Eat your heart out, Rupert Murdoch! Book publisher Chelsea Green won’t be up for sale anytime soon. To the contrary, Chelsea Green employees celebrated the Fourth of July this year not only independent but as brand-new employee-owners of their company. On July 2, Chelsea announced that the company had established an Employee Stock Ownership Plan (ESOP).
Chelsea Green was founded on South Green in Chelsea, Vermont, by Margo and Ian Baldwin in 1984. With help from some bestsellers like George Lakoff’s Don’t Think of an Elephant, the company became a successful small publisher, making money and getting recognized by ForeWorld magazine in 2011 as “Publisher of the Year” for its books on politics and sustainable living.
Sustainability became an issue for the company itself four years ago when early investors started itching to be repaid. Selling out and retaining independence in today’s conglomerated market had become a contradiction in terms.
“When we founded the company twenty-eight years ago we imagined some day we’d sell,” Margo Baldwin explained July 3. “Having established a pretty nice little company that’s doing well and doing good in the world, it simply made no sense to have it dissolved and taken over by a big publisher.”
Five of the six big book publishers in the US are foreign-owned corporate conglomerates. Another option would have been to become a not-for-profit (“not a fun existence,” says Baldwin).
“Selling to our employees was the a win win for everyone.”
Details vary, but in basic terms, an ESOP is a sort of employee benefit plan: a way to create a market for departing share-holders and reward employees when they leave the company or retire. Under the agreement Chelsea Green completed June 29, original investors be repaid, the Baldwins will retain a minority portion of the company’s privately held stock, 80 percent will be held by Chelsea Green’s twenty-one employees—and the company will stay in the state where it was born.
“It’s an amazing law that more companies should know about,” says Baldwin. ESOP regulations permit companies to use their own stock to buy existing shares and transfer ownership to workers using pre-tax dollars. Employees’ shares vest over time—depending on seniority, company performance and the details of the plan. What the company pays in in stock is tax-deductible. Without paying a dime, employees end up with what amounts to a nifty tax-deferred pension plan. And there’s more to it than money.
ESOPs aren’t cooperatives. Baldwin will be staying on, as president and publisher. Still, ESOPs also change the model of ownership.
“With shared ownership, everyone is invested in the company’s performance—and everyone’s involved in figuring out the operation going forward. It’s a step towards building new leadership from within,” Baldwin explained.
A survey of Vermont employee-owned companies includes King Arthur Flour, Gardener’s Supply, PC Construction and Carris Reels, among others. It’s not just a Vermont phenomenon. According to the National Center for Employee Ownership, Chelsea Green employees will be joining 11 million Americans currently participating in stock ownership plans. Publishing’s a risky business, but ESOP companies (according to the Center) tend to outperform the competition in profitability, productivity and employee retention and compensation.
“It’s not just a future. I think it’s the only future,” says Baldwin. One thing’s sure: they were partying harder at Chelsea Green this Independence Day than over at Harper Collins.