Mini-cast 188: California's Expanding Employee Ownership Act


California's Expanding Employee Ownership Act

Bret Keisling is joined by Project Equity's Hilary Abell to discuss California's Expanding Employee Ownership Act, which will expand employee ownership by providing education, technical assistance, and other resources for enterprises considering ESOPs and co-ops.


The Act's primary sponsor is Senator Josh Becker. Co-sponsors include Project Equity, Ownership America, and The WORC Coalition.


You can act now to add your voice of support; Project Equity and WORC have put out a script that makes it easy, and you can access it here.


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About California's Expanding Employee Ownership Act:


The Expanding Employee Ownership Act, reduces the barriers for businesses seeking to transition to employee ownership and worker-led models, such as employee stock ownership plans, known as ESOPs, and worker cooperatives, or co-ops.

If enacted, the Act creates a hub within the Governor’s Office of Business and Economic Development, better known as GO-Biz, that will focus on helping workers, business owners and other stakeholders learn about employee ownership, provide funding for technical assistance to study feasibility of transition, and assist business owners and workers in navigating resources to smooth the path for transition.


In a blog post for NCEO, Corey Rosen wrote that the Act would:

  • Create a “California Employee Ownership Program” to be administered by an “Employee Ownership Program Manager.”

  • Appropriate funds to make grants to qualified nonprofits to provide outreach and education programs on employee ownership in the state;

  • Provide grants of up to $50,000 per company to pay for up to 50% of the cost of conducting feasibility assessments for employee ownership transitions.

  • Direct the Program Manager to “work with all California state agencies whose regulations and programs affect employee-owned companies, and businesses with the potential to become employee owned, to enhance opportunities and reduce barriers.”

  • Direct the Program to “work with the California Infrastructure and Economic Development Bank, the California Pollution Control Financing Authority, and related entities to shape and implement guidance on lending to broad-based employee ownership vehicles.” This could result in these agencies making loans or loan guarantees for ESOP transition (the Pollution Control Financing Authority has a very broad scope that possibly could include such loans).

About Hilary Abell:

In her own words:

Project Equity logo

"I am a co-founder of Project Equity, currently focused on demonstrating and expanding impact and fueling public policy to support broad-based employee ownership, driving racial and economic equity.


Project Equity is a nonprofit that builds economic resiliency with low-income communities by demonstrating and replicating strategies that increase worker ownership. Since our launch in 2014, Project Equity has grown to work with small business clients around the country on employee ownership transitions and is raising awareness and building the ecosystem of support for this powerful business model nationwide.


I am passionate about scaling social and environmental impact, developing leadership (especially among those who rarely access formal leadership roles), and helping individuals, communities, and organizations realize their full potential."


Hillary Abell previously appeared on the EsOp Podcast in Episode 113: Project Equity's Hilary Abell.

 

Mini-cast 188 Transcript

[00:00:00] Bret Keisling: Welcome to the ESOP Mini-cast. Thank you so much for listening. My name is Bret Keisling, and as it says on my business cards, I'm a passionate advocate for employee ownership. In March 2022, California Senator Josh Becker introduced legislation, California Senate Bill 1407, that would expand employee ownership of businesses by providing education, technical assistance, and other supportive resources.


[00:00:30] Senate Bill 1407 seeks to reduce barriers for businesses seeking to transition to employee ownership and worker-led models, ESOPS, co-ops, et cetera. Co-sponsors of the bill include The Worker-Owned Recovery California - the WORC Coalition, Ownership America, and Project Equity.


[00:00:47] Here to discuss the bill with us is Project Equity co-founder and returning podcast guest Hilary Abell.


[00:00:53] Hilary, thanks for coming on the Mini-cast.


[00:00:55] Hilary Abell: It's great to be here, Bret.


[00:00:56] Bret Keisling: I appreciate this. And just for queuing up time, we are dropping this episode on Friday, June 10th. We're going to talk about things in the days and weeks ahead. For those of you who are listening to this in the future, in our archives, just be mindful that we are talking about June of 2022.


[00:01:12] And I will segue very briefly too: Hilary, you were a guest on Episode 113 of our primary EO/ESOP Podcast. Alison Lingane your co-founder at Project Equity was on Episode 112. Recently, in the last week or two, Evan Edwards the CEO as of last year has been on the podcast. We love what Project Equity is doing. So, our listeners can check out all of those episodes and the more than 400 episodes in our archives at www.EsOpPodcast.com.


[00:01:40] Hilary, thank you so much for making the time. What can you tell us about Senate Bill 1407?


[00:01:45] Hilary Abell: Well, first and foremost, I want to tell you that it's passed the Senate. It's called the California Employee Ownership Act. It has been approved unanimously by a bipartisan committee in the Senate, and then passed as part of a consent vote and it's headed to the California assembly later this month.


[00:01:59] So, we're very optimistic that this bill will pass and we're running a parallel process to get it funded. We have a $20 million budget ask so that the state can fund outreach and education around employee ownership all around the state and also provide assistance for companies needing support in paying for the feasibility studies or other parts of the technical assistance or professional services needed to become a great employee-owned company.


