Employee Ownership

I was ignorant about a lot of things in my 20s. Despite having a decent technical and business education, there was a lot about how the world worked that I didn't understand.

When I went to work for Microsoft in the late 80s, I did it because I loved the mission; I wanted to work on the PC wave. Microsoft offered these things called "stock options" that were entirely new to me and that I had no real sense of how to value – I had learned options pricing theory, but I didn't really know how to apply it to options in the wild. I built a spreadsheet and tried applying options pricing theory to the Microsoft offer, but my conclusions were far off.

Beyond the personal value, I really didn't understand how powerful employee ownership could be and how it could affect a company's culture. A month after I joined Microsoft, the Applications team announced a slip in the schedule for Microsoft Word, and the stock dropped substantially. It was immediately clear that our fates were tied to each other, and when someone from the Word team reached out and needed help, we all jumped to help.

Later in my career, when Marc Andreessen famously said that Netscape would "reduce Windows to a poorly debugged set of device drivers," it was easy to rally people inside the company to help our internet efforts. The languages team jumped in to help with internet scripting and language support; the kernel team jumped in to help on the Java VM, etc. I don't know if Marc ever really said those exact words, but the threat to one of the business pillars of Microsoft motivated everyone in Microsoft to respond.

And that is because we were owners, we felt like owners, we knew our livelihood depended on our joint efforts, and we knew that strong company performance would be shared with us. Microsoft didn't create stock compensation, it has been common in the tech world for a long time, I am sure many other tech employees have had similar experiences.

Late in my career, through an acquisition, I ended up back inside a Midwest manufacturing company for a while and was reminded that employee stock ownership is not a broad-based phenomenon in our economy.

There is ample evidence that economic mobility has eroded in our country, for instance, this new study from Harvard. The consequences of this are bad — resentment, division, susceptibility to populist politicians. There have been many proposals floated for how to address mobility – wealth taxes, rent control, greater mandated benefits, etc. A lot of these require new bureaucratic infrastructure. Some of them seem very unworkable. None of them are close to getting enough support to become law.

Employee stock ownership seems like a great tool to address mobility and inequality. It exists, it is well understood, it requires no new laws, it doesn't slow down entrepreneurs or interfere with the market. Many models can work. Stock options and restricted stock packages work well in the tech industry. Central States Manufacturing is a great example of an ESOP outside of tech. It nicely aligns shareholder interests and employee interests.

And at the most fundamental level – shouldn't the people working hard every day at a company have some element of ownership? Who deserves it more?