(The Center Square) – The U.S. Senate Committee for Health, Education, Labor, and Pensions held a hearing Wednesday to discuss strengthening Employee Stock Ownership Plans (ESOPs), emphasizing the potential to boost retirement security, support small businesses, and empower workers through shared ownership nationwide.

Chairman Sen. Bill Cassidy, R-La., said in his opening that “we must enhance our retirement system to give the worker the power; ensuring they have financial security after finishing his or her career.”

“The ESOP model is pro-worker, pro-family, and pro-business,” Cassidy added. “Studies show that ESOPs result in higher employee satisfaction, lower turnover, and greater financial success that puts more money directly into workers’ pockets.”

During the hearing, Sen. Bernie Sanders, I-Vt., praised King Arthur Baking Company for being a model for shared ownership, calling it proof that empowering workers strengthens businesses and the economy.

“Arthur is not only an enormously successful baking company,” Sanders said. “What makes it so special is that it is directly owned by its employees, not some multi-billionaire on Wall Street.”

Brock Barton, chief financial officer of King Arthur Baking Company, testified that he believes “in the philosophy that employee ownership improves corporate performance and employee engagement.”

“It fosters accountability, pride, and a commitment to our customers, partners, and communities,” Barton said. “Each employee owner plays an important role in shaping our workplace and driving high performance.”

Dr. Joseph Blasi, director of the Institute for the Study of Employee Ownership and Profit Sharing, told the committee that “ESOPs are safer workplaces.”

“According to the Occupational Health and Safety Administration injury tracking population data, from 2016 to 2019, ESOPs have a 9-13 percent decrease in workplace safety incidents compared to non-ESOPs,” Blasi said.

While lawmakers agree that American workers deserve to retire with security and dignity, the committee will continue to find ways of supporting employee ownership and the role that it will play in shaping the future of the workforce.

The natural products industry is a cornerstone of our economy, supporting jobs and economic growth across communities large and small. The industry is facing a pivotal moment as baby boomer-owned businesses undergo a wave of retirements and ownership transitions. With millions of jobs and billions in economic value tied to these businesses, the question of who will take over is more urgent than ever.

Employee ownership offers a compelling solution, not just for preserving jobs and strengthening local economies, but it increases business value by aligning the interests of workers and the company, leading to higher productivity, improved performance and faster growth. Additionally, employee-owned companies are more resilient during economic downturns, have lower turnover rates and foster a culture of innovation and problem-solving, all of which contribute to long-term value creation and sustainability.

A catalyst for change

A “silver tsunami” is rapidly approaching as the baby boomer generation—those born between 1945 and 1965, roughly—enters retirement, ushering in a transformative era for the food and beverage industry. Research indicates that over the next decade, approximately 51% of U.S. businesses owned by boomers will undergo ownership transitions, transferring billions in assets. For the natural products sector, an industry deeply rooted in local economies and agricultural supply chains, these transitions present an unprecedented opportunity to reimagine ownership structures in ways that sustain businesses, protect jobs and empower communities.

Related:Female leaders drive sustainable change, transform global food systems

This moment isn’t just about continuity; it’s about seizing the largest wealth transfer in our country’s history to build a more equitable and resilient future. By embracing employee ownership models, which are becoming easier to implement as investors and regulators design simpler models, natural products business owners can ensure a smooth transition while preserving their mission, strengthening worker engagement and reinforcing their businesses against economic volatility. Research consistently shows that employee-owned companies outperform their peers in both productivity and profitability, making this a once-in-a-generation opportunity to redefine the future of the industry for long-term success.

While standout examples of employee ownership, such as King Arthur Baking, KeHE Distributors and Bob’s Red Mill, have existed for years, they remain the exception in an industry that prides itself on values like sustainability, community impact and using business as a force for good. Despite these companies’ success in aligning profitability with employee well-being, the broader natural products sector has yet to fully embrace employee ownership as a standard practice, missing a powerful opportunity to further its mission and enhance both business performance and social responsibility.

Related:The Natural List – Inside natural product investments and innovation

Value creation through employee ownership

Employee ownership is no longer an exit strategy requiring concessionary returns; it’s a proven method for maximizing value creation. An ecosystem of nonprofits, research organizations, think tanks and impact investors has spent years building the business case for shared ownership. Leading advocates, such as the National Center for Employee Ownership (NCEO), Project Equity, Democracy at Work Institute (DAWI) and the Rutgers Institute for the Study of Employee Ownership and Profit Sharing, continue to champion this movement.

