When workers own a bank, when a town provides high-tech infrastructure, when non-profits go into business - these are enterprises that sustain communities and empower employees. Bill Marshall is vice president of a Missouri bank's loan department,
where he has responsibility for more than $80 million in current
outstanding loans. At times though, he comes across less like a banker
than a social visionary. Marshall is fond of saying things like, "It
really is not important how much the bank trusts its customers; what is
important is how much the customer trusts the bank." And, "If we are
going to make money in this community, it's important for us to give
something back." And, "This is one of the most challenging places I've
ever worked, and also the most fun. You end the day with a great deal
of self-worth."
Clearly, the bank where Marshall works the Phelps County Bank of
Rolla, Missouri is a different kind of financial institution than the
one I use in Washington, DC. Where I deposit my pay check, so many
mergers and buy-outs have taken place over this decade that I sometimes
wonder what my bank's name will be this month. My banking experience is
about as intimate as a stop-by at a Wal-Mart; not a single teller
recognizes me when I approach his or her window. These days, I mostly
frequent the outdoor ATM, being sure to smile at the video camera
recording my transaction. Welcome to banking in the '90s.
But not so in Rolla, Missouri, population 15,000, home to an
employee-owned bank. CEO Emma Lou Brent and her 60 fellow employees own
100 percent of the bank through their Employee Stock Ownership Plan
(ESOP). Over the past decade, they've seen the bank's assets more than
double and their outstanding loans nearly triple. In the process,
Phelps County Bank has surpassed the town's other two banks in size.
What sets the bank apart is the commitment of its owners to customer
service and satisfaction. According to Marshall, each employee is given
not only the responsibility, but the authority to deal with customer
problems. To ensure the staff has the training to meet the needs of
customers, the bank has established in-house classes, and to round out
each person's understanding of the workings of the entire bank,
employee/owners go through cross-training days during which tellers,
for instance, sit with accountants. As a result, employees are
empowered to deal with customer problems without having to clear their
solutions with management. As employee/owner Sherry Snelson puts it, "I
can use my own good judgment. It's good for us and for the customer."
How does all of this goodwill translate into financial benefit? At the
Phelps County Bank, profits are broadly shared; all employees will
likely retire or leave with substantial stock holdings. Today, the
average Phelps Bank employee's vested ESOP account is worth more than a
quarter of a million dollars, and growing.
Businesses that don't get up and leave The
Phelps County Bank is clearly different from most businesses in America
today, but it is far from unique. Indeed, beneath the surface of what
we normally think of as the US economy giant transnational
corporations and banks, international trade, stock markets, and
individual business owners an alternative approach to organizing
economic activity is growing.
Some businesses trying out this new approach are like the Phelps County
Bank, owned by the people who work in them. Others are owned by their
customers, by the community at large, by the city government or by
locally based nonprofit groups. All share in common one essential
quality: they are "rooted" in the community. Or to put it another way,
unlike many businesses today, these firms cannot get up and leave in
the pursuit of higher profits or less regulation. These real-life
innovations in cities large and small are creating enduring jobs,
spreading ownership of wealth, fostering democracy and participation,
and stabilizing their communities.
These neighborhood and community-based economic institutions include
such models and innovations as community development corporations,
consumer and producer cooperatives, employee-owned firms, municipal
enterprises, for-profit subsidiaries of nonprofit organizations, urban
land trusts, local currency and barter systems, and community supported
agriculture programs. In recent years, these experiments have
experienced tremendous growth: 30 years ago, there were a handful of
community development corporations; today, there are roughly 3,000
across the country. Fifteen years ago, the first community supported
agriculture effort was launched; today, there are some 700 such
programs.
While they comprise a small part of the total economy, these
innovations in ownership begin to point the way toward new
possibilities for organizing our economy and stabilizing our
communities.
When workers own their jobs Twenty
years ago, the idea that workers would own productive capital at their
workplaces was considered wildly impractical and even quasi-socialist.
Today, 11,000 companies have employee stock ownership plans. Nearly as
many are enrolled in ESOPs, profit sharing, and broad stock option and
investment programs, as are members of all private and public sector
unions (15.7 million versus 16.1 million). US workers now own over $664
billion in such ownership schemes. These plans control over 8.3 percent
of all corporate equity, a dramatic increase over just a decade ago;
about 1,900 companies some of them among the largest in the nation
are majority worker-owned.
For the workers at medium-sized firms like Krause Publications of Iola,
Wisconsin (430 employees), Web Industries of Westborough, Massachusetts
(250 employees), and the Reflexite Corporation of Avon, Connecticut
(400 employees), employee ownership means that their jobs will be there
tomorrow. After all, who among the worker/owners are going to vote to
send their jobs abroad?
