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Employee Ownership Is a Powerful Tool for Founder Exits of Mission-Driven Businesses

As the B Corp movement celebrates its 18 th year and mission-driven businesses have become a key part of the corporate landscape, many founders are now faced with a conundrum: how to exit the businesses that they built while preserving the business’s core social and environmental aims, which often include a deep commitment to their employees’ welfare.

When Selling to Private Equity is Not an Option

For a founder of a mission-driven business—whether a B Corp, a public benefit corporation, or a traditional company committed to social or environmental values—selling to private equity or even to a strategic buyer may be unappealing, as these types of acquirors may be unwilling to commit to the preservation of the company’s unique mission. Such a sale could subject employees to new management that does not value them beyond their capacity to generate profits; unsettle customers, suppliers and other stakeholders who fear that the business will abandon its social mission; and leave the former owners ultimately regretting their decision to sell.

Employee Ownership Transitions are Increasingly Attractive

These concerns have led to rapid growth in employee ownership transitions in which the owners sell their business to the employees whose hard work has made the company a success. These transactions can take various forms, but three transaction structures are most common: (i) worker co-operatives, (ii) employee stock ownership plans (ESOPs), and (iii) employee ownership trusts (EOTs). ESOPs are the most common form of employee ownership in the United States; worker co-ops are a growing segment (especially in industries like agriculture); and EOTs are relatively new in this country but are a long-standing part of the corporate landscape in the United Kingdom. While other, more customized options are feasible, these three types of exits offer a high degree of market recognition and flexibility, allowing owners to realize the equity value that they have built while preserving their mission.

Choosing the Right Structure for Your Business

If employee ownership seems like the right fit for a company, the choice of structure will depend on various factors specific to the business and the owners’ financial needs. Relevant factors include the company’s culture, size, financial stability and profit potential; the availability of outside financing; whether a partial or complete exit is planned (and whether in one or several stages); the willingness and ability of the employees to take on management and oversight roles; the timeframe on which the owners wish to exit and receive payment for the sale of the business; and the type of corporate governance framework that best suits the company’s mission, industry, and identity. In some cases, tax considerations, transaction costs, and complexity may make one structure more attractive than others.

Common Aspects of Employee Ownership Transitions

All three structures mentioned above share some common traits: an employee-owned business will typically (1) repay the selling owner over time for their stock, (2) be governed by a board of directors with at least some employee representation, and (3) maintain elements of democratic decision-making and mission-driven purpose in its core identity. All share the overarching goal of elevating workers’ economic and governance rights while ensuring the continued pursuit of the company’s mission.

Watch This Space

In upcoming posts, we will explore worker co-ops, ESOPs and EOTs, as well as other options, in more detail. Regardless of which avenue is most appropriate for an individual company, exiting to employee ownership is an appealing option for many mission-driven companies and offers a unique opportunity to realize the value of the founder’s creation while locking in the company’s commitments to employees, customers, other stakeholders, and the broader community.

This article is intended to provide general information about Employee Ownership and does not constitute legal advice. We encourage you to consult with an attorney for advice based on your specific circumstances.  

This article does not create an attorney-client relationship between ImpactGC and you or your company, or create any duties to provide advice with respect to Employee Ownership. ImpactGC is not responsible for updating you or your company about developments regarding Employee Ownership. 

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Jim Black

Meet the Author

Jim is a purpose-driven corporate lawyer and founder with over 25 years of top-level legal experience, including as a law firm partner and general counsel. He provides excellent, actionable legal counsel to mission-driven clients regardless of industry and is dedicated to supporting companies with ethical and sustainable business practices to further his personal mission of helping make business a force for good.

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Meagan Olsen

PARTNER

CONTACT

EDUCATION

J.D., Fordham University School of Law

B.S. Business Administration (Accounting and Finance), Georgetown University

PRACTICE AREAS

TBC

BAR ADMISSION

New York, California

Meagan is an accomplished lawyer with twenty years of experience, including as a partner at a top-tier global law firm, in house counsel at a Fortune 500 company and general counsel to multiple growth companies.