As the market evolves, new ownership structures like Employee Ownership Trusts (EOTs) partial ESOPs and broad-based phantom stock plans offer innovative approaches to transitioning businesses. These models provide more flexibility than traditional ESOPs, making it easier for small- and mid-sized businesses to adopt employee ownership. This is particularly relevant for the natural products industry, where many businesses operate on a smaller scale with tighter margins. Employee ownership strengthens ties between employees and businesses, ultimately enhancing long-term growth and stability.

Federal and state-level initiatives are also increasingly incentivizing employee ownership through subsidies, tax credits and dedicated support programs. States like California, Colorado and Washington have introduced legislation offering significant financial support. For example, Colorado’s tax credit of up to $150,000 for employee ownership conversions reduces the financial burden on businesses during the transition.

The strongest testament to the value of employee ownership in the market context is its growing popularity within the private equity sector. KKR, under the leadership of Co-head of Global Private Equity Pete Stavros, has implemented employee ownership structures in more than 50 of its portfolio companies. Stavros has shown that granting ownership stakes to employees can be a powerful driver of value creation, not only for workers but also for investors. He led the creation and launch of Ownership Works, a nonprofit dedicated to scaling these practices throughout the large-cap private equity sector. Ownership Works has collaborated with over two dozen private equity firms, setting up 88 employee ownership plans by the end of 2023, with five already delivering cash returns to workers.

An opportunity for the natural products industry

For decades, leaders in various industries have sought solutions to the nation’s economic challenges, with income inequality being a persistent issue. Amid many proposed strategies, employee ownership is emerging as a promising solution. The natural products industry, with its strong ties to communities and broad economic footprint, is particularly well-positioned to champion employee ownership, setting an example for equitable and sustainable business practices.

The natural products industry, along with its millions of employees, plays a vital role in the nation’s economy and culture. By adopting employee ownership, companies can join a transformative movement that is setting a new standard for capitalism, one that genuinely values workers as partners and contributors to success. Employee ownership offers a roadmap for aligning business success with worker prosperity, demonstrating that profitability and shared prosperity are not mutually exclusive, but mutually reinforcing.

Harmony Place in Durham, housing for employees of Harmony Homes. (Courtesy of Harmony Homes)

An innovative new loan fund of nearly $9 million is being brought to bear to help develop workforce housing in the Upper Valley. With investments from eight major local employers, the Upper Valley Loan Fund is a new approach to the state’s housing crisis that has employers and housing advocates statewide taking notice.

While the shortage of affordable housing is recognized as a statewide issue, the Upper Valley has been experiencing its own crisis for decades. A report by Vital Communities, a regional civic engagement organization, says the Upper Valley needs 10,000 new homes by 2030 to meet demand, which would require tripling the current annual rate of housing production.

(Pictured Left: Vital Communities housing breakfast. Courtesy of Vital Comminities)

Tucked under the umbrella of Vital Communities is a corporate council made-up of the top executives of major employers in the Upper Valley who put their heads together on a regular basis to consider the issues facing the region, says Allan Reetz, director of public and government affairs for Hanover Co-op Food Stores.

“Through lending our voice, our muscle and our insights, we can move some needles,” says Reetz. “It was a few years ago that we really centered on housing, not for the first time but to a brand-new level. Housing in the Upper Valley has been an issue for well over 20 years. I think the first housing breakfast might date back to 2004.”

A Collaborative Approach

Clay Adams, president of Mascoma Bank and chair of the corporate council, says the lack of housing is a barrier to economic vibrancy. “We are all so pained by this that we wanted to try to be part of the solution.”

The eight employers in the Upper Valley Loan Fund include: Dartmouth Health, Bar Harbor Bank and Trust, Citizens Bank, Dartmouth College, Hanover Co-op Food Stores, Hypertherm, King Arthur Baking, and Mascoma Bank.

The Upper Valley Fund will be managed by Evernorth, a nonprofit that provides affordable housing and community investments in Maine, NH and Vermont. Deb Flannery, vice president of lending at Evernorth, says the fund will allow them to build or preserve apartments for people who can afford rents of $1,200 to $1,600 per month. By comparison, the current market rate for apartments in Grafton and Windsor counties is between $1,500 to $2,200 per month, she says. “One of the things that is different about this collaborative is its cross-sector approach,” says Flannery. “It’s not just one employer doing it on their own but a collaboration of employers and affordable housing partners to leverage the full capacity the system has to deal with this problem.”

Currently in the Upper Valley area, there are about 250 units in the direct pipeline. With the money these business have put into the fund, another 250 units are targeted for development. While some contributors to the fund put forth as much as $2.5 million, for the Hanover Co-op, Reetz says, “Its donation of $100,000 may seem small but its a lot for a grocery cooperative. It would take 25 Hanover Co-ops to equal one Mascoma Bank.”

