Mass. lawmakers revive effort to spur employee ownership
Had things worked out differently, Harpoon might have gone the way of many beloved Boston brands: gobbled up by an out-of-state buyer.
In 2014, Harpoon cofounder Rich Doyle had wanted to cash out and try something different, putting the major craft brewer in play. There was talk of selling to a bigger brewer or a private equity firm. But Dan Kenary quietly found another way to buy out his business partner: an Employee Stock Ownership Plan that would give workers an ownership stake in the company.
Employees knew Harpoon could be on the block, but initially didn't know about Kenary’s plan. They were on edge when he summoned them to the company’s waterfront beer hall one night to introduce them to the new owners. Kenary then broke the tension by suggesting they shake hands with their colleagues. The workers would own the company now.
That episode resurfaced on Tuesday for an important reason: Massachusetts lawmakers have revived a state effort to help guide owners of small- and mid-size businesses on selling their companies to employees. Harpoon president Charlie Storey attended the announcement at the State House to explain the advantages of employee ownership.
The news: The Massachusetts Office of Business Development last month hired two consultants, ICA Group and Working Wealth, to revive the Massachusetts Office for Employee Involvement and Ownership. ICA and Working Wealth will be paid $150,000 to travel the state and preach the gospel of employee ownership — at events and in meetings with potential candidates and their advisers. The target audience: ICA estimates some 28,000 Massachusetts firms with between 10 and 100 employees could be up for sale through 2025 as their owners approach retirement age.
The “EIO” office was once a small but important gear in the state’s economic development machinery. State funding was zeroed out in a recession-related round of budget cuts more than a decade ago. Representative Paul Mark tried repeatedly over the years to restore its funds, to no avail. Then he found two crucial allies: Senators Julian Cyr and Karen Spilka. Cyr championed the issue in the Senate. Spilka, then the ways and means chair and now Senate president, made sure the funding made it into the budget.
They each had personal reasons for doing so. As a kid, Mark learned his dad would be laid off from a nearby warehouse when he saw it on the news on Christmas Eve; he figures an employee-owned business would not act so heartlessly. Cyr watched his parents sell their Truro restaurant to a hotel, which converted it into a function hall; he believes employee ownership could have saved it. And Spilka, working as a government lawyer at the time, helped write the original law that established the EIO office in the late 1980s.
Spilka sees employee ownership as a way to help narrow the income inequality gap, by expanding opportunities for wealth creation. Employee ownership also can provide peace of mind for retiring owners, and some level of stability for the workers who remain.
In Harpoon’s case, the company worked with Citizens Bank to essentially borrow money so its newly formed employee ownership plan could buy a 48 percent stake in the company, and then distribute the shares to employees over time. Workers become fully vested over six years. (Kenary and other managers and board members own the rest.)
Storey talked about the administrative challenges of starting up a stock ownership plan. But he said the benefits outweigh the costs. Harpoon has remained independent, charting its own destiny. The resulting sense of teamwork, he said, led to improved employee morale and company performance.
Can a $150,000 state contract help stem the tide of retirement-related closures and sales to outside buyers? A tough goal, for sure. But many business owners might be eager for this kind of solution, needing just a nudge or two in the right direction.