Impact Investing and Employee Ownership

The data on the benefits of employee-owned companies is very compelling.  For example, a recent Rutgers University study found that employee-owned firms have higher productivity rates and generally outperform similar firms that are not employee-owned.  Moreover, employee-owned firms were less likely to shut down or lay off workers during the last two recessions.  Given these trends, it’s curious why employee ownership doesn’t get more attention in policy circles and among economic developers.  It’s also a challenge for these companies to raise money, as a new Fifty by Fifty/Democracy Collaborative report shows.    The study was written by Maryann Beyster, the daughter of J. Robert Beyster, the founder of SAIC, which was, at one time, America’s largest employee owned business.   The study reviews the current landscape of impact investing and suggests that these investors can and should be expanding investments in employee owned firms.  A few CDFIs and private investors target this market, but they are rare exceptions.   The benefits of aligning impact investing and employee ownership could be profound, bringing new resources to a neglected, but important, segment of American business and creating new opportunities for profitable investments in community development.

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