What are the upsides and downsides of being an Employee-Owned company?
In: Economics
There are several different setups and legal definitions (technically, any incorporated company that offers stock can be an ’employee owned company’) so I’m assuming you mean a worker’s cooperative situation where the employees both own a large segment of the company and have a meaningful voice in the company’s operations.
The benefits are that employees will generally get a larger share of the profits, will have a closer impact on the direction of a company, and often are more stable.
The drawbacks are that they tend to be less risk-averse–which means their overall profits tend to be lower. (That stability of a benefit comes at a cost.) Also, if the setup is one of one worker/one vote vs a unified CEO making decisions, it’s not uncommon for divisions to happen rather quickly and for the system to fall apart.
(There’s a reason why most worker collectives are a “hybrid” system where there’s still a C-Suite making decisions, or the system is build on a scaffolding of legal stopgaps to prevent certain things, rather than frequent, direct decisions by the workers. Most US/NA/UK fall under the former, most old-school EU fall into the latter.)
Historically for new coops, things will be fine for a while, but if they aren’t successful they fall apart…but if they *are* successful, there’s usually an inflection point (spend this money to grow to take advantage of opportunities vs pay out to workers now) that cause a divide that cripples the organization.
Obviously, some survive, but there’s a reason why the list of current operating coops is pretty small and the ones that exist are hybrid models.
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