Leveraging her deep experience as a corporate and securities lawyer and broad experience as a general counsel, Meagan works with companies across industries and at all stages of their lifecycle, making her a versatile legal partner. She works with clients to understand their strategic goals and KPIs, identify risks and opportunities, and collaborates with them to implement legal solutions that support the business’s objectives. 

Meagan has significant experience working with boards of directors and executives on corporate governance and investor relations, and guiding companies through complex domestic and international M&A transactions, debt and equity financings (public and private), SEC reporting obligations, stock exchange compliance and commercial contracts. She also has experience advising companies on a wide array of strategic and operational matters, including international market and product expansion, marketing, sustainability programs, equity plan management, executive compensation, employment/HR matters, intellectual property matters, litigation management and compliance.   

Meagan is passionate about supporting purpose-driven organizations, a commitment that is evident in her personal consumer choices and volunteer efforts, as well as her professional pursuits. She enjoys working with organizations on implementing people- and planet-focused initiatives. She also has a demonstrated commitment to non-profit organizations, including assisting multiple non-profits with formation and tax-exempt qualification and advising AIDS Project Los Angeles and I am a voter (an organization focused on voter registration and civic engagement) on transformative corporate transactions, all on a pro bono basis. 

Meagan is based in Los Angeles. In her free time, she enjoys spending time outdoors and volunteering with her family, playing pickleball, and exploring the city’s vibrant food scene.

Key Experience: 

  • General Counsel and Corporate Secretary, Parachute Home, a premium home essentials company with a commitment to responsible materials, circularity and emissions reduction 
  • General Counsel and Chief of Staff, Byte (subsidiary of Nasdaq-listed Dentsply Sirona Inc.), a mission-driven teledentistry platform and clear aligner brand dedicated to improving access to oral health and straight smiles  
  • Partner, Paul Hastings LLP 
  • Senior Counsel, Corporate & Securities, Mattel 

Memberships/Activities:

  • Guest lecturer at UCLA School of Law and USC School of Law 
  • Member of TechGC and Women’s General Counsel Network 

Jim Black

MANAGING PARTNER

CONTACT

EDUCATION

J.D., University of Virginia School of Law

PRACTICE AREAS

TBC

BAR ADMISSION

New York, District of Columbia

Jim is a highly experienced corporate lawyer with more than two decades of legal experience, including as a partner in a leading global law firm and most recently as Chief Legal and Compliance Officer and Member of the Executive Leadership Team of a publicly traded international company.   

 

Jim’s career has shown him the importance of working with a clear focus on ethical and sustainable business practices, which led him to co-found ImpactGC to further his personal mission of helping make business a force for good.  Jim is fully committed to operating with a triple-bottom-line approach (People, Planet, Profit) and to helping mission-driven clients of all types pursue their important social, environmental and governance aims. 

Jim has extensive experience counseling founders and executive teams on corporate strategy, major transactions and other important matters, including litigation management, corporate governance and compliance. He has advised on numerous complex commercial contracts across a range of industries, as well as mergers and acquisitions and corporate finance deals. His commitment to social justice and human rights is reflected in a long track record of pro bono and other volunteer work, including advising a prominent LGBTQ civil rights organization, the Innocence Project and the American Academy in Berlin, among others.   

Jim spent well over a decade working and studying overseas, including in Germany and the Czech Republic, and he speaks fluent German.  He is a frequent author and speaker on a wide range of business law topics, including those of particular relevance to mission-driven companies. He is based in the Washington D.C. area, where he loves to spend time hiking, biking and running the trails and communing with nature in the woods of Northern Virginia.  In his personal time, he is a devoted father of two, partner and dog dad of a highly opinionated Shiba Inu.  

