- "Not only is employee ownership a scalable solution, it is the only scalable solution to address the growing inequality in household net worth in the United States." Tweet This
- "Transitioning ownership to the employees through an Employee Stock Ownership Plan (or ESOP) is a way to...include every employee in the ongoing future value creation of the organization." Tweet This
There is no shortage of criticism about the current state of capitalism in America and how it affects families. But what would an economy explicitly founded upon solidarity and human dignity look like? Is it practical, or a pie-in-the-sky intellectual dream? Gellert Dornay is the co-founder and former CEO of Axia Home Loans. Under Dornay’s leadership, Axia became the first 100% employee-owned mortgage bank, and Dornay has since become an advocate for employee-owned businesses. I asked Dornay why he made that move, whether it’s scalable, and how an economy built on solidarity could affect marriages and families.
David Lapp: In 2016, you turned the company you founded, Axia Home Loans, into an employee-owned company. Why did you do that?
Gellert Dornay: When we launched Axia in 2007, we always had the dream of including all the employees in our eventual success, should we achieve any. My partner and I had witnessed, and experienced for ourselves, how many corporations tend to put their shareholder's benefit ahead of the customer, community, and employee. Not that making a profit is a bad thing! But taking excessive profit to the detriment of the other stakeholders is not fair. We are a closely held company, and it was appropriate to provide our small shareholder group a strong return on their investment. Transitioning ownership to the employees through an Employee Stock Ownership Plan (or ESOP) is a way to generate a strong return to the selling shareholders but to also include every employee in the ongoing future value creation of the organization. Furthermore, the board of directors now has a fiduciary responsibility to the employees who are now the shareholders. Decisions around where jobs will be located, offshoring supply, health benefits, working environment, community engagement, and such, all consider the long-term best interest of our employees.
Lapp: A critic might say, “What you’ve done with Axia Home Loans is great. But you’re the equivalent of a Mother Theresa in business. You can’t build an economy of Mother Theresas.” Is what you’ve done with Axia Home Loans scalable?
Dornay: There are something like 2,000 companies in the US that are 100% owned by their 2 million employees. These are not just microbreweries and bakeries but include industry leading companies like Publix Supermarkets (200,000 employees), Winco (40,000), Air Tractor in Texas, Gortex, Harpoon Brewery, and many more. Not only is this a real, scalable solution, it is the only scalable solution to address the growing inequality in household net worth in the United States.
Transitioning ownership to the employees through an Employee Stock Ownership Plan (or ESOP) is a way to generate a strong return to the selling shareholders, while also including every employee in the ongoing future value creation of the organization.
Lapp: What would an American economy built on employee-owned businesses look like, and what difference would it make for families and marriages?
Dornay: Not only do Millennials working at employee-owned firms earn a third higher wage, they often benefit from more extensive maternity and paternity plans than other firms provide (see NCEO.org for more information). An ESOP is governed primarily for the best interest of their employees and their families and dependents. It's easy to imagine that families would be more stable financially, have more secure jobs, and be in a better position to welcome children into the world and provide for them. The birth rate in the U.S. has been plummeting over the last number of decades to well below replacement. This is, in some part, directly reflective of the economic uncertainty of many working families. So, more ESOPs might have a substantial impact on lasting marriages and increases in the birth rate.
Lapp: Which intellectual traditions or people have influenced your view of business?
Dornay: As a young entrepreneur, I was initially drawn to the "eat what you kill" paradigm. It didn't make sense that the Little Red Hen should have to share any bread with the other animals that didn't till the soil, or harvest the wheat, or roll the dough. But as I spent more time with larger and larger corporations around the world, it became clearer that many people were just left out of the opportunity to contribute; they weren't invited to till the soil, and they were left home from the hunt. As a practicing Catholic, I began to look into what the Church said about economics, if anything at all. I thought I already knew about "Catholic Social Teaching," that it merely amounted to giving bread to poor people and was as an excuse to promote socialism and redistribution of wealth. But in reading what the popes from Leo XIII onward actually said, I discovered awesome principles that lay at the foundation of the Traditional Catholic approach to building a political economy. These principles include promoting the common good, human dignity, subsidiarity, and solidarity and are aligned with the great writings of St. Thomas Aquinas and expounded upon by a number of more recent authors, including Heinrich Pesch, Michael Naughton, John Medaille, Joseph Pearce, Christopher Ferrara, G.K. Chesterton, Fr. Vincent McNabb, Hillaire Belloc, and many more who have all been an inspiration to me.
Lapp: Apart from employee ownership, what are some other things that businesses can do to support marriages and families and how can the government help?
Dornay: As most young women are entering the workforce prior to marriage or childbirth, it is becoming clear that there is a need for companies to do more. I have had a number of young women who have worked for me in the past welcome their first child into the world. They initially have the plan to take a few months off and then return to full-time work. However, 90 days later, it is not uncommon for them to decide not to return to full-time work and instead stay home a little longer with their child. I have tried to provide opportunities for some of these new mothers to work from home on a part- time basis. Some have remained in these roles for years, providing real value to the company and substantive earnings for their family. We also made a practice of passing the basket around to fellow employees to make financial gifts to new parents and to newlyweds. The company matches the funds collected. This type of practice is very common in smaller companies. Myriad business owners who know their employees personally make great efforts to provide a great work-life balance.
Our government is often well intended but too frequently ends up creating bigger problems than the ones they are trying to solve. The biggest economic challenge we have today is providing for single mothers and their children. More fathers need to be held responsible to provide for their offspring and their mothers. The tax laws discourage marriage and lead to greater numbers of out-of-wedlock births.
It's too easy for companies to lay off employees, offshore their jobs, and depress wages. I'm not sure the German practice of codetermination is the right kind of thing for us, but if we don't voluntarily find better solutions, the government will continue to enact more dramatic legislation forcing employers to provide more extensive benefits and job security.
As a society we need to better identify what our first principles are. Freedom of speech is certainly important. But without a right to life, it is not of much good. We need to find our way back to focusing on the family as the basic unit of society. A flourishing family unit equals a flourishing society.