No. 2 fund among Large Growth stocks, in its annual ranking of mutual funds.

1demcollBanks: There is one bank dedicated to supporting cooperatives of all kinds, which has lent to worker-owned cooperatives and employee stock ownership plan companies for decades; it is National Cooperative Bank. Investors can open a variety of accounts with this bank, with FDIC insurance; these include checking, savings, IRAs, and certificates of deposits.

 

Read the full report now: http://www.fiftybyfifty.org/impactinvesting

  • Steve1027

    This is great work! I wonder how unions might fit into the cooperative movement. Perhaps instead of buying access to corporate democrats, maybe some union funds could be channeled toward worker ownership funding instead. Sounds like a better use of union dues given the state of the democratic party.

  • Ownership. Holy Sh*t, what a slippery slope. The hidden corporate entity behind this report by Mary Ann Beyster is her father’s company SAIC. Check for yourself the link she provided at the bottom of this article. For those of you who may be unfamiliar with Science Applications International Corporation(SAIC), allow me to share a few quotes from a 2007 Vanity Fair article.

    “SAIC maintains its headquarters in San Diego, but its center of gravity is in Washington, D.C. With a workforce of 44,000, it is the size of a full-fledged government agency—in fact, it is larger than the departments of Labor, Energy, and Housing and Urban Development combined. Its anonymous glass-and-steel Washington office—a gleaming corporate box like any other—lies in northern Virginia, not far from the headquarters of the C.I.A., whose byways it knows quite well. (More than half of SAIC’s employees have security clearances.) SAIC has been awarded more individual government contracts than any other private company in America. The contracts number not in the dozens or scores or hundreds but in the thousands: SAIC currently holds some 9,000 active federal contracts in all. More than a hundred of them are worth upwards of $10 million apiece. Two of them are worth more than $1 billion. The company’s annual revenues, almost all of which come from the federal government, approached $8 billion in the 2006 fiscal year, and they are continuing to climb. SAIC’s goal is to reach as much as $12 billion in revenues by 2008. As for the financial yardstick that really gets Wall Street’s attention—profitability—SAIC beats the S&P 500 average. Last year ExxonMobil, the world’s largest oil company, posted a return on revenue of 11 percent. For SAIC the figure was 11.9 percent. If “contract backlog” is any measure—that is, contracts negotiated and pending—the future seems assured. The backlog stands at $13.6 billion. That’s one and a half times more than the backlog at KBR Inc., a subsidiary of the far better known government contractor once run by Vice President Dick Cheney, the Halliburton Company… SAIC is a body shop in the brain business. It sells human beings who have a particular expertise—expertise about weapons, about homeland security, about surveillance, about computer systems, about “information dominance” and “information warfare.” If the C.I.A. needs an outside expert to quietly check whether its employees are using their computers for personal business, it calls on SAIC. If the Immigration and Naturalization Service needs new record-keeping software, it calls on SAIC. Indeed, SAIC is willing to provide expertise about almost anything at all, if there happens to be a government contract out there to pay for it—as there almost always is.”

    Mary Ann Beyster tells us in her report, “Why Invest employee ownership? Our foundations commitment to employee ownership stems from it’s founding 30 years ago, by my father, J. Robert Beyster. He was the founder of Science Applied International Corporation (SAIC), which grew into a Fortune 500 company, and was the largest employee-owned research and engineering company in the US with approximately $8 billion in revenue in 2006 when the company became publicly traded. My father believed and demonstrated that the success of SAIC was based on a core principle that ‘those who contribute to the success of their organization should share in the profits and ownership of the enterprise.’ ”

    It is of little consequence whether it is a privately owned or a work-owned enterprise that destroys our quality of life and our Earth’s ecosystem. The idea of ownership at the core of monetary market economics is the root source of much of the systemic violence in our world. One of the biggest problems with money is that unless you go out of your way to look behind the surface of what money is representing, it is all too easy to just turn a profit and imagine how clever you are. Money, as a placeholder for ownership, is one of the most dangerous ideas ever to have evolved from the human mind. It remains to be seen whether or not we will wake up to that danger before it is too late.