Local
worker ownership an opportunity for Rhode Island
By Ben Choiniere for UpriseRI
Rhode
Island, like many places across
the United States, faces trouble
ahead. Modest employment gains have come with lower wages and less
benefits. Economic inequality is
rising.
We have more outside ownership and less local businesses.
We have more outside ownership and less local businesses.
As our local enterprises
disappear, Rhode Island disappears. We are a small state so the sense of what
creates the Rhode Island experience is very important. What we are losing is
more than nostalgia.
We are losing jobs,
profits, tax revenue, local control and opportunity for the future. Eventually
we even loose our residents, as a recent Glassdoor study shows
Providence topping cities in the nation where workers are looking to leave.
The Local Ownership Opportunity Act (H7799, S2871),
sponsored by Representative Aaron
Regunberg (Democrat, District 4, Providence) in the House and
Senator Sandra Cano(Democrat, District 8,
Pawtucket) in the Senate, is a step in the right direction.
EDITOR’S NOTE: Charlestown has already had a great
experience with a worker-owned business. Sol Power, the
company chosen by the town for the Solarize Charlestown effort to get
homeowners to install solar panels, proudly describes itself as a “cooperative”
that is “employee-owned and democratically run.” Please continue reading to
learn more about the proposed legislation that would promote more such local
worker owned businesses.
Based on the results of
the poll those employees can then enter into discussion with stakeholders
including workers, owners, unions, creditors, liquidators, customers, etc. The
goal of the discussion is to develop a future business plan and negotiate a
purchase.
If successful the buyers
would operate the business as a worker cooperative, defined by legislation
passed by the Rhode Island General
Assembly in 2017.
This is a pro business
bill, just not in the way we normally think. The bill seeks to make it easier
for workers to acquire a closing company by normalizing and facilitating that
process. The goal is to increase the number of Rhode Island small businesses
and business owners. This will create more entrepreneurs in the state.
We need this. Attend any
local dissolvent auction and you will see productive equipment, the printing
presses, lathes, assembly lines, bakery ovens, and hospital beds, sold off and
leaving our state for pennies on the dollar. Drive through any city or town and
see the retail spaces and warehouses, which sit empty and degrade.
Rhode Islanders can be
part of the solution. We don’t have to go begging others to save us, only to be
owned by them.
The “silver tsunami”
of baby-boomer retirements is coming. According to a 2004 US Small Business Association study,
85 percent of all business owners do not have a succession plan in place and
only 15 percent of businesses are passed along to children.
Rhode Island has
many more businesses with soon-to-be retiring owners causing more local jobs to
be lost to closures and out-of-state sales if succession plans are not
established.
Combined with the threat
of shifting conditions in our economy, as well as the typical fluctuations in
business cycles, many local businesses are not well positioned for long-term
success.
Business models of the
past will not work forever. Changes will need to be made. The greatest
opportunities come from turning around struggling businesses.
It is well known in
process improvement consulting that some of the most innovative solutions to
business challenges can come from the employees doing their work. The challenge
is empowering employees and making them feel they have ownership by giving them
a direct personal stake in the success of the enterprise.
A worker owned
cooperative does all of these things.
The bill provides the owner
with a first or second option for transitioning their business. The owner makes
the decision about what should happen with their property. There is not any
requirement as to whom to sell the business. The bill is about making options
and opportunities known of which the owner or employees may not be aware.
This bill is about being
fair to loyal employees who have been at a company long enough to form a plan
and take action.
There are finance
options, such as the Cooperative Fund of New
England, available specifically for coop businesses. There are
many documented examples (see: 1, 2, 3, and 4) of successful sales
of businesses to existing employees.
With the passage last
year of a business to incorporate as a worker cooperative, a group of employees
may be able to do this today. However, there are some unique hurdles in the
road for business owners selling their business to their employees as compared
to selling to an existing corporation. The state has an interest in lowering
these hurdles, placing the employees on more even footing with other potential
buyers when the business owners are looking to sell.
The places in the world,
as near as Massachusetts and as far
as Italy, where worker
coop business sectors have grown the fastest and survived for generations, have
been places where there is a supportive legislative structure.
In the case of Italy
this meant lower unemployment through the recession. A 2014 OECD paper found
that Italian worker cooperatives actually grew 22 percent during the 2008-2012
recession.
We have to start
thinking differently about economic development. What Rhode Islanders see being
done is give-away tax breaks to out of state and out of country corporations.
What we see is the state’s resources being given to wealthy investors not our
neighbors and not our co-workers.
Let’s give workers a
chance. We have the talent and labor in this state to succeed. We don’t need to
try and buy jobs from somewhere else, only to have another state buy them away
from us in a few years. This bill ensures employees know what options are
available.
It helps employees make
that transition from worker to owner, from employee to entrepreneur. Isn’t that
the American Dream? If you agree, let your senators and representatives in the
Rhode Island General Assembly know.