After more than two decades of growth and success, Fort Collins based New Belgium Brewing became 100% employee owned three years ago, with the employee stock ownership plan buying out the 59% of the company previously held by its founders. Today it sounds like they might be putting themselves on the auction block. With around 500 employees, and a potential valuation of a billion dollars, it’s not too hard to understand the temptation. That’s $2 million worth of company value per employee.
When I first heard about this, I was sad. The more I think about it, the more it seems like an almost inevitable outcome of New Belgium’s success, and what I understand to be its ownership structure. While employee owned, it’s still a stock ownership company, which usually means that the voting power of the owners is proportional to their share of ownership. I don’t know how evenly distributed ownership of New Belgium is, but in theory a small minority of the employee owners could have decided to sell the company off, if they had a majority ownership stake between them.
This is still probably a much better outcome than you’d expect from a normal company selling itself off. Usually, the employees would be left to fend for themselves, while founders and investors take home their winnings. The workers would be lucky to continue working with the company. At least in this case, a big chunk of the equity is held by those whose work helped build it.
This set of structures and incentives means that it’s easy for the profit maximizing money machine to gobble up an enterprise that seems to have had a different set of values for a long time. The brewery is run on 100% renewable energy. New Belgium supports a paid team of traveling carnies, who put on the Tour de Fat and Clips film festival, contributing money to bicycle advocacy organizations all over the country — including our own Community Cycles. Early on they decided to allow employees to participate in the ownership of the company, and then recently they became a certified B-Corp, and the employees took over ownership entirely.
Comments that then CEO Kim Jordan made when the employees took over ownership of the company suggest that she’d hoped this structure would lead to a durably different organization:
There are few times in life where you get to make choices that will have multi-generational impact — this is one of those times. We have an opportunity to write the next chapter of this incredible story and we’re really excited about that. We have always had a high involvement ownership culture and this allows us to take that to the next logical level. It will provide an elegant succession framework that keeps the executive team in tact ensuring our vision stays true going forward.
Jordan also said then that she’d remain CEO for the long term, but earlier this year announced that she would be retiring, to focus on running their family foundation (funded by her own cash-out).
I think I was disappointed when I saw news of the sale because I also saw New Belgium’s employee ownership as a source of durable change. But anything that can be bought out is susceptible to success. Do a good enough job, and the capital will come, seeking to devour and assimilate you. Which is totally fine, if your goal is to make money and be part of that system, which has solved lots of difficult problems and created all kinds of wonderful things (while also creating lots of difficult problems, and destroying all kinds of wonderful things… but that’s another topic).
If your goal is to create a durable, economic change-making organization you need a different structure. A different container. Something that isn’t automatically assimilated as soon as it succeeds. It’s a different kind of thing.
The most familiar organizational structure that provides this kind of insulation is the 501(c)3 non-profit organization, but it seems to me like this protection is incidental, and flows from their tax-exempt status — the IRS doesn’t want anybody building a tax-exempt business that succeeds due to that unfair advantage… and then gets cashed in. So when a 501(c)3 liquidates or sells out, it can only be taken over by another 501(c)3.
Cooperatives are another more egalitarian and economically participatory container that can provide this kind of protection, if they’re set up to do so from the beginning. They have a natural protection from the influences of capital because of their member instead of capital centered structures. Rather than one dollar, one vote, co-ops are one member, one vote, typically regardless of whether different members have invested different amounts of equity. Member economic participation is also typically not based on the amount of equity held by each member. Instead, it’s based on the amount of “patronage” that the member engages in with the co-op. If it’s a buyer cooperative (like most food co-ops) then you get a dividend based on how much you bought. If it’s a producer cooperative (like most agricultural co-ops) then your dividend depends on how much you produced. If it’s a worker cooperative, then it’s based on how much you worked. More money doesn’t buy you more power, or entitle you to accumulate money more quickly than anybody else. Unsurprisingly, this means that most co-ops have relatively flat equity structures, often requiring exactly the same ownership share from each member.
The more democratic governance structure means you can’t end up with a small minority of shareholders wielding the power to sell the entire enterprise — it would take at least a simple majority. Some cooperatives (like Equal Exchange) that are dedicated to being a durable vehicle for economic change go a step further, and incorporate a poison pill into their bylaws, which requires net proceeds from the sale of equity to be given to a charitable organization, or another cooperative, rather than being paid out to the member-owners, while also requiring a super majority to amend the bylaws.
This is a structurally very different kind of thing than a traditional employee owned company like New Belgium. The members of this kind of cooperative are more like stewards than owners. They have a hopefully mutually beneficial relationship with the organization, but don’t have the same power or incentive to liquidate it. This same dynamic came up in a very personal way over the summer, when the members of the Chrysalis and Masala housing cooperatives were displaced so that our homes could be renovated. It was inconvenient, and frustrating, and a month behind schedule. Some members wanted to be compensated monetarily for the inconvenience and frustration (even after we were able to move back in), but that compensation wouldn’t have come from someone else. The 501(c)3 group equity organization that owns the houses — the Boulder Housing Coalition — is just us. Taking money from it to pay for that inconvenience would be taking money from the third house in the co-op system, or taking money from future co-op members by neglecting our capital reserve contributions. Past generations of co-opers put up with inconveniences so that we could have the houses as they are today — they put in sweat equity, and lived in hundred year old homes that needed a lot of work. They took care of these dwellings, and we’re benefiting from that labor and inconvenience today, so I feel an obligation to pay it forward, and help ensure that our little autonomously governed housing system can take care of itself, and hopefully grow in the future, carving out a little niche in parallel to the other systems.
I prefer this type of relationship with resources, in part because of my work on climate policy. Our economy is built on ownership and private property rights, even in contexts where the ability to destructively utilize a resource has permanent consequences for future generations. Stewardship implies less power and more responsibility than ownership, so maybe it’s a hard sell, but I’d rather live in a world full of good stewards than owners, and for that to be possible, we need to build organizations that are durably dedicated to stewardship, at least for those of us who want such things.
Janelle Orsi at the Sustainable Economies Law Center in Oakland, CA has a little cartoon that gets at some of this stuff too, in the context of the “Sharing Economy”