Key Experience: 

  • Chief Legal and Compliance Officer and Member of the Executive Leadership Team, Northern Data Group 
  • Partner, White & Case, LLP 
  • Partner, Acceleron Law Group, LLP 
  • Counsel, Morrison & Foerster LLP 
  • Counsel, Linklaters LLP 

Select Speaking Engagements and Publications: 

  • “The Benefit Corporation Movement”, presentation at ABA Business Law Section Meeting, Orlando, FL April 2024 
  • “Leading Evolving Organizations”, panel discussion on employee ownership at BLD Southeast, September 2024 
  • Various contributions to ABA M&A Committee Deal Points studies and the Annual Survey of Judicial Developments Pertaining to M&A 
  • Numerous other articles in ABA publications and the legal and financial press on various aspects of business law 

Memberships/Activities:

  • Member of Steering Committee of B Local Mid-Atlantic
  • B Academics  
  • National Center for Employee Ownership 
  • American Bar Association Business Law Section, Middle Market & Small Business Committee (MMSB) and M&A Committee 
  • Former Co-Chair of International Business Transactions Subcommittee of the ABA MMSB Committee 
  • Real Leaders  
  • Global Alliance of Impact Lawyers 
  • American Council on Germany 

Julie Ryan

MANAGING PARTNER

CONTACT

EDUCATION

J.D., cum laude, Georgetown Law

PRACTICE AREAS

Complex commercial contracts | Cross-border M&A | Venture capital | Private equity | Corporate governance | Impact investing | Employment matters | Technology start-ups | Regulatory compliance | Partnerships | Secured transactions | Data privacy | Entity formation and structuring | E-commerce | Intellectual property licensing

BAR ADMISSION

New York, District of Columbia, California

Julie is an accomplished global corporate and securities lawyer with over 25 years’ legal and entrepreneurial experience. She is recognized for her unique problem-solving, collaborative approach, and enjoys working with clients to understand their specific business concerns and creating tailored, practical legal solutions. 

Starting her career at the law firms of Clifford Chance LLP and Akin Gump LLP, Julie developed broad expertise representing major clients in a range of complex cross-border transactions.  She also has significant experience working with entrepreneurs and small- to mid-cap companies. She is the co-founder of AltaClaro, an innovative experiential online learning platform, and has represented numerous successful tech start-ups in all stages of growth.  

Most recently, Julie served in an in-house counsel role as Chief Regulatory Officer and Deputy General Counsel at Northern Data, a German public company, where she spearheaded the company’s U.S. restructuring and successfully negotiated several high-stakes commercial transactions. 

Julie is passionate about supporting women and minority-owned businesses and working with purpose-driven clients, believing that every business, large or small, deserves high quality, practical legal support from a lawyer who understands their business goals and concerns. She also enjoys being involved with the community. She currently is an adjunct professor at Georgetown Law, volunteers with several non-profit organizations and accelerators, has published a textbook as well as numerous articles, blogs, and presentations, and served on the corporations committee for the State Bar of   California for over 8 years. 

Julie spent several years working overseas, including Bogotá, Colombia, and Montreux, Switzerland, and speaks fluent French and Spanish. She is based in the Washington D.C. area where she loves to spend time with her family on the Potomac River paddling and sailing.

Key Experience: 

  • Chief Regulatory Officer and Deputy General Counsel, Northern Data AG 
  • Partner, Acceleron Law Group, LLP 
  • Partner, Russ, August & Kabat 
  • Senior Attorney, Akin Gump LLP 
  • Co-Founder and Chief Learning Officer, AltaClaro, Inc. 

Select Speaking Engagements and Publications: 

  • Collaboration with Halcyon House, an accelerator for impact-driven businesses and ChIPs, an organization that advances and connects women in technology, law, on a series of presentations on starting a business. 
  • Startup Law 101: Negotiating to “Yes,” Virtual Event hosted by ChIPs Advancing Women and sponsored by Halcyon House (panelist). 
  • “Silicon Beach Jeopardy: 6 Essential Areas for In-House Counsel to Consider When Managing Venture Capital or M&A Transactions,” CLE Presentation, Namwolf Annual Meeting, Los Angeles, CA. 
  • Transaction Lawyering: An Experiential Approach to Communication & Problem-Solving (Carolina Academic Press). 
  • “Advising the Pre-public Company,” CLE Presentation, Annual Meeting of the State Bar of California, Monterrey, CA. 

Memberships/Activities: 

  • Adjunct professor of law at Georgetown Law  
  • Real Leaders  
  • Global Alliance of Impact Lawyers 
  • Association of Corporate Counsel 
  • Women’s Bar Association of DC 
  • Women Owned Law 
  • WeTheChange 
  • Business for America 
  • Conscious Capitalism 
  • B Local Mid-Atlantic