The partners will earn 1.5% on their investment, which is a small return with a big community impact, Reetz says. “I tip my hat to those who were able to put forth funds. They had to also convince their boards to commit to the long haul.”

More Flexible Capital Needed

Harrison Kanzler, executive director of AHEAD in Littleton, which completed Lloyd’s Hills Apartments (Pictured Right, Courtesy of AHEAD), a 28-unit project in Bethlehem in 2022 and is now working on 58 units in Woodstock, says the financing is always a complex and challenging process.

“The work that Evernorth and Mascoma Bank did in the Upper Valley, working with businesses to get together low interest funding and financing options for developers of workforce housing is pretty incredible,” says Kanzler. “Seeing something like that in every region of the state would be huge.”

Kanzler says people may not realize how much money is involved in these developments. “If we have to carry (even for a year or two) a 7% line of credit, that can be hugely detrimental to the development and our ability to do it. Having a fund that’s largely pooled resources from businesses investing in housing to bring that line of credit down to 2% or 3% can make a huge difference.”

Adams of Mascoma Bank agrees. He says projects simply cannot get built without some flexible capital. “There are all kinds of sources, and this is just one of those. But it shows that the businesses and institutions in this are willing to put their money where their mouth is,” he says.

Patrick Hess, director of real estate development for Avesta Housing, a nonprofit that develops and advocates for affordable housing in NH and Maine, says the housing crisis is so acute that anyone who has an interest in addressing it in any shape or form needs to be thinking as creatively as possible about partnerships. “The Upper Valley fund really speaks to the commitment of those employers and the deep need,” Hess says.

Changing Zoning

Avesta, with a NH office in Exeter, broke ground on its first of four affordable housing developments in the Mount Washington Valley, River Turn Woods, in September 2022. The development will provide 156 new homes in the Conway area.

“While Conway hasn’t got a funding consortium, they were very supportive of recent zoning changes in the town of Conway that allowed for increased density for developments that include affordable housing,” says Hess. “Local businesses came out and spoke in favor of our current project when it was going through the public approval process.”

The city of Rochester has been looking at many avenues to increase workforce housing, says Mayor Paul Callaghan. The city updated zoning regulations around density in different areas of the city and plans to evaluate additional changes in 2023.

River Turn Woods, an Avesta Housing project. (Courtesy of Avesta Housing)

“We hosted meetings with local manufacturers facing worker shortages driven by the affordable housing shortage,” he says. “A long commute just doesn’t serve a company well when it comes to retaining workers.”

Apple Ridge, a workforce housing apartment complex in Rochester, now has 102 apartments as the project enters phase 3, with 68 units leased (a ribbon cutting for the second phase was held in August). “These contribute to an overall citywide total of about 900 subsidized or workforce units,” Callaghan says.

He says Rochester is fortunate to host many manufacturers including Sig Sauer. “They expected to bring 300 jobs and they’re approaching 500. The city needs to maintain the housing supply to support these businesses. We want folks to be able to live here and work here; when that happens, the whole community benefits because they spend their money here,” Callaghan says.

Businesses Tackle Housing Crisis

The Hanover Co-op Food Stores employ about 350 people, Reetz says, many of whom travel 45 to 50 minutes to work. Parents often struggle to get to a teacher conference, band concert or sports practice.

Pictured Right: Allan Reetz, director of public and government affairs for Hanover Co-op Food Stores. (Courtesy of Hanover Co-op Food Stores)

“We understand the impact these issues can have on our community and the neighborly relations we all value in a rural setting,” says Reetz. “I’m not in a position to go out and try to find apartments. What I am in a position to do is to show up to local and state meetings, put my shoulder behind a lot of important efforts and do whatever I can to move the needle.”

Dave Duncan, vice president of facilities management at Dartmouth Health, says with job openings numbering in the hundreds, they considered building housing and even conducted some design and planning work. “But we quickly learned that’s not our expertise,” says Duncan. “Our expertise is running a hospital, so we pivoted because there were several extremely well organized and qualified developers that were opening up new apartments.”

Duncan says they worked with local landlords and set up lease agreements and have developed some successful partnerships. “It has become a good recruiting tool for us,” says Duncan. “In the past, nurses would accept a job and then decline it the end. Now people interested in working at Dartmouth know that at least a portion of their transition to the area would be less stressful.”

Dartmouth Health created resource guides and a website with local listings of rentals. “We also have someone on our team who manages the housing program,” says Carolyn Isabelle, director of workforce development. “She supports the candidates one-on-one as they make that transition to the Upper Valley and has worked with about 1,200 people in the first 18 months.”

