Chloe Chassaing had seen the news reports in April 2021 about businesses struggling to find enough people to fill positions, particularly in the hospitality sector.
That was about the time that White Electric Coffee, a coffee shop on Westminster Street in Providence, had reorganized as a worker-owned cooperative called CUPS Cooperative Inc., and Chassaing was one of the new worker-owners.
For CUPS Cooperative, which still does business as White Electric, there was no shortage of job candidates.
“Even when we were first opening and putting out the word on social media that we were looking to hire people … we had dozens of applicants in a few days,” she said. The high number of applicants “showed us that people want to work in a different kind of environment because we had a lot of interest, and we still do.”
And so do other businesses that operate under an employee stock ownership plan – basically a model in which the workers own a slice of the company.
Though nearly every industry suffered because of the COVID-19 pandemic, employee-owned businesses took less of a hit than those with traditional ownership models, according to a recent study by the National Center for Employee Ownership.
Businesses with an employee stock ownership plan – or ESOP – model tended to weather the pandemic with stronger finances than their counterparts with traditional ownership models and also retained and added more employees, the report found.
The result: more financial stability for the employees.
According to the study, which drew from U.S. Department of Labor data from September and November 2021, ESOP account balances stood at around $132,000, more than double the average 401(k) account balance of $64,000. ESOP businesses also offered a contribution 2½ times higher than traditional employers, often in addition to a 401(k) plan, the report notes.
Kristin Allain, director of human resources at Newport Restaurant Group, attributes the company’s resilience throughout the pandemic to its 100% employee ownership.
For this time of year, staffing levels are about the same as they were prior to the pandemic, Allain says, which she believes derives from the employee-owned business culture and a benefits package that offers perks not typical to the food service industry, such as 401(k) matching contribution, flexible spending account and health insurance.
And ultimately, employee-owners at the company‘s 14 Rhode Island restaurants had the power to implement a model that felt like it would best serve their own needs, Allain says.
“There were a lot of difficult decisions to be made,” she said, “and in this case, with our company, they were made with our employee-owners at the heart of it. To me, that makes all the difference.”
Outside of employee-owned businesses, observers say that the study arrives at several valid findings, but also overlooks some factors.
The National Center for Employee Ownership report “makes some great points about the ESOPs having a major positive impact on the culture of the company and the morale of employees,” said Harsh Luthar, a professor of management at Bryant University.
But he adds that it also may be “slightly skewed” by outside stock market trends not accounted for in the report.
“Despite ups and downs over the last five years, the stock market has skyrocketed,” Luthar said. After plummeting in March 2020, the S&P index nearly doubled by the end of the year, he notes. “So, it is only logical that the value of the employee stock options plans went up dramatically during that time,” he said.
In general, Luthar says ESOPs can be riskier because while they can be impacted more dramatically by upswings in the stock market, the same holds true for downturns. Luthar also cautions employees against placing all of their money in company stock for this reason.
But ESOP organizations and employee-workers see an overall benefit that goes beyond finances alone.
An earlier study by the Employee Ownership Foundation and the Rutgers School of Management and Labor Relations, which surveyed businesses in August and September 2020, echoed the findings of the National Center for Employee Ownership report: ESOP companies demonstrated a job loss rate 25% lower than businesses that aren’t employee-owned businesses, according to the study. And while two-thirds of traditionally owned companies cut hours for employees during the pandemic, this rate stood at about one-third of ESOP businesses.
[caption id="attachment_408457" align="alignright" width="300"]
PIECE OF THE ACTION: Christian Rakotoarisoa, one of the worker-owners at White Electric in Providence, serves a latte at the coffee shop.
PBN FILE PHOTO/MICHAEL SALERNO[/caption]
Just over a quarter of ESOPs cut employee pay during the crisis, the report also notes, compared with 57% of other businesses, and ESOP businesses were also more likely to allow employees to work from home and provide personal protective equipment.
Many worker-owners say it’s this support, coupled with the ability to have a say in company decisions, that boosts employee morale and attracts people to buy their own stock in an employee-owned business.
At White Electric, Chassaing is one of around 12 worker-owners and has noticed this shift since the company’s employees purchased the business from its former owners, following a contentious, ultimately successful union campaign. Just over a year ago, the business reopened as the first cooperatively run coffee shop in Rhode Island.
Like most companies, White Electric’s business was slowed by mandated closures, as well as voluntary safety measures, such as staying closed to indoor dining until March. Each decision was made by vote among the worker-owners.
