A record 4.5 million Americans quit their jobs in November, the Bureau of Labor Statistics recently reported, evidence of a deep disaffection among workers across the nation. And in December, 4.3 million workers walked out.
Denise Pouncy, a cashier at Johnny’s Pizza House in Shreveport, La., was not one of them. Pouncy is a 23-year veteran at Johnny’s, a 39-store pizzeria chain in the region, and she says she is happy in her job.
Pouncy has something most other restaurant workers don’t, however: in addition to being a Johnny’s worker, she’s a Johnny’s owner. Since 2000, the 900-person chain has been employee-owned and that means greater fulfillment and more financial security, Pouncy said.
“Johnny’s is the best company to work for,” Pouncy, 43, told NBC News. “You meet new people, you have great bosses and leadership — they take the time to know their employees. And when I get ready to retire, I know I’m going to be comfortable.” Some of Johnny’s owner-employees have received seven-figure checks when they retired, its president Melvin DeLacerda said.
Employee-owned companies like Johnny’s provide ownership stakes at no cost to their workers in a type of retirement account governed by the same law that created 401(k) accounts. Companies owned by their workers tend to pay higher wages, have lower turnover, better benefits and more inclusive cultures, research shows.
Academics say these companies exemplify the idea of “shared capitalism.” With the wealth gap widening across the U.S. and more Americans expressing dissatisfaction in their jobs, employee-owned companies say their structure is the solution.
“It’s hard for the working middle class to build real wealth only from wages,” said Joseph R. Blasi, a professor at Rutgers University and director of its Institute for the Study of Employee Ownership and Profit Sharing. “This structure provides workers with a second income by having an ownership holding in the company.”
There are roughly 6,500 employee-owned companies in the U.S., according to the National Center for Employee Ownership, a nonprofit advocacy group. They employ 14 million workers, or 8.6 percent of the labor force; the structure is most popular among manufacturing companies, construction firms and professional services concerns.
Many employee-owned companies are on the smaller side, but there are large ones as well. Among the biggest or better-known worker-owned companies are Publix, a supermarket chain with 225,000 employees headquartered in Florida; W.L. Gore & Assoc., maker of Gore-Tex, with 11,500 workers; Clif Bar & Co., a California-based maker of energy bars and other food products with 1,100 worker/owners and Bob’s Red Mill, an organic food purveyor in Milwaukie, Ore., that employs 700.
For years, Tom Sanders, 77, ran MMC Corp., a national construction services company in Overland Park, Kan., that he owned with his two brothers. The Sanders wanted to keep the company in the family —their grandfather had founded it — but none of their children were interested in taking over.
In the late 1990s, Sanders served on the board of an employee-owned company and saw the benefits it produced. The family began shifting MMC over to employee-owned in 1999 and Sanders said the result has been significant growth and satisfied workers.
“Your young people stay interested,” he said. “They’re not as tempted to go out and be an entrepreneur because they can be an entrepreneur at their own desks every day.”
Research shows that employee turnover rates are lower at these companies — a 2018 study indicated quit rates at employee-owned companies were half that of traditional concerns. The study also found that employee-owned companies are also more resilient in crises. During Covid, these companies added rather than cut workers, a new study for the Employee-Owned S Corporations of America or ESCA shows, and they are likely to offer more generous benefits packages, including child care and tuition reimbursement plans.
Median wages among workers aged 28 to 34 were 33 percent higher than at companies not owned by employees, 2017 research by NCEO shows, while workers of color at these companies have family net worths averaging 79 percent higher than workers of color at those that are not employee-owned.
Also compelling: retirement accounts of workers at employee-owned companies are on average twice as large as those held in 401(k)s at traditional companies — $132,000 versus $64,000, according to the new ESCA study. Retiring with six- and seven-figure payouts is not uncommon, managers of some of these companies told NBC News. Most employee-owned companies also offer 401(k)s in addition to their stock plans. Unlike 401(k)s, however, which employees contribute to, workers in employee-owned companies don’t pay for the stock they wind up owning in the operations.
Since 1990, Felimon Chairez, 53, has been working full-time at McKay Nursery Company in Waterloo, Wisc. His ownership in the company has boosted his retirement account well into six figures, he said. Just last year, the value of McKay’s employees’ stakes grew 30 percent; Chairez said he expects to retire comfortably in just a few years.
“The company is doing good, so I feel happy about it,” Chairez, a documented migrant from Mexico, said. “I feel lucky that I got involved in this program. I’ve been watching many people retire and I know very many people that retire happy.”
Tim Jonas, McKay’s chief financial officer, said the structure encourages workers to perform more efficiently. Since it became employee-owned in 1984, McKay’s has added two locations in the state and its expenses have declined.
“It has definitely attracted workers,” he said. “If they stay here five years or more, they tend to be lifetime employees because they can see the value in the retirement account. We’ve had more than 10 people that cashed out with over $1 million; some were management but quite a few were regular nursery workers.”
Shifting to an employee-owned company can be complex because it must abide by IRS rules and those dictated by the Department of Labor, which allowed for these plans under the Employee Retirement Income Security Act of 1974. Business owners often pursue such shifts when they’re approaching retirement age and want to leave the operation in the hands of the workers who helped build it.
The set-ups differ from firm to firm but generally involve borrowing money to buy out a founder’s shares, which go into a trust operated for the benefit of employees. The company pays off the loan over time until the employees own the operation outright through the trust that doubles as a retirement plan. Every year, an independent assessment firm analyzes the value of the shares in the trust and the company reports those values to participants. When they leave, the company buys out their shares.
Rules vary among companies, such as how long an employee has to work before participating in a plan, when a worker gets fully vested and how withdrawals are distributed. As is the case with 401(k)s, employees receiving payouts must roll them into an individual retirement account to avoid paying taxes on the lump sum.
Private-equity firms are often among the potential buyers for larger companies looking to sell. But some executives say employee ownership is better given the problematic outcomes for workers in private equity takeovers. A 2019 study by the National Bureau of Economic Research found that among 10,000 company buyouts between 1980 and 2013, employment fell an average 13 percent at public companies taken over by private-equity firms.
Skip Behm is chief financial officer of AArete, a management consulting firm that switched to employee ownership in 2018. Private-equity firms were very interested in buying the company, Behm said, but it turned them down. “We’re trying to do what’s right for our employees and we felt the culture would change to maximize profitability first, and culture second,” Behm told NBC News.
The numbers of employee-owned companies have grown slowly in recent years, but interest in the concept is rising said Mary Josephs, founder of Verit Advisors, a consulting firm. She said her firm has seen significantly more inquiries into the structure, post-Covid, and among larger companies. “Employee ownership plans are emerging as an elegant alternative for these companies — they can stay private and transition employee ownership more broadly beyond a subset of partners,” Josephs said.
The positive feedback loop of employee ownership means a more successful business, said DeLacerda, president of Johnny’s Pizza House. “There’s a loyalty factor that’s hard to put a dollar amount on,” he said. “The one thing I’ve noticed? In our area recently we’ve seen a lot of restaurants that had to shut down or limit hours because of staffing problems. We have not had to shut down yet.”