Pictured Left: Workforce Housing in Dover being constructed by Harmony Homes. (Courtesy of Harmony Homes)

John and Maggie Randolph, the owners of Harmony Homes at Hickory Pond and Harmony Homes By the Bay, two large assisted living facilities in Durham, saw the effect of a lack of affordable housing on their workforce and decided to build their own. They constructed seven one-bedroom apartments, as well as a child care center in Durham and are now in the process of framing out 44 cottages in a development in Dover.

John says he expects they’ll have occupancy by spring. The units will be available for employees but also to the general public at the fair market HUD rental rate of about $1,100 for a one bedroom.

“Working with the city of Dover, however, has been amazing,” says Maggie. “Their approval process is streamlined; everyone who needs to be there—from the fire department to the city engineer—is at the table. It’s not easy and they are stringent, but they’re very fair and straightforward.”

Maggie says she heard about the Upper Valley fund and would love to partner with more organizations, but she recognizes it’s hard for businesses to get involved in housing, to be a landlord and an employer at the same time. “We have a special team to handle it, and we’d be happy to help other businesses if they want to own rental housing but don’t want to manage it themselves.”

John says they are always looking at other potential housing sites. “We continue to fight the good fight,” says John. “Building affordable housing, it’s not something you’ll make money at. It has to be a passion; the costs grow and everywhere you turn there are obstacles, but it’s the right thing to do.”

Half mentorship, half competition, Baking Pitchfest 2024 is designed to champion standout baking brands. It also provides equitable opportunities for POC entrepreneurs in the baking industry and winners will receive financial support, brand exposure and mentorship to help accelerate their businesses.

The competition has two editions.

Baking Pitchfest Product Edition focuses on baking brands founded and owned by POC across the US. Product must be baking related – including ingredients, mixes, ready to eat foods and tools – and must already be in full production. Owners must be able to provide proof of sale.

Finalists will travel to Vermont for a two day event in May to pitch their product idea. Entries will be judged on uniqueness, quality, creativity and potential for success.

Winners will receive mentorship from Project Potluck, brand-building exposure on King Arthur’s marketing platforms along with a purchase order within a year.

Founded in 1790, King Arthur today is considered the go-to baking resource for speciality baking items (flours, mixes and gluten-free products available in US retail). It is also known for inspiring connections and community through baking. The Vermont-headquartered company is a certified B Corp, 1% for the Planet member and 100% employee-owned.

Disruptive innovators of colour

Pic: GettyImages/Rawpixel

The Bakery Edition focuses on POC-owned bakeries in the Northeast and Washington state looking to reach the next level. Finalists will compete in a virtual event for a chance to win financial support to build their business.

Applicants will be judged on vision, baking and business expertise, creativity and potential for success.

Winners will receive a grand prize of up to $10,000 in funding , a one-on-one business consultation with PrepShift, free membership for a year to the Bread Bakers Guild of America and exposure through King Arthur’s marketing platforms.

The Product Edition is open to applicants nationwide, while the Bakery Edition is open to bakeries located in Washington state and the Northeast (Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont).

“We look forward to witnessing the innovative products and business concepts that will shape the future of baking,” said Molly Lawrence, corporate social responsibility manager at King Arthur.

“Pitchfest 2024 is a testament to King Arthur Baking’s dedication to fostering a more inclusive baking community and empowering creative POC leaders in the industry.”

Applications are open until 10 February.

‘A space where innovation knows no bounds’

To participate, individuals and businesses must be POC-led and sign to the Project Potluck community.

Project Potluck was founded in 2020 by Ibraheem Basir, founder and CEO of A Dozen Cousins, Ayeshah Abuelhiga, founder and CEO of Mason Dixie Foods, and Arnulfo Ventura, CEO of Alter Eco.

A first-of-its-kind organisation, the non-profit focuses on helping POC thrive by tackling the inherent bias in hiring, networking gaps, lack of access to capital for diverse founders and more. With a goal of implementing lasting change in the CPG and food and beverage industries, Project Potluck provides new opportunities for POC to network, learn, and grow from leaders and veterans in the space.

The commitment to become a POC member ensures the event remains true to its core purpose of providing equitable opportunities.

“We believe in the transformative power of diverse voices in shaping the future of the baking industry,” said Kathleen Casanova, executive director of Project Potluck.

“Baking Pitchfest 2024 is more than a competition; it’s a platform for empowering People of Colour to break barriers and redefine the narrative in baking. Through mentorship, competition and community, we’re fostering a space where innovation knows no bounds.”

