Posts Tagged ‘share the wealth’

Photo: Jonathan Wiggs/ Globe Staff
Boston’s City Fresh Foods management (above, CEO Sheldon Lloyd
) is selling a stake in the business to its workers via an employee stock-purchase program.

One of the main reasons there is such inequality between the wealth of executives and labor is that when a company does well, very little of the money comes to workers. It’s almost a sharecropper scenario. That’s why sometimes workers pool their savings to buy a company and make it a cooperative. And it’s why owners who worry about inequality offer employees ownership shares.

Jon Chesto writes at the Boston Globe, “City Fresh Foods in Roxbury is in high demand, as the food provider has raced to distribute locally produced meals to homes in and around Boston during the pandemic on behalf of various nonprofit agencies.

“Now, City Fresh co-owners Sheldon and Glynn Lloyd say they are offering a way for employees to share in this success — by bringing them on board as equity partners.

“About 90 of City Fresh’s 150 workers were eligible to participate in a new ’employee stock purchase program’ that closed to applicants last week. The company said 35 employees opted to buy shares in the privately held company through paycheck deductions, collectively representing about 3,500 shares, or a 35 percent ownership stake.

“Bringing employees into the fold as owners has been a longtime goal for Sheldon Lloyd, the chief executive, and his brother Glynn, who now leads the Foundation for Business Equity, launched by Eastern Bank.

“City Fresh workers, many of them immigrants, will now be able to directly benefit as the value of the company increases, through the appreciation of stock and the granting of dividends during profitable years like the last one. The hope is that the dividends employee-owners receive will at least compensate for the cost of the new paycheck deductions. …

‘We’ll still make money, but it’s going to be shared differently,’ he said. ‘It’s not a huge capitalistic moneymaking venture, ultimately, if it continues down this path. But it’s the right thing. It keeps me going.’ …

“The transfer of ownership in the nearly 30-year-old company helps provide for an exitfor two of its investors, Boston Impact Initiative and Cienega Capital. Those investors had together held a 40 percent stake in City Fresh since 2015, when minority investor Unidine Corp. was bought out. …

“Employee ownership [helps] ensure a shared interest in a company’s financial fortunes, said Eastern Bank’s chief executive, Bob Rivers, whose firm helped finance the stock sale at City Fresh. …

“At City Fresh, Sheldon Lloyd envisions a company that outlasts him and his brother. The pandemic, he said, is exacerbating the gap between haves and have-nots, favoring white-collar employees who can work from home and who have money in the stock market.

“ ‘There’s an inequity within the inner city, in the Black and brown communities,’ he said. “In a small way, this helps to bridge that gap.’ ” More at the Boston Globe, here.

Author John Case wrote the book on those types of arrangements. At the New Republic in 2019 he explained, “Close to 7,000 U.S. businesses are partly or wholly owned by a trust known as an employee stock ownership plan, or ESOP. The list of companies with full or majority employee ownership includes giant firms such as the Publix supermarket chain in the Southeast, with more than 200,000 employees; large and middle-market enterprises such as W.L. Gore & Associates, maker of Gore-Tex fabric, with nearly 10,000; and smaller companies such as King Arthur Flour (300) and New Belgium Brewing (800).

“These companies are typically more productive than their conventionally owned peers. They grow faster, pay higher wages, and are less apt to lay people off in a downturn. Successful ones — as most are — enable employees to build up serious wealth over time. A recent Rutgers study found that the average worker in a company with an employee stock ownership plan has already accumulated $134,000 in wealth just from his or her stake in the business. Some have a million or more.
” More here.

You might also like the Nonprofit Quarterly’s article by Davis Taylor and Rob Brown about the Coop economy in Maine, here.

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