Employee ownership has emerged as a viable method of creating asset-building opportunities – an economic priority in light of the wealth disparity in the United States. Studies of worker-owned companies have shown that they provide more stable and resilient jobs for its employees, create wealth in the community it is a part of, deliver higher wages and benefits, and mitigate structural inefficiencies in the enterprise. Fostering models that encourage and provide pathways for employee ownership may be a central campaign for creating a more equitable society.



Employee ownership generally occurs in the U.S. through an employee stock ownership plan (ESOP) or in the form of worker-owned cooperatives. However, there are fewer than 400 worker-owned cooperatives in the country, and the incubation of new worker cooperatives and ESOPs have several barriers relating to information gaps, entrepreneur incentives, collateral limitations, and capital access.

the worker-owners of the new belgium brewery

the worker-owners of the new belgium brewery

Business owners, especially retiring ones, are increasingly looking to convert their businesses to employee ownership structures. There is a great opportunity for such conversions: a staggering number of healthy, successful businesses are about to undergo a succession process, with baby-boomer owners gearing up for retirement – a generation that owns 2.34 million businesses.  While some transitioning businesses may be shut down, sold to competitors, relocated, or taken over by private equity funds, some retiring owners may prefer a situation in which the company – and, relevantly, its employees – continue to thrive. This provides a great opportunity for worker ownership and subsequent asset-building for the workers of these enterprises.

There is a growth in investment strategies that have sought to boost conversions through innovative financing, primarily through two groups: CDFIs and lenders leveraging grant capital for worker cooperative conversions, and Private Equity firms using leveraged buyouts to transition companies to ESOPs. The latter group has achieved market returns but without a focus on impact, and in fact often risks extracting value from the workers and over-leveraging the company, while the former relies on grant capital to subsidize operating expenses and provides technical assistance beyond what a traditional lender can offer.

Project Description

This project explores the viability of a new fund model that combines a private equity + ESOP structure, already in existence, to shepherd companies to employee ownership while centering workers, especially people of color and low-wage workers from marginalized communities. As such, it provides both a model for the conversion process at scale with non-extractive finance, and impact recommendations and guardrails to ensure that benefits accrue first and foremost to workers.

We have released a working paper culminating the research on this fund model, detailing how it relates to other efforts to finance employee ownership conversions of different types. We invite you to read it and let us know what you think.