The Massachusetts Center for Employee Ownership (MassCEO) works to help transition companies of all sizes to broad-based employee ownership. Our goal is to create a more just, robust, and inclusive economy by converting and supporting employee owned companies.
As the business landscape continues to rapidly change, executives must be increasingly attuned to the nuances of their market. Responsive decision making capability is integral to continued business success. In this hyper-competitive landscape, employee-ownership has positioned itself as a powerful tool to gain a strategic advantage. Vesting ownership with employees has been shown to increase worker productivity, happiness, and wealth. These advantages are also enjoyed by the employing entity, which typically becomes more resilient to economic downturns and generally more competitive.
The Legislature of the Commonwealth of Massachusetts recreated MassCEO in 2017 to achieve these ends. While the current iteration of our office is new, the concept is not. From 1989 to 2008, the Massachusetts Office for Employee Involvement and Ownership existed to help expand employee ownership in the Commonwealth. Now, as a “Silver Tsunami” of baby boomer business owners begin to retire, the need for succession planning is acute. MassCEO hopes to reach these retiring business owners. We are excited to introduce this new version of our state office to the public, and begin our mission of expanding employee ownership in the Commonwealth.
What Does Employee Ownership Mean for a Company?
Employee ownership typically assumes two legal forms:
1. ESOP: The first comes through development of Employee Stock Ownership Plans, or ESOP. In an ESOP, a company establishes a trust into which it contributes new shares of its stock. The company can also contribute cash from its own reserves to purchase existing stock. A company can deduct these contributions within certain limits. These shares are then allocated to employees, often based on years of employment or role within the company.
The trust can then allocate dividends, when possible, to employees. ESOPs are often the preferred employee ownership vehicle for larger businesses
2. Worker Cooperatives: Employee ownership can also occur through worker cooperatives. These democratic companies grant employees full control over all decisions and administration, based on the concept of “one worker, one vote.” Worker cooperatives are often the preferred model for smaller companies, however it is possible to scale this structure. Mondragon, based in Spain, is the largest worker cooperative in the world employing 74,335 people.
MassCEO offers free educational resources to help business owners learn more about the various forms of employee ownership and explore which model may be appropriate for their business.