Hypothesis: ESOPs for the Online Economy
I work in a startup town, the rare kind of place where you can trip over veteran founders, with multiple exits behind then, on the sidewalk. By 鈥渆xits,鈥 I mean the end-goal of most tech-oriented startups鈥攖he moment when the startup is sold, either to a bigger company or, more rarely, to the investing public on the stock market. The whole culture of startup communities like Boulder is aimed toward this; it鈥檚 when founders and investors get their big payday. And yet this is the logic that turns our online infrastrutures into commodities. In the exit, it is often the data and loyalty of us the users that is being sold to the highest bidder.
What if another kind of exit were possible? What if founders and investors could aim for an exit that sold to the users with a real stake in the future behavior of the firm, as well as in its sustainability? These are questions I鈥檝e been puzzling on for some time now, and I think I鈥檓 starting to see a viable path forward.
The ESOP, or employee stock ownership plan, is the most successful strategy for enabling employee ownership in the US economy. In companies from New Belgium Brewing to Southwest Airlines, it makes worker-owners of 14 million Americans. In contrast, there are just several hundred worker co-ops with just several thousand workers among them. Two things make the ESOP model work as well as it has:
- it consolidates the ownership shares in a trust, making it far easier to finance than a bunch of individual workers with individual credit histories
- since the 1970s and 1980s, there has been appropriate tax treatment in US law
For a particular profile of firms (generally closely held and medium-sized) the ESOP has been an attractive exit strategy for many founders.
The inventor of the ESOP model, Louis Kelso鈥攁 Coloradan and graduate of 欧美口爆视频 Boulder鈥檚 business and law schools鈥攄idn鈥檛 want to stop at that. He envisioned the ESOP as just one kind of 鈥淪OP鈥 enabling more broad-based capital ownership. I suspect the challenges of the online economy present an opportunity to consider other such models he proposed, particularly the CSOP, or consumer stock ownership plan. Analagous to the ESOP, this would enable long-term users of a business (Kelso envisioned examples like neighborhood grocery stores or monopoly utilities) to become owners of it鈥攂y borrowing outside capital on the promise of future growth. Such financing means the CSOP could provide an exit payout far greater than what cash individual users could muster.
What if, for instance, Uber drivers could become dividend-earning owners in this way, or if Facebook users could use such a trust to elect their own trustees to the company鈥檚 board? This could be a strategy for remedying some of the critical accountability crises of the online economy.
I am currently engaged in research on the feasibility of such models, with the support of a fellowship from Rutgers University鈥檚 . The first step is a paper with , a brilliant thinker on legal strategies for a more democratic online economy. We鈥檙e exploring what conditions would work best for this kind if exit, as well as the policies needed to make it more feasible.
More to come. . In the meantime, if this topic is related to your interests, I would love to hear from you.