Photo: Nicholas Aponte, a chef de tournant at El Five in Denver, prepares ingredients ahead of the dinner rush on Sept. 10, 2024. (Sara Wilson/Colorado Newsline)
This article is excerpted from a story by Sara Wilson that appeared on Colorado Newsline on September 19, 2024. Read the full article here.
As Danielle Carre and Brad Burritt considered their retirement, they wanted to make sure the Colorado company they built stayed in town and continued to contribute to the economic fabric of rural Delta County.
The married couple grew Empowered Energy Systems over two decades, providing solar energy to Hotchkiss, Montrose, Delta and other western Colorado towns. But their time at the helm of the company — Burritt as general manager and Carre in charge of administration — is reaching its endpoint.
Instead of selling the company or handpicking a new owner, however, the duo made an unconventional business choice and converted Empowered Energy Systems into a worker-owned cooperative, putting the company’s future into the hands of its employees.
It officially became a cooperative at the start of this year. Now, instead of making budget calls between the two of them at the kitchen table, a four-member board of employee-owners hashes out important decisions. They are both members of the board and plan to stay on for another couple of years during the transition.
“It is a viable company. It has a really good reputation. We do really good work, and our employees have been instrumental in developing that,” Carre told Colorado Newsline. “We thought it was a great way to transition, to keep a good company with good positions in the community where hopefully they can thrive and survive.”
More Colorado businesses are converting to employee-owned models with the direct support of an office within the state’s Office of Economic Development and International Trade. Experts say Colorado’s office is a model in how states can support businesses that want to explore or transition to employee ownership.
“I think states all over the country are looking to Colorado as an example,” Loren Rodgers, the executive director of the National Center for Employee Ownership, told Colorado Newsline. “States are all over the map on this. Everything Colorado is doing overlaps something some other state is doing, but Colorado is more comprehensive in putting it all together.”
Gov. Jared Polis, a Democrat, established the Employee Ownership Commission in April 2019 in one of his first executive orders as governor. The office followed a year later to help usher businesses through the expensive, complicated process of becoming employee-owned. It sustains a network of training, support and consulting for businesses and helps them acquire the various tax incentives available to employee-owned businesses.
“Our small businesses are what drive Colorado’s economy, and employee ownership is a critical resource for Colorado businesses,” Polis spokesperson Shelby Wieman wrote in an email. “Since taking office, Gov. Polis has worked to make Colorado a leader in employee ownership, including the creation of the Employee Ownership Office as a one-stop-shop for businesses, and tax credits to save businesses money on the transition to employee ownership. Employee ownership is an important tool for business to attract and retain talent, and it’s great to see so many companies in Colorado taking advantage of these opportunities to drive further economic growth.”
Funding for employee-owned businesses in Colorado includes a cash collateral program for loan access, a credit reserve program and tax credit to cover up to half of the conversion costs. To date, about $950,000 in tax credits have been issued to 11 companies, according to the office. The Employee Ownership Office lists close to 200 employee-owned businesses in Colorado.
The most recent business to get help from the office is Rocky Mountain Steel Inc., a small fabricator in Olathe with about 30 employees. Rocky Mountain Steel converted to a 100% employee-owned business in June as the original owners, Bernie Lorimor and Tim Warner, approached retirement.
“The employees and people out here making things happen — they are the company, and for them to benefit financially from that success is a game changer. It’s the way things should be,” Dylan Wiman, Rocky Mountain Steel’s new president, who assisted with the transition, told Colorado Newsline.
“The distribution of wealth in a company is completely changed when you’re an employee-owned business. The wealth is spread to everyone, instead of being pulled to one or two people,” he said.
Employee ownership a ‘no-brainer’
Employee ownership is a broad term for business models that allow employees to own shares in their company. It can take various forms.
Worker cooperatives, like Empowered Energy Systems, are companies where employees have sole ownership and democratic control over the direction and future of the business. Workers can choose to join the cooperative for a fee.
So far, Empowered Energy Systems has four co-owners and 10 total employees. Carre hopes more employees will join the cooperative when they see proof of its success and learn more about the structure.
“A lot of the initial hesitancy was about taking on the responsibility of owning a company and being more involved than coming to work, going home and forgetting about it,” she said. “But I think there is enthusiasm. I think it will be about taking the time to become educated about the process.”
The most common employee ownership model in the country by far is an employee stock ownership plan, known as an ESOP, in which workers own shares through a trust funded by the company. That means employees end up owning part of all of the company they work for, and therefore have increased control and voting rights. ESOPs still have typical company leadership hierarchies.
It is distinct from stock options, where eligible employees can buy stock at a lower price than market rate. ESOPs give shares to employees and keep them in the trust.
Research shows that ESOPs largely have a positive effect on their employees because they are more connected to the inner workings of their company and have a personal interest in its success. Voluntary quit rates are about one-third of the national average and layoff rates are about one-fourth of the national average. Employees in ESOPS also tend to have more in retirement savings than employees in traditional business structures.
ESOPs can also provide significant tax advantages. Cash contributions to the plan from the company are tax deductible, for example, and in S corporations the percentage of ownership held by an ESOP is not subject to federal income tax.
“Employee-owned businesses tend to just perform better. They tend to grow faster, both in terms of sales and employment, than non-employee-owned businesses,” Rodgers said. “There’s stuff that doesn’t have good research attached to it, but we see it all the time at our conferences. People are just eager to find ways to get everybody involved in thinking of business ideas, and it’s this enthusiasm about how to engage everybody.”
This article is excerpted from a story by Sara Wilson that appeared on Colorado Newsline. Read the full article here.