Employee Ownership as a Succession Option

Posted by Mariah Davis on Sep 25, 2019 Mariah Davis

As a certified B Corp, Mascoma Bank is part of the global movement to use business as a force for good. But what does that mean? How can business be a force for good? The Vermont Employee Ownership Center is a prime example of how businesses can have a positive impact in the real world, on the lives of their owners, employees, customers, and the communities in which they are embedded.

VEOC conference with people at tables looking at a presenter

The first statewide employee ownership center started at Kent State University in Ohio as a result of hard times at the steel manufacturing plants in the late 1970s and 80s when tens of thousands of jobs were eliminated. That first employee ownership center believed that when employees have broader ownership of assets, it’s a good thing for employees, communities, and the country.

The Vermont Employee Ownership Center (VEOC), based on the Ohio model, was founded in 2001. VEOC is a statewide nonprofit whose mission is to “promote and foster employee ownership in order to broaden capital ownership, deepen employee participation, retain jobs, increase living standards for working families, and stabilize communities.” In the 18 years since its inception, VEOC has gone on to assist more than 30 businesses in implementing some form of employee ownership.

Employee ownership as a succession option does not immediately come to mind for a lot of business owners who are looking ahead to retirement or exit from the business they have built. But employee ownership can be a very successful model, with concrete financial benefits as well as improvements to productivity, turnover rates, company longevity, and more.

In considering employee ownership, business owners are typically thinking about their legacy after retirement—they want to receive the value that they have built up over their career, and they are motivated to make sure the jobs they’ve created stay within the community. There is also the possibility of tax benefits in the form of deferred capital gains taxes.

Research shows that when a company has high levels of participatory management combined with ownership, it tends to improve company performance by several percent in terms of productivity. “Companies that lean into building a culture of ownership around legal ownership by the employees can become quite high-performing companies,” according to Matt Cropp, Co-Executive Director at VEOC.

The benefits of employee ownership go beyond the financial. Combining ownership with high participation culture often produces companies that are rated best to work for, with high employee satisfaction and more investment in developing the skills of the employee owners.

While the decision to implement some form of employee ownership can have a variety of goals, it often creates a great place to work, with opportunities for employee to share in the success of the company. This creates a positive feedback loop—sharing in the success of the company means employee owners are more invested, which creates more success, which benefits the employee owners and benefits the community they’re embedded in. A company that is employee-owned is more likely to stay in the area and be committed to their community. Additionally, employee-owned companies are significantly less likely to engage in layoffs during recessions. “It’s a stabilizer,” says Cropp.

In their mission to promote employee ownership, the VEOC offers a number of services, including information and workshops as well as hands-on assistance. Initial meetings with employee groups or business owners to determine if employee ownership is worth pursuing are free. Taking the process farther, business assessments can determine if employee ownership will allow owners and employees to achieve their goals.

The annual Vermont Employee Ownership Conference is the Center’s capstone event. It is a one-day deep dive into employee ownership and an opportunity for business owners and employees to meet other business owners, managers, and employees of companies interested in learning about employee ownership, as well as business advisors and other business professionals, economic development professionals, and government officials. It’s a day of speeches and workshops designed to inform attendees about the benefits and challenges of employee ownership.

As a tax-exempt, non-profit, educational organization, the VEOC relies on foundation grants, government funding, and contributions from individuals and businesses.

We at Mascoma Bank are thrilled to be a part of the good work being done by nonprofit organizations like the Vermont Employee Ownership Center and invite you to join us in supporting groups that make our communities healthier and happier. Visit www.veoc.org/ for more information.

Topics: Community, volunteering