[zschuessler]

I heard few song lines from a new artist I've discovered. It has me thinking on a problem I want solved. Although, I'm not actively working on it.

Why aren't there more employee-owned companies? And I don't mean solely shareholder programs, I mean actually owned by every employee and they are paid dividends of profit after all planned R&D costs. Similar to the Alaska oil pipeline bonus. Even interns.

All studies show that the companies structured this way that do exist (they seem few) have much higher output, quality, and happiness among staff.

After more research I found that this exists: https://esca.us/ - Wawa is a member, pretty cool.

Talking more to others about the idea I've heard interesting stories. Some machine tooling shops have an actual employee-owned setup. All employees are incentivized to make every product output great and keep profits high, because they all share the profits.

Anyway, I'm not actively working on this. But wanting to shape this idea more in the future. It feels like it could help the current state of America. But perhaps I'm too hopeful and naive :-)

---

Hobo Johnson - My Therapist:

"The idea's about equity, it's about wealth

Most think that it's dumb, you should think for yourself

If I buy a pizza place that makes a definite profit

Yeah, let's say yearly, the owners make $100,000 off it

And if I buy this pizza place for, let's say, $300k

And when the workers recoup in three years, I'll sign it over that day

And wouldn't everybody not see

They should buy their pies from me?

You'd rather have a boss

When you can work democratically?"

---

"Incentives are the strongest force in the world. They explain why good people do awful things, why smart people do stupid things, and why ordinary people do amazing things."

- Quote I have pinned from @morganhousel

[solardev]

There are some employee owned cooperatives, including a few in tech I've seen, but I think they're a lot harder to raise capital for (and thus a lot harder to grow) than either public companies or member owned cooperatives.

How do you fundraise outside of the small pool of employee-owners?

[elil17]

The US Small Business Administration actually offers small business loans to groups of employees trying to get a controlling share of their companies. However, the program is pretty hard to use (like every other government program). https://www.sba.gov/brand/assets/sba/sba-lenders/ESOP_Borrow...

There's actually a bill in congress right now that would, among other things, provide technical assistance and outreach for employees who might be able to use the program: https://www.congress.gov/bill/117th-congress/house-bill/4141...

[evancharles]

I am involved with a company called Teamshares that helps small businesses convert to employee ownership. A big part of what makes it work is exposing company financials to all employees in a way that helps connect one's actions with financial performance.

We are hiring software engineers, in case anyone is curious. https://www.teamshares.com/careers

[didgetmaster]

Ownership implies both risk and reward. Those who own anything (a private company or stock in a public company) are entitled to their share of the profits but also must take on the risk of the value going down. How do you convince all the employees of any company ('even the interns') to take on the risks accompanying ownership?

[8note]

They already do - when the value goes down today, they are laid off, or the bosses do more wage theft than usual

[elil17]

In ESOPs part of your pay is in the form of company shares. Your risk and reward increases as you build up company shares and pays out when you retire.

[reidjs]

Maybe take a hybrid approach? The leadership members contribute some investment funding and in turn own portions of the company's profit relative to their investment. You also have hourly/contracted workers who do not have a stake in the company, but have well defined job specs.

My fear in that situation would be 'lazy investors' who donate some money but do no work to grow or manage the company.

[diordiderot]

> 'lazy investors' who donate some money but do no work to grow or manage the company.

so regular investors then xD

[uoaei]

I think people will do that calculus on their own and decide their level of risk tolerance. Typically it takes a lot of trust and communication, at the very least a solid decision-making structure, for people to feel comfortable signing on to such an enterprise.

[andrewmutz]

Most business ventures have risk of failure and loss of capital. How does that work in this model?

If the capital comes from the employees, this loss would be very hard for them and probably would not appropriate for more workers.

If the capital comes from a bank, is there collateral? If so, where did the capital for that collateral come from? If not, does the bank need to lend to you at an extremely high interest rate for it to be worth the investment?

If the capital comes from investors who have an equity stake in this, how is it different than any other VC? Who keeps the profits when the business is up and running (the employees or the investors)? If the employees, why would the investors invest?

[adamgordonbell]

Hobo Johnson is amazing. Not sure about his pizza place idea, but his stories about relationships are so raw.

https://www.youtube.com/watch?v=15nberWl0EU

[lifeisstillgood]

I am writing a book (The Software Mind) and am bouncing around the next stage of company formation. Democratic companies are such an obvious next stage.

[olinda]

How would this be different from a partnership like a law firm or consultancy? Or are you just suggesting that more firms are structured as partnerships?

[cpeterso]

Igalia is a private, worker-owned, employee-run cooperative model consultancy focused on open source software. They’ve contributed significant JavaScript and CSS features to Chrome, WebKit, and Gecko.

https://en.m.wikipedia.org/wiki/Igalia

[adamsmith143]

Worker Co-Ops aren't a new concept but I think in the USA it's taboo because it gets in the general vicinity of "Communism" so people are wary. I always thought it was disturbing that Americans can simultaneously preach about their love of Freedom, shouting Freedom this Freedom that and yet subject themselves to an essentially Authoritarian/Dictatorial workplace for 8+ hours a day with no qualms. Apparently Democracy only goes as far as the front door of your office and is dropped off there until you clock out. Quite strange.

As poster above mentioned fundraising is a major challenge. Seems like debt is your only option if you want to keep the thing 100% employee owned. Bootstrapped businesses are of course a thing and can scale to Unicorn level but at a much slower pace than a VC backed startup.

[riizade]

I'm also thinking quite a lot about this.

TL;DR There are many pieces to our culture and capitalist economy that make this difficult, but somewhat surprisingly to me, also many legal hurdles to formalized democratic corporate structures.

I've taken a few steps to talk to lawyers and contact advocacy/support groups for worker-owned co-ops and things, and there are a number of surprising hurdles for this type of formalized corporate structure.

In particular, whether a member is considered an "employee", an "investor", an "owner", or some combination of the three differs in jurisdictions, often at the _county_ level, not just the state and country level (experience primarily in the US).

US law gives a massive number of very specific rights to investors, making it difficult to pull someone's ownership shares if they leave the organization in some jurisdictions. Additionally, the tax implications for individuals can be extremely complicated.

Talking to a lawyer, they said one of their clients had been working for ~10 years to hire someone across state lines and hasn't managed to do it yet because of the legal complexity (some kind of employee-owned construction company in Northern California that wants workers from Oregon I think).

For the time being, my own structure is on hold, but I'm thinking of simply formalizing the structure in the equivalent of an employee handbook and putting legal ownership into some kind of blind trust then paying members at a rate tied to net income without formally specifying that it's a dividend, but I have no idea how many laws that might be inadvertently breaking.

In any case, Mondragon is an interesting case study, as they are (to my knowledge) the largest worker-owned cooperative in existence at the moment, but workers outside of their home country (France, I believe?) are not able to participate in ownership and profit sharing for legal reasons.

[zschuessler]

This is fascinating. If this ever becomes a more serious endeavor, reach out - email in my profile.

Another user posted about Teamshares (https://www.teamshares.com/). It appears to operate similarly: investors buy up companies and give them to the employees. I'm assuming some level of fee is given to Teamshares to continue operating.

Oddly enough.. one of the backers of Teamshares is Collab Fund, where my second quote is pulled from on one of their most recent posts. Small world.

[makeworld]

Look into coops.

[aaronax]

Tessitura and NISC are two great examples of technology-centric co-ops.

Technically a co-op is usually "member-owned" whereas they were talking about employee owned. A substantial difference in some ways but not in others.

[patmcc]

Worker cooperatives/co-op is the most commonly used term for this type of structure, I think.