Why We Invested: Common Trust
We’re proud to announce The Ownership Fund’s investment in Common Trust. Giving more people access to ownership by making employee ownership easier is a key theme for both Social Capital Partners and the Fund. Common Trust aims to popularize an underutilized form of employee ownership in the US — the Employee Ownership Trust — and has the team to execute on an ambitious path to scale.
Common Trust is focused on helping business owners transition ownership of their companies to their employees using US Employee Ownership Trusts (“EOTs”). Critically, the EOT model requires that the benefits are available to all employees, and at no cost to them. The Ownership Fund is focused on reducing wealth inequality, and these two key elements are required for an employee ownership model to do this effectively.
As was highlighted in our introduction of The Ownership Fund, many forces in today’s economy drive ownership concentration, a key driver of wealth inequality. In the US, the bottom 50% of Americans account for less than 5% of total wealth. In addition, the increasing concentration of economic power is correlated with lower wages for workers, as large corporations often prioritize shareholders profits, and is responsible for creating a more challenging environment for small, independent businesses which are important to the success of communities.
While various forms of employee ownership including Employee Stock Ownership Plans (“ESOPs”), worker-owned cooperatives, and EOTs have existed in the United States for decades, barriers still exist that prevent many business owners from considering employee ownership as a viable succession alternative. These barriers include a general lack of awareness about employee ownership, misconceptions about transaction mechanics, and perceived complexity. EOTs have been under-utilized in the US, and present an alternative to the more popular ESOP model. We believe it’s critical for as many different models as possible to be available to address the different needs and objectives of business owners, and it’s one of the reasons we think Common Trust is a very important company.
Given that an estimated 3 in 5 business owners will look to retire over the next decade, the so called “silver tsunami”, a massive opportunity exists to increase the breadth and inclusivity of business ownership. In response, Common Trust is providing business owners with a full-suite of exit planning services. From initial EOT feasibility assessments to customized EOT design and financing packages, Common Trust is making employee ownership a more viable exit alternative. The EOT structure provides exiting business owners with an attractive succession alternative that will position their companies for long-term success, while also providing employees with additional income to help build wealth.
As organizers of $100MM+ in shared ownership transactions, Common Trust’s team brings both strong commitment and experience needed to drive greater uptake of EOTs. We are excited about the ownership opportunities that Common Trust is creating for employees, while positioning businesses for continued long-term success that will benefit a broader set of stakeholders. While this is only the beginning of their journey, we’re excited to be a supporter of Common Trust. If you’re interested in learning more, or investing in Common Trust, please don’t hesitate to reach out.
The Ownership Fund’s investment in Common Trust was led by Taylor Sekhon. He and Ian MacDonald wrote this note.
