The Investor's Shelf — one book
Beyond the Corporation

Beyond the Corporation

David Erdal
2011
T3 271 pages · about 4h 31m to read OL19961884Wgoodreads

An owner who converted his own firm, on employee ownership in practice.

Summary

Erdal ran his family's paper business in Scotland, converted it to employee ownership, and then took a doctorate studying the effects of employee ownership on the communities where the firms operate. This book combines both.

The research is the distinctive part. Erdal studied three towns in northern Italy with different levels of employee ownership: Imola, where cooperatives account for a large share of employment, Sassuolo, where they account for almost none, and Faenza, in between. He compared health, education, crime, social participation and other outcomes across the three, controlling for what he could, and found better outcomes on most measures where employee ownership was more prevalent. He argues the mechanism runs through reduced income inequality, greater control over one's own work, and stronger local commitment by firms whose owners live in the community.

The practical material covers his own conversion of Tullis Russell to employee ownership, the mechanisms available including employee benefit trusts and share schemes, the valuation and financing problems in converting a company, and cases including Mondragon in Spain, Baxi in Britain, and the John Lewis Partnership.

His general argument is that employee ownership improves productivity as well as social outcomes, and that the obstacles are not economic but arise from the difficulty of the transition and from the absence of institutions supporting it.

The Italian study is a comparison of three towns and cannot establish causation, since the towns differ in ways beyond ownership structure. Erdal is an advocate who converted his own company, and the book argues a position. The practical material on conversion mechanics is useful and comes from experience.

Key takeaways 7

  1. Towns with higher levels of employee-owned enterprise showed better health, education and social participation outcomes in Erdal's Italian comparison.
  2. The proposed mechanism runs through reduced income inequality, greater control over one's own work, and local commitment by owners who live in the community.
  3. Converting a company to employee ownership requires solving valuation and financing problems that have no standard solution.
  4. Employee benefit trusts allow ownership to be held collectively rather than requiring individual employees to buy shares.
  5. Mondragon's federation structure supplies the financing, training and mutual support that individual cooperatives cannot generate alone.
  6. The obstacles to employee ownership are transitional and institutional rather than economic.
  7. A three-town comparison cannot establish causation, since the towns differ in ways beyond ownership structure.

Who should read it

Owners considering succession through employee ownership who want both the conversion mechanics and the case for wider effects.

Where it sits in the reference 2

Business models
Business themes

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