[00:02:23] Bret Keisling: Hilary, we're going to have a good bit of information on our show notes and that includes a link to a blog post Corey Rosen wrote at the NCEO. And just to highlight from his blog post, it creates the California Employee Ownership Program and designates a program manager who's the administrator. It appropriates funds to make qualified grants to nonprofits to spread the word of employee ownership and promote employee ownership, provides grants of up to $50,000 per company to pay for up to 50% of the cost of conducting feasibility studies. I think as a former trustee, that's huge. And then it directs the program manager to work with all of the agencies in California that may have some rules, regulations, et cetera, that impact employee-owned companies.


[00:03:04] This is a far reaching and expansive bill.


[00:03:07] Hilary Abell: It is. We were able to create what I would call my dream bill, to be honest. We, those of us who are sponsoring it, you know, all of the many organizations that are part of The WORC Coalition, as well as Project Equity and Ownership America in consultation with others in the employee ownership field as well, we're able to take what we know works.


[00:03:25] Things like outreach and education campaigns, and just having that consistent outreach to diverse stakeholders in our ecosystem. So, to first and foremost business owners, but also those who business owners look to for advice and those in the community that would want to help spread the word.


[00:03:40] So, we're really investing in this bill in outreach and education. And we've also learned as a field and, you know, I can say from our experience at Project Equity, we've worked with a number of local governments who have provided funding to subsidized feasibility studies. And what we've found is that subsidy can activate sort of a coupon mentality that some business owners have, or that human beings have. And of course, business owners are human beings like anyone else. And most of us don't plan for the future very well or very much in advance. And most of us like to respond to a good deal.


[00:04:10] So, these feasibility studies are really helpful and certainly for companies that might, you know, have tighter cashflow, but could still be a good fit for employee ownership, it can also just help make it possible.


[00:04:20] So, we're really putting in the things that we know can build a comprehensive program for the state and that we believe can scale employee ownership throughout the state.


[00:04:28] Bret Keisling: I think that's great and it's very important. And you know, my role has evolved in my experience with employee ownership. I was a CEO for two and a half years, and then an ESOP trustee for seven years. And with that hat on I imagine, you know, one of the really important aspects of this bill is that the professional advisors who look to attract clients and are looking to build their client base, to be able to go to businesses and say, half of the fees are going to be covered by this state grant, to me makes it a huge marketing opportunity in all the best sense. It incentivizes our professional advisors to take a more robust look and what we're talking about that's just another component of the education with the nonprofits, Hilary, of we want more people to talk about employee ownership.


[00:05:13] Hilary Abell: Absolutely. You know, I want to share one anecdote with you. Something that just happened yesterday. I got an email from the staffer that we work with at Senator Becker's office, saying that he had had a great phone call with a business owner who heard about the bill, called up their office, and shared that she was working on selling her business to someone in another state and is actually putting that process on pause so that she can explore the possibility of transitioning to employee ownership.

[00:05:36] So, we're already seeing that the business owners are being reached just through the fact of having a bill, which was, was really thrilling.


[00:05:42] Bret Keisling: Hilary, and this ties in with a number of themes that we talk about and certainly Project Equity, you know, you first came to my attention and we talked about the podcast of all the work you're doing in municipalities and I think there was work in Miami County that you folks were doing that we had discussed. We often talk that employee ownership keeps jobs in the community. Here on a statewide level, and your anecdote is a perfect example of this, this is the power of employee ownership.


[00:06:07] For all of the elected officials and representatives who are going to be considering this bill in the coming weeks, your jobs are going to stay in your districts, in your communities. These are the taxpayers. And then we throw in the facts, that you're very much aware of, that during the pandemic and there is data to support this: four times less likely to have layoffs in employee ownership, three to four times less likely to have wage reductions, which means employee owners are less likely to avail themselves of the community safety nets.



[00:06:34] So, they're better jobs, more profitable jobs and all the stuff that we talk about all the time. So, this is very important.

[00:06:40] Hilary, let's do a call to action. What can people, particularly in California, do to help this succeed?


[00:06:45] Hilary Abell: For anyone in California listening to this podcast. Anytime between June 10th and June 14th, we have some very specific asks for you. First and foremost, we would love for you to reach out to the five senators and three assembly members who manage the budget process. We know that the hardest thing to do is going to be to get this bill funded. And we also know that the state has a huge budget surplus and as we talk to legislators around the state and, you know, state staffers, we do remind them of exactly what you just said, Bret, that employee ownership actually saves the state money because it keeps jobs, it reduces the burden for unemployment insurance when folks are laid off, and in many other ways.


[00:07:22] So, we would love for you to call those senators offices and those assembly members offices. If you're shy about making phone calls, we're told that tweets are just as good and that your support can be registered on the air and stay on the air.


[00:07:34] And we have instructions: who to call, who to tweet, the phone numbers, a sample tweet for you to make it really, really easy. Should be something you can do in 10 minutes or less.


[00:07:42] The information on who to reach out to and samples to make it easy will be on the ESOP Podcast's webpage as well as The WORC Coalition's website and that's WORCcoalition.org.


