NEWS
02/05/2019 7:45 PM AEST | Updated 03/05/2019 4:08 PM AEST

This City Has A Radical Plan To Get Rid Of Bosses

As the baby boomers retire, Berkeley, California, wants them to sell their businesses to their workers.

BERKELEY, California ― In a 4,000-square-foot industrial space tucked away in a West Berkeley neighborhood, a team of glass blowers is hard at work. In one corner, a young man named Sam is repairing a piece of laboratory glassware used for cannabis distillation, the bright orange flames from his lathe dancing just inches from his face. In another, a woman named Laurel is concentrating on fusing powdered glass “frits.”

They both work for Adams & Chittenden Scientific Glass, a company based in the San Francisco Bay Area. But later this month, Sam and Laurel won’t be employees anymore; they’ll be co-owners of the company, along with eight of their fellow workers.

The company, which produces and repairs highly specialized glass instruments, was launched in 1993. It’s obvious in talking to the two founders, George Chittenden and Tom Adams, in their ramshackle office overlooking the main workshop how passionate they are about their unusual craft. But they’ve both reached retirement age and are ready to step away.

Robert Raymond
Sam, an employee of Adams & Chittenden Scientific Glass, is repairing a piece of laboratory glassware used for cannabis distillation.

“George is 65 and I’m 71, so I’m sort of heading towards retirement one way or another,” Adams joked from his seat behind a desk littered with papers and custom-made glass components. “And so for a while, we’d been thinking, ‘Well, what the fuck are we going to do?’ We could close the doors and walk away or sell to somebody ― but that just wouldn’t feel right.”

“Because the work we do is so idiosyncratic, finding a competent, knowledgeable buyer seemed highly improbable,” Chittenden explained. He and Adams didn’t want to put their workers through what happened to them in the early 1990s when they worked for another glass-blowing company that was sold off to someone unfamiliar with the business. They both quit because of poor managerial decisions, which they put down to the new owner’s inexperience. 

So Adams and Chittenden are taking an alternative approach to business succession: They’re selling the firm to their workers.

“The idea of converting into a co-op really made sense,” said Chittenden. As a cooperative, the business will be owned and managed by the workers, with each member given a share of the profits and a vote on how the company is run.

Robert Raymond
George Chittenden, co-founder of the company, at work.

Millions of baby boomers like Adams and Chittenden will retire over the next 30 years in what has been dubbed a “silver tsunami.” Yet the vast majority of the estimated 2.34 million boomer-owned businesses don’t have succession plans.

Without such plans, many of these businesses face closure or sale to corporations in distant cities, which could have major repercussions for local economies. Berkeley is just one of many U.S. cities now facing potentially dramatic shifts in their small-business landscapes. But Berkeley has a plan.

The city’s Office of Economic Development has partnered with local organizations to explore options for dealing with the approaching silver tsunami. It has set up a city-funded program, believed to be one of the first of its kind in the U.S., which aims to retain and support small businesses that are at risk of closure ― or, in some cases, of being gobbled up by asset-stripping private equity firms. It will do this by converting them to employee-owned businesses, otherwise known as worker cooperatives.

“Small businesses comprise 97% of all of the employers in the city of Berkeley,” Jordan Klein, the city’s economic development manager, told HuffPost. “And they account for about 40% of the jobs within the city — so obviously they’re critical to our local economy.”

Berkeley, along with larger cities like Austin, Texas, and New York, is part of a broader municipal movement that views employee ownership as not just a strategy to retain at-risk businesses, but also a way to address rising income and wealth inequality. 

California has the fourth highest level of income inequality in the U.S., and the Bay Area specifically is experiencing a housing affordability crisis that makes it increasingly difficult for low- to medium-wage earners to live in the cities where they work. 

The business cooperative model helps tackle some of the root causes of these crises by giving workers a say in decisions that affect their lives, said Peter Gowan, a policy associate at the Next System Project, who has just authored a report on worker ownership.

 A worker co-op “says that ... we’re not going to have someone who makes money just by owning things, that the people who work at this business are also going to get the wealth generated through profits,” said Gowan.

