ESOPs and Social Responsibility

Are employee-owned companies more likely to embrace social responsibility than conventional firms? The evidence so far isn’t definitive, but it points in a positive direction.

Case in point: a study by Anne-Laure P. Winkler and her coauthors, published last year in the Journal of Business Ethics. The researchers examined companies that had completed an assessment from the nonprofit B Lab, which certifies B corporations. You can’t get even think about being a B corp without a lot of socially responsible practices, so that part was a given. But companies with employee ownership scored higher than others on “external stakeholder engagement”—meaning (in part) involvement with the environment and the surrounding community.

The most recent evidence comes from a new research report from Fifty by Fifty, a nonprofit dedicated to spreading the word about employee ownership. This one found that employee-owned B corps achieved scores on environmental and social impact that averaged 20 points higher than similar firms without employee ownership. The scores were double those of conventional businesses.

The F×F researchers identified 45 US companies that were both B corps and employee owned, noting that 37 of them had been awarded the “best for the world” designation by B Lab. Employee ownership and a socially responsible mission amount to a new “enterprise design,” say the researchers—an alternative to conventional investor-owned corporations.

Among the companies that are briefly profiled in the report are Eileen Fisher, Recology, and Gardener’s Supply.