Consider Joseph Industries, Inc., a 100 percent employee-owned
manufacturer of fork-lift parts headquartered in Streetsboro, Ohio.
Founded as a very traditional, hierarchical corporation in the late
1960s by the Joseph Brothers, the company had grown into a $4-billion
enterprise by the mid-1980s. When the brothers began thinking about
retiring and selling the business over a decade ago, employees realized
that the sale could have dramatic and most likely negative consequences
for their jobs. The company's managers sought out an employee-owned
firm, Fastener, to buy Joseph Industries and help them make the
transition to worker ownership.
By 1987, Joseph Industries had been converted into an ESOP, and the
company's culture shift was underway. Suddenly, a company with
absolutely no history of non-management employees making decisions
adopted a structure that encouraged employee input on governance issues
and a management team that stressed open communications. Quarterly
discussions about the budget are held in which employees go through
company financial statements line by line and discuss successes and
shortcomings. Any worker/owner of the company can run for the Board of
Directors with a petition signed by 10 other employees. Charles L.
Carr, who began working at Joseph on the parts line shortly after
returning home from Vietnam in 1972, now runs the company's warehouse.
The change in culture has been dramatic, he says. "We started with one
guy making all the decisions. If he failed, he failed. Now, if we fail,
we all fail." Since converting to an ESOP, sales per employee have
increased 36 percent. Higher revenues have translated into more wealth
for the company's employee/owners. Says Carr, "We have people here
running machines who are now millionaires. I'll be here until I retire,
and I hope to retire early as soon as I get $1 million in my own
account."
"... on behalf of 10,000 cities" While many
municipalities in recent years have privatized some city services, many
others have established city-owned and operated profit-making ventures
in order to generate additional revenues, create jobs, and increase
responsiveness to community needs and interests.
Municipal programs to turn organic waste into marketable fertilizer and
soil supplements are thriving in cities like San Francisco and Austin,
and in rural communities like Mecklenburg County, North Carolina. In
the Washington, DC, suburbs, Montgomery County's composting facility
sold nearly $500,000 worth of its Leafgro soil supplement to nurseries,
retailers, and area residents.
A big area for potential growth of city-owned enterprise is in
telecommunications services. As access to state-of-the-art technologies
becomes ever more essential, community-owned telecom companies have
sprung up across the US to provide service when corporate interest has
been inadequate or nonexistent.
In Glasgow, Kentucky, population 14,000, city leaders became concerned
over the high prices being charged by the local cable provider. Bills
were running $40 per month a price equal to that of the average
person's electric bill. The electric utility was already owned by the
town, so it wasn't a big leap for Glasgow leaders to set out to build a
telecommunications venture that could integrate cost savings for cable
and electric customers by enhancing efficiency and competition.
Thanks to their efforts, Glasgow residents today enjoy benefits of
cutting-edge technologies most people in the US don't even dream about.
Their telecommunications utility provides Internet access 100 times
faster than a telephone modem can provide, and residents pay only
$11.95 a month for unlimited use. In addition, Glasgow's city-wide
"Intranet" links the resources of local government, businesses,
libraries, schools, and neighbors.
Glasgow residents also have a choice of cable TV providers; its
community-owned service offers 53 cable TV channels for under $15.00 a
month. Glasgow has even become the only US city that offers its
residents an alternative to the local commercial phone service provider.
This linked infrastructure of electricity and telecommunications has
enabled Glasgow residents to overhaul the way they purchase energy,
with revolutionary potential. Most Americans receive electric bills
indicating the total kilowatt hours consumed in a month. The Glasgow
Electric Plant Board (GEPB) in conjunction with the Tennessee Valley
Authority, from whom Glasgow purchases its energy has installed
hardware and software capable of measuring household energy use in more
detail. GEPB can post usage information to a household's private
homepage, informing residents about the hourly energy consumption of
their water heaters, air conditioners, and other appliances.
By charging lower rates for cable, telephone, and data communication,
Glasgow's municipal enterprise has helped keep more money in its own
retail economy. Says William J. Ray, General Manager of the Glasgow
Electric Plan Board, "lower cable rates have saved residents at least
$10 million over 10 years, and its ability to more efficiently manage
electrical power has saved residents more than $1.75 million over that
same period. This is money that stays in the community and is
circulated time and again, helping local businesses and the families
they support."
In addition, Glasgow has prospered economically as businesses have
expanded or relocated to the area in order to access the potential of
the broadband network.
