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Time to Review Tools for Minnesotans to Own, Manage Business

May 21, 2009 By Lee Egerstrom, Economic Development Fellow
Nearly three days have passed since the gavel came down on the 2009 regular session of the Minnesota Legislature. Given the health of the Minnesota economy, it isn't too early to begin preparing for the 2010 session.

With companies facing shutdowns and whole industries contracting and consolidating, Minnesota lawmakers should look at tools the state has for helping workers and community stakeholders start, purchase and retain businesses.

Especially important are tools that would help employees raise capital to purchase and take over plants or businesses that are currently in trouble or may soon be abandoned or sold. The latter may be marketed by impassive owners or by private owners looking to retire.

Employee Stock Option Plans (ESOPs) for wholly-owned and partially-owned worker equity stakes in companies are one option. Linking ESOPs with Minnesota's well established cooperative heritage and legal codes, and with emerging models for low-profit social investment ownership schemes should be encouraged - at least not discouraged by unintended legal barriers. 

Minnesota has actually repealed former laws that provided programs and assistance for employees to buy their businesses, says John Logue, director of the highly successful Ohio Employee Ownership Center at Kent State University.

One such program provided grants for pre-feasibility studies on alternatives to plant closures. It was repealed in 1989, an OEOC study of state programs shows. That may mean workers and stakeholders may face obstacles in accessing federal funds for planning and feasibility studies. While not impossible, it can make access to federal stimulus funds more difficult.

This is relevant because the Minnesota Newspaper Guild has teamed with the University of Minnesota's Minnesota Journalism Center to sponsor a conference on June 16 on "New Economic Models for News."

Spurring interest in alternative media ownership models are the bankruptcy filing for the Star Tribune in Minneapolis, uncertain newspaper economics that could impact ownership of the St. Paul Pioneer Press, and closures and bankruptcies for several weekly newspapers surrounding the Twin Cities metro area.

Among speakers confirmed for the conference is Joel Kramer, founder and chief executive of, the new online newspaper developing one potential model for media ownership. Other speakers cover a wide variety of ownership alternatives, including Robert Lang of the Mannweiler Foundation and developer of the L3C low-profit, limited liability company model; Ted Venetoulis who has a nonprofit model; newspaper industry officials, and Jennifer Towery, Peoria Newspaper Guild president who is involved in developing a new Guild and community ownership plan for the Peoria Journal Star.

While media are under extreme stress in the current recession, they are by no means the only economic sector looking for more durable and sustainable ownership options.

Scott Martin, president of the Northland Institute that helps ESOP development in Minnesota, says growing up at Waseca inspired him to consider ESOP and community ownership options.

Waseca had two anchor industries when he was young, he said. Herter's Inc. was an outdoor gear company that was sold to an unrelated industry company. It was closed within a couple of years although a brand name has been resold. Meanwhile, the Corchran Inc. metal works was sold by its owner to its employees, and has continued to grow and prosper.

"This is the heart of economic development," Martin said. "Looking back at Herter's, you keep saying, 'coulda, shoulda'."

By some counts, Minnesota ranks third behind California and Illinois in being home to worker owned companies, although Ohio may have surpassed Minnesota since Logue's OEOC at Kent State has helped 86 companies convert to employee ownership.

Among the approximately 100 such Minnesota companies are Colle & McVoy of Bloomington, Foldcraft Co. of Kenyon, Toll Co. of Plymouth, Brass Co. of Eden Prairie, and Padilla Speer Beardsley of Minneapolis. Professional firms such as law offices and accountancies also make use of this form of ownership.                   

Another Minnesota-based company, Lifetouch Inc. of Eden Prairie, is profiled by the Beyster Institute at San Diego State University as an example of what can be achieved with employee ownership.

Meyertholen's article makes another observation that is especially germane to the planned conference at the University of Minnesota. Louis Kelso formed the first ESOP ownership plan in 1956 to buy and sustain a newspaper at Palo Alto, Calif.

It's time for Minnesota to be innovative again. By embracing alternative ownership models, we can strengthen our economy and move forward.
Note: The June 16 University of Minnesota conference has a June 9 registration deadline. The fee is $25. Registration can be made via web or by reserving a registration by contacting Sarah Saubert at .(JavaScript must be enabled to view this email address).

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