Blog – Employee Ownership and Building a Democratic Economy

Employee Ownership and Building a

Democratic Economy

 

By Harold Pettigrew, Wacif Executive Director

At the event “Building a Democratic Economy: How Do We Create Prosperity for All?”, the Aspen Institute hosted Marjorie Kelly of the Democracy Collaborative, co-author of the new book, “Creating a Democratic Economy: How to Build Prosperity for the Many, Not The Few.” Wacif’s own Harold Pettigrew spoke at the event on how the strategies we are deploying now have been tried and proven as viable approaches to build community wealth and a democratic economy.

  • Does past shape prologue?

    When Wacif was founded 32 years ago, its mission explicitly, boldly staked out the importance of a democratic economy in which decision-making power extends to workers, customers, and the wider community. A democratic economy is a commitment to create pathways to opportunity for all, borne of the recognition that, in the words of Fairfax County’s Chief Equity Officer Karla Bruce, we all do better when we all do better.

  • “A democratic economy is a commitment to create pathways to opportunity for all, borne of the recognition that we all do better when we all do better.”

  • And the urgency of creating a democratic economy is accelerating: as Marjorie Kelly and Ted Howard note in their new book, 47% of Americans can’t put together $400 in an emergency and half of working Americans feel that they don’t have a good job. The urgency of this moment is not experienced evenly: in DC, White households have an average household wealth 81x higher than their African American neighbors. Similarly, the District’s white-owned businesses are valued 3.4x higher than black-owned businesses, a trend that extends beyond the District’s borders to the broader metropolitan region.

  • Employee ownership is one strategy for creating a democratic economy with equitable opportunity for all. That’s one reason that Wacif teamed with Citi Community Development to launch the DC Employee Ownership Initiative in 2018. This initiative is timely- more than 2,600 African American entrepreneurs in the District will retire over the next 10 years, and approximately 40% of them do not have specific plans for ownership transition. Nationwide, as the Silver Tsunami of retiring baby boomers begins and the supply of businesses for sale potentially outstrips demand, employee ownership will be an important way to maintain and build community wealth.

  • “Nationwide, as the Silver Tsunami of retiring baby boomers begins, and the supply of businesses for sale potentially outstrips demand, employee ownership will be an important way to maintain and build community wealth.”

  • Employee ownership democratizes ownership, and allows business owners to preserve their legacy, while providing a viable exit strategy. Ownership Employees gain opportunities to build wealth in high-quality jobs and participate in workplace governance. Communities benefit from business conversions to employee ownership structures because legacy businesses are preserved in neighborhoods, ensuring that wealth equitably benefits the communities that generated it.

    In many ways, Wacif’s mission aligned with the District’s rich history of employee ownership and collaborative economics. For example, from the 1930s to the 1960s, the District’s employee-owned Capital Cab Company operated approximately 1,500 cabs, making it one of the largest cab companies in the world. Nannie Helen Burroughs Avenue, one of the major thoroughfares east of the Anacostia River, was named after Burroughs, who founded Cooperative Industries of DC, a cooperative economic enterprise that canned food, made clothing and home tools, and served more than 5,000 families. This proud economic heritage offers solutions that can help us meet this moment.

  • That said, employee ownership is not well-suited to all businesses, and is just one of many resources in the toolkit for a democratic economy. Economic and community development stakeholders also need to harness the power of anchor institutions, help public sector colleagues stand up and implement progressive set-aside programs that benefit small businesses across a number of attributes, and create pools of capital tailored to the needs of specific kinds of entrepreneurs and the specialized challenges they face.

    The past does shape prologue, and reflecting on the past can help us find solutions that take us forward. As demonstrated by the examples of Capital Cab Company and Cooperative Industries of DC, much of this discussion is a renaissance. Implementing strategies like worker-owned cooperatives, employee stock ownership plans (ESOPs), and employee ownership trusts, will help build a democratic economy. This will help bridge the racial wealth gap and decrease the asset ownership gap while bringing us closer to Wacif’s vision—a just society where communities can prosper and people can thrive through entrepreneurship.

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