Not surprisingly, national telecommunication corporations have had a
hostile response to this community entrepreneurship, using tactics
ranging from law- suits to legislation in an attempt to keep Glasgow
from posing a competitive threat. "It's a war we are fighting on behalf
of 10,000 cities," says Ray.
Community-owned enterprises The
New Community Corporation of Newark, New Jersey, is an acknowledged
leader in building and anchoring capital. In the late 1960s, race
relations in the city of Newark were stuck in a sump of hatred and
hostility. As in many other cities around the nation, people who could
afford to leave the inner city predominately Whites fled in droves
to the suburbs. Riots in 1967 left Newark's Central Ward in shambles.
Shops and service providers abandoned the area, leaving the Central
Ward with no decent housing, no jobs, no health center, and no major
grocery store.
Then, in 1968, the young, audacious, rabble-rousing Father William
Linder (now the gray-haired, audacious, rabble-rousing Monsignor
Linder) organized a group of committed parishioners and formed the New
Community Corporation, one of the first community development
corporations in the country. Thirty years later, NCC employs 1,200
people and has provided low-cost housing for over 7,000. Through its
efforts, the Central Ward now has a new 55,000 square-foot Pathmark
store, open 24 hours a day, 364 days a year. NCC wooed Pathmark to the
area by accepting the bulk of the financial risk, and it has paid off.
Within two years of opening, the Central Ward's Pathmark has become the
chain's most profitable store. The union shop employs 150 full-time
workers and 100 part-time workers, almost all from Newark, and the
store's annual profits exceed $1 million. Where does the money go? Most
of it to the New Community Corporation: NCC owns 2/3 of the store's
shares and reinvests its portion of profits back into the community.
With ownership comes three out of five seats on the supermarket's
board, allowing NCC to influence store hours, pricing, and programs
with an eye on the community, not just the financial bottom line.
Asian Neighborhood Design (AND), a community development corporation
based in the San Francisco Bay area, is another success story. AND
earns more than 60 percent of its $7.2 million budget from its
for-profit architectural services, casework, and furniture
manufacturing business. With a staff of over 100, many of them
southeast Asian immigrants, AND has trained more than 600 construction
workers, about 80 percent of whom are now in jobs, returning to school,
or moving on to more advanced training.
Community development corporations aren't the only nonprofits learning
how to succeed in business. Seattle's Pioneer Human Services (PHS), a
nonprofit that works with former drug addicts, began operating with
grant money. PHS has since become entirely self-supporting thanks to
its for-profit enterprises: the 150-seat Mezza Cafe; the Food Buying
Service, which distributes over 7 million pounds of food to nonprofit
organizations in 20 states; the 132-room St. Regis Hotel; Pioneer
Industries, a light metal fabricator; and others.
Pioneer Industries offers all full-time employees training and a
competitive, livable wage. With a budget of $18 million last year, PHS
employed 860 people and served over 5,000 clients.
By operating successful business ventures, says acting president David
Guth, "We have an ability to be self-sustaining and in doing so have an
ability to set our own future."
Economic democracy What
are we to make of these innovations in ownership? Judged by size and
revenue, the Phelps County Banks, the Joseph Industries, the New
Community Corporations, and the Pioneer Human Services of the country
are relatively small-scale enterprises. And, CDCs, cooperatives,
municipal enterprises, and worker-owned companies are not perfect. As
with more traditional businesses, some fail. Some employee-owned firms
are more democratic than others; some CDCs more accountable to the
community than others.
But these enterprises do focus attention on essential issues for the
future of democracy: How do we revitalize and sustain community? How do
we place wealth and assets into the hands of more people? How do we
give average working people more control over their jobs and economic
livelihood? After all, the primary rationale of Employee Stock
Ownership Plans is that the ownership of capital matters, indeed, it is
absolutely central. By holding that issue up for consideration, the
very existence of an economic alternative like worker-owned firms shows
that it is feasible to organize the economy along new lines.
One thing is certain: the trajectory of growth for ownership
innovations of many types is on the rise in the United States. In the
end, each points toward new possibilities for America in the new
century.
Ted Howard is executive director of the National
Center for Economic and Security Alternatives, 2000 P St., NW, Suite
330, Washington, DC, 20036. The Center's report "Innovations in
Ownership," to be published this spring, is a survey of the full range
of efforts that democratize capital, broaden ownership of productive
assets, and help stabilize communities by anchoring capital locally.
This article is based on research conducted by: Amanda Beatty, Michael
Jones, Amy Kedron, Stephanie Lessans, Jeff Pope, and Kristin Rusch.
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