Because these co-ops are managed democratically, the worker-owners can vote on strategic decisions such as whether to provide themselves with a living wage, for example. A 2017 report released by the National Center for Employee Ownership found that worker-owners make on average 33% more than their employee counterparts in the same industry.

And 2016 research that studied international data found that worker co-ops tend to match or outperform traditional business structures: They survive at least as long, they are often more productive, they may weather recessions better, and they provide workers with profit-sharing opportunities unavailable at traditional companies. 

“There is a real potential for a worker co-op model to ensure the survival of a business,” Gowan said. “But it’s more than just survival. It’s a transition to a model that allows workers to choose who governs over them for half of their waking lives. It’s a really effective model for addressing this crisis of extractive capitalism.” 

For businesses like Adams & Chittenden Scientific Glass that don’t really see any other viable options, co-ops have a strong appeal.

“When we first started thinking about the future, it was totally unclear,” Adams recalled. Then he came across the idea of converting to a co-op while listening to the radio. “It was a local segment that talked about the whole process of retiring baby boomers selling businesses to their workers. It struck me as like, ‘Huh, that’s kind of interesting.’”

Robert Raymond
George Chittenden (left) and Tom Adams (right) in the West Berkeley space where their business is located.

The company has been helped through the conversion process by Project Equity, a small nonprofit based in nearby Oakland that promotes employee-owned businesses

As one of the local organizations partnering with Berkeley on its cooperative development program, Project Equity has been identifying firms that fall within the silver tsunami risk profile. It found more than 1,000 businesses, which together employ 30% of workers and generate around 60% of the revenue earned by the city’s businesses.

“There’s a big disconnection right now between the people who are making decisions and those who are affected by their decisions,” Project Equity’s co-founder Alison Lingane told HuffPost. “It’s not just the workers who are affected ― it’s the whole community. And the wealth and income gaps that result from this are in many ways the defining issues of our time.”

Project Equity has now started the process of contacting businesses and explaining how they could become co-ops. If a company is interested, Project Equity will conduct a feasibility study to determine whether co-op conversion is a viable option. The business has to be profitable — the goal of this program is not necessarily to save firms that are failing even before their aging owners retire ― and, of course, the workers must actually be interested in taking on the business.

These studies can take months and each one comes with a price tag of roughly $5,000. So far it’s all subsidized by the city. This is significant, said Lingane, because “Berkeley is the first city in California that we’re aware of where the city itself has actually put money into this strategy.” 

The idea of converting boomers’ businesses to co-ops is gaining support on the federal level as well. In 2018, the Main Street Employee Ownership Act, which makes it easier for employee-owned businesses to get loans, was enacted with bipartisan support. The law is designed to level the playing field for worker cooperatives, which, because of their ownership structure, tend to find it harder to secure financing than traditional firms. 

“What we’ve had for a very long time is a model where small and medium-sized businesses are built up by owners,” Gowan told HuffPost. “And then one of these big equity firms — vulture capitalists, I like to call them — sweeps in and strips out the parts that are most profitable and they lay off all the rest of the workers. We see this all around the country.”

Gowan is hopeful that the mass retirement of the baby boomers will spur an alternative vision to take root.

Adams & Chittenden Scientific Glass is on the cusp of completing the final legal steps toward conversion. They made the announcement at their annual pig roast in March, an event that they’ve put on for the last two decades and that draws hundreds of community members into their workshop for live music, demonstrations and, of course, a pig with a custom-blown glass apple in its mouth.

“Everybody here is here because they dig glass,” Chittenden said. “So they’re committed. And if they’re productive and run the business well, they’ll be better paid and they’re going to have control of their situations.”

Chittenden is all too aware of the economic inequality in his community. “It’s so problematic here in the Bay Area,” he said looking over the workshop floor. “That’s one of the things that, just on a kind of soul level, this transition feels really good about — the employees are becoming owners of their business. And if these guys can make a good living doing this stuff, I’d be really proud of that, really proud.”

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