For more than 20 years, Praxis consultants have participated in the Cooperative Charitable Trust Forum, a learning community of practitioners who work in employee ownership. One of the community’s activities is traveling together outside of the US to visit places that have strong traditions of shared business ownership.

In June 2024, Praxis consultants Matt Hancock and Alex Moss traveled to the Emilia Romagna region of Italy with other members of the learning community. Matt Hancock received his master’s degree from the University of Bologna, where he studied leadership, governance, and strategy in cooperative firms. He helped to organize this Cooperative Charitable Trust Forum trip so that colleagues from the United States could immerse themselves in this unique employee ownership landscape.

Comparing American and Italian employee ownership sectors

In the United States, there are more than 6,500 employee-owned firms. Most of these firms are structured as Employee Stock Ownership Plans (ESOPs). In the Italian region of Emilia Romagna, there are more than 3,000 employee-owned firms, mostly organized as cooperatives. Unlike most worker cooperatives in the US, which tend to be much smaller, the Italian worker-owned firms range from a few dozen to a few thousand workers, so they are more comparable in size to US ESOPs.

The most successful of these co-ops have been employee-owned for many decades, some 90 years old or more. Like many of our most successful ESOPs, co-ops have healthy balance sheets and often grow through acquisition. Even as they compete on the global markets, the employee-owned firms in Emilia Romagna remain committed to supporting local communities and have remained employee-owned.

The importance of ownership culture in Emilia Romagna

Meeting with local employee-owned firms, research centers, and practitioners yielded important lessons to bring back to the American context. The most successful firms had these common practices:

• They hired based on cooperative spirit in addition to technical skills
• They were committed to succession planning and leadership development at all levels
• They accepted support from the larger cooperative movement in the form of debt and equity financing

Social, governmental, and mutual support

In the larger society in Emilia Romagna, there is a high level of awareness about employee ownership and cooperative culture because nearly a quarter of the workforce works in an employee-owned firm. Steady government support for employee ownership helped the sector grow stronger over time as well. By law, each employee-owned co-op makes a tax-deductible contribution of three percent of their annual profits to a fund managed by the cooperative movement to invest in co-op startups or expansion of existing co-ops.

The most powerful support comes in the form of the government not taxing profits set aside as "indivisible reserves." This has encouraged co-ops to set aside 30 - 70% of their profits as "limited equity." This money can be used to grow the co-op, but it can’t ever be paid out to members. Interestingly, this practice long predates the law that requires it. This is an example of co-ops making a business choice to prioritize future generations over current members and stakeholders.

Employee-owned co-ops also have a strong tradition of helping each other, which can look like providing start-up capital, doing business with new co-ops, and mentoring.

To learn more, read or watch an interview with Matt Hancock about the employee ownership sector in Emilia Romagna from May 2023.