In a transaction that would be impossible for a Canadian company, the owners of North America’s largest builder of acoustic guitars secure a sustainable future for their company and its employees.

TORONTO, Feb. 16, 2021 /CNW/ -Taylor Guitars, a leading global builder of premium acoustic guitars based outside San Diego, California has transitioned to 100% employee ownership. Backed by a Canadian pension fund, Healthcare of Ontario Pension Plan (HOOPP), and Canadian non-profit Social Capital Partners (SCP), this is a landmark transaction where a pension fund has directly financed an employee ownership conversion with a flexible, long-term debt facility.

Taylor Guitars views the transition to employee ownership as the next step to ensure a sustainable future for the company, while also providing a valuable financial benefit to people who have contributed to its success. “We believe we’ve created a special company, where passionate people can engage in problem-solving innovation, collaboration and respect” said Kurt Listug, co-founder and Chief Executive Officer “Securing our independence through a 100% Employee Stock Ownership Plan (ESOP) allows us to strengthen this culture.”

The transaction was financed with debt from HOOPP, SCP and the owners themselves. “We evaluated a number of potential financial partners, but it was key to us to work with someone who shared our values and long-term outlook. HOOPP and SCP stood above the rest as partners who care deeply about the success of our company and its employees, and feel the same way we do about our environmental and social objectives.” Bob Taylor, co-founder and President, Taylor Guitars.

“We are committed to seeking partnerships with market-leading companies with strong growth potential and a stellar track record of innovation and growth” said Jim Walker, Managing Partner at HOOPP Capital Partners. “And the ESG aspect of this transaction is also appealing given Taylor’s environmental sustainability initiatives and the fact that our capital will be invested to help create a prosperous future for Taylor Guitar employees who now own the Company.” he added.

SCP notes that a similar transaction would be impossible in Canada, as there is no equivalent to the Employee Stock Ownership Plan (ESOP) structure available in the United States. As a result, Canada has very low levels of employee ownership. Social Capital Partners looks to change that and are campaigning for a better regulatory environment that includes a defined structure and targeted incentives, as exist in both the United States and the United Kingdom. The proposed changes would allow for a significant increase in broad-based employee ownership in Canada, which would in turn foster growth and keep jobs in local communities.

SCP started advocating for employee ownership because of the proven social and economic benefits of employee ownership. “Employee ownership has been studied in the US for decades. Employee owned firms grow faster, default less often, are far more resilient in economic downturns and pay their people more, even before you factor in the wealth generating effects of ownership,” said Jon Shell, Managing Director & Partner of Social Capital Partners. “It’s also a great business succession option as it lets owners exit for fair prices while protecting the people and communities they care deeply about.” he added.

About Taylor Guitars

Taylor Guitars was founded in 1974 by Bob Taylor and Kurt Listug and has grown into the leading global builder of premium acoustic guitars. Taylor now employs over 1,200 people and currently produces hundreds of guitars per day in its state-of-the-art factory complexes in both United States (El Cajon, California) and in Mexico (Tecate). The company maintains an active dealer network, with Taylor guitars sold through hundreds of retail locations in North America and with international distribution to 60 countries, including a distribution warehouse and factory service center in the Netherlands.

About Social Capital Partners (SCP)

Founded in 2001 by entrepreneur and philanthropist Bill Young, Social Capital Partners (SCP) is an independently funded non-profit that designs and implements systemic ideas to tackle social problems. SCP initiated their Employee Ownership Capital project in 2019 to link institutional capital to employee ownership conversions in the United States using the Employee Stock Ownership Plan structure. The transition by Taylor Guitars to 100% employee ownership is the project’s first transaction. SCP is campaigning for a targeted employee ownership policy in Canada. For more information see www.employee-ownership.ca.

About Employee Stock Ownership Plans (US-ESOP)

The US-ESOP is a type of tax-qualified defined contribution plan available in the United States through which all qualified employees receive a retirement benefit linked to Taylor Guitars’ future equity value. Taylor Guitars will be joining over 6,400 other successful ESOP companies, such as Clif Bar & Company, King Arthur Flour Baking Company, and W.L. Gore & Associates, which are committed to their independence, their values, their employees, and providing the best quality, innovation and service to its customers and external partners. More information about ESOPs can be found at esopinfo.org. Chartwell Financial Advisory, Inc. advised Taylor Guitars on all aspects of the ESOP transaction and creation of the optimal ESOP capital structure.

SOURCE Social Capital Partners (SCP)

Media Contact: Kiki Cloutier, Principal, Earnscliffe Strategy Group on behalf of Social Capital Partners, 416-885-4651, [email protected]