Op-Ed by Mike Shesterkin, Executive Director, SMSBF

We live in an age of income and wealth disparity. A recent Pew Research study indicates, “The highest-earning fifth of U.S. families earned 59.1% of all income, the richest fifth held 88.9% of all wealth.” Other measures indicate equally disturbing trends. What is it about this system that leads to the grotesque disparities we see?

One criticism has to do with business ownership. In this system, business ownership is reserved for those who have access to sufficient capital and are willing to take the risk of starting a business. The owners of the business are those who benefit from its profitability, and the argument goes, since they took the risk, they ought to enjoy the spoils.

Of course, the problem with this model is that over the years, wealth has concentrated among an ever decreasing proportion of the population. In other words, those who own the businesses have tended to keep the profits for themselves rather than redistributing the profits. The Nobel Prize winning economist, Mohammad Yunus, calls this concentration of wealth a “ticking time bomb.” Eventually, the folks who “have not” will get angry. We are already seeing signs that pressure is building.

What can be done about this?

One answer lies in shifting our view of business ownership and imbedding within it a sense of democracy. Surprisingly for most, there are a number of worker-owned businesses operating in the U.S. today. The Publix grocery store chain and W. L. Gore and Associates, makers of Gore-Tex, are but two examples of worker-owned businesses.

Why would this make a difference?

In a recent New Republic article, author John Case writes,

“…ownership mightily affects the distribution of wealth and income all by itself. To take just one example, consider a successful midsize company—a regional restaurant chain, say, or a construction firm with $200 million in annual revenue and $10 million to $20 million in net profit. If it’s owned by one person or a small group, as is often the case, these owners may receive a million or more in income every year, and they have an asset likely worth tens of millions. Most of their employees will be lucky to earn $50,000 a year and save up a few thousand in a 401(k) plan. Surely broadening the ownership of business is a good idea.”

There is growing awareness that models such as Employee Stock Ownership Plans and Co-Operatives provide the means to increasing equity and stemming the disparity caused by the concentration of wealth. There are other benefits as well.

When the responsibility for the business is shared in a democratic sense, employees and leadership are more inclined to make decisions that benefit the community in which the business operates. For example, employee-owned businesses are less likely to sell-out and close, thereby putting people out of work and burdening the community. During hard times, employee-owned businesses are more likely to seek solutions that will keep the business going.

We need to work together, as a community, to advance the movement toward employee ownership. We also need to work to change public policy, so that it is more friendly to forming and running employee-owned businesses. In this month’s lead story, Karen Tyler-Ruiz talks about the work she does as the Executive Director of the Center for Community-Based Enterprise (C2BE), the Detroit based non-profit that’s helping to flip the script on business ownership. Karen and her team work with business owners and entrepreneurs to help them navigate the process of forming employee-owned businesses.

Detroit and Michigan ought to lead the nation in the number of employee-owned businesses. Our community has a rich heritage of bringing democracy to the workplace. Let’s resurrect that heritage and work to build a thriving, locally-owned triple bottom line economy in Detroit and the region.