[00:07:55] Bret Keisling: Excellent. We'll include all of the relevant links in our show notes, as you had said, on the website and people can find them there. We're also going to put them out in social media.


[00:08:03] And Hilary, let me just drive home a point. It is so important that California elected officials hear from California constituents. There is nothing more powerful than saying I am one of your voters or potential voters and I support this bill. And again, we remind everybody if you're listening, I don't care your political leanings one way or the other as you are a listener, employee ownership helps all of us.


[00:08:26] So, in California, you're absolutely right. But I'm assuming if the rest of the country were to take a couple of minutes and you know, our listeners are around the country and around the world. But if you were to tweet, if you were to reach out and just say, hey California, we support this. We support California doing this because, you know, forgive me for taking a moment to be preachy, if California enacts this bill and it becomes law it is huge for California, but so many states are then going to follow California's lead and that becomes huge for all of us.


[00:08:55] So, in my mind, in terms of how do we become a movement that we talk about a lot on the podcast, this is all hands on deck. Really critically important if you're in California, but the rest of us can help as well.


[00:09:05] Hilary Abell: Absolutely. Absolutely. So, those tweets can be sent by anybody. And there's also a sample letter of support that folks around the country can send in to register their support for the bill as well.


[00:09:15] And I couldn't agree with you more, Bret, that having a bill that's actively being considered is an amazing way to mobilize people. Whether you're an employee, owner, an advocate, or someone who just likes the idea of employee ownership but isn't directly connected to it, this is a way you can support it by, you know, making these calls, taking a few minutes to tweet.


[00:09:32] And this helps us build a movement.


[00:09:34] Bret Keisling: You're exactly right. And there are 3 million employee owners in privately held ESOPs and co-ops in the United States and boy, if we could just do some mobilization. So, if you're an employee owner and you're a listener, reach out, check out where to direct your comments on our website. If you're a professional advisor, reach out to your clients. And by the way, we have professional advisors who might be listening to this. If you're an ESOP lawyer, or an ESOP valuation advisor, or some of my former trustee colleagues and you're in a different state and you have California clients. Imagine, Hilary, for just a moment, if you know, the ESOP lawyer in Pennsylvania reached out to a client, a California client, and didn't just say to the CEO reach out to the state rep, but hey CEO, could you ask your employee owners to show their support? You know, and we'll get there someday, but it would be great if we could start with this and get everybody to rally around this bill.


[00:10:23] Hilary, we're going to pay attention to the bill throughout the summer. And you've mentioned some critical dates, but we're going to pay attention to what we can to support it. We are hoping, it's not confirmed yet, but you were kind enough to introduce us to Senator Becker's office and I'm hoping by the end of July or early August, we might be able to have him on. I'd be honored to have that conversation.


[00:10:41] So, we're going to do whatever we can at the Podcast Network to support this as always, thank you so much for everything that Project, just everything Project Equity is doing. You guys have so much exciting stuff going on. And Evan Edwards talked about it a couple of weeks ago. But you're doing great.


[00:10:55] If I can, I also want to give a shout out and thanks to one of my team members and one of your team members. Nancy Mayne of the Podcast Network came across the legislation and just a couple of days ago said maybe something we should talk about, she was spot on. She reached out to Stazee Bacigalupo in your office and just two days later, you've introduced us to Senator Becker. You're here talking on the Mini-cast. So, I want to thank Nancy and Stazee for helping facilitate this.


[00:11:19] Hilary, thank you so much for coming back on the podcast.


[00:11:21] Hilary Abell: Thank you, Bret. This has been terrific. And thank you so much for all that you do to spread the word about all forms of employee ownership, about worker cooperatives, ESOPs and other forms as well. And all of those communities, all of those business models will benefit from this bill. So, thank you for helping us get the word out about it.


[00:11:37] Bret Keisling: That's kind of you. It's absolutely my pleasure and a blessing to do what I'm doing. And this is me, nobody talks about employee ownership, perhaps, more than I do through all the podcast episodes, but folks that it's time for us to stop talking and it's time for us to take some action. It is time for us to tweet and write and support and do whatever all of us can to see that this bill becomes law.

[00:11:56] Hilary, I hope you'll come back anytime and keep us up to date on what's important in your world.


[00:12:01] Hilary Abell: Would love to. Thanks so much, Bret.


[00:12:03] Bret Keisling: With that, we'll wrap up today's episode of the Mini-cast. Thank you so much for listening. This is Bret Keisling. Be well.


[00:12:09] Bitsy McCann: We'd love to hear from you. You can find us on Facebook at EO Podcast Network and on Twitter @ESOPPodcast. This podcast has been produced by Bret Keisling for the EO Podcast Network, production assistance by Victoria Huerta, original music composed by Max Keisling, branding and marketing by BitsyPlus Design, and I'm Bitsy McCann.


Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.


A note on the transcript: This transcript was produced by Descript, an automated transcription service. While it has been reviewed by The EsOp Podcast, we can not guarantee the accuracy of the transcription. Please refer to the original audio when citing sources.