Employee Ownership Sparks New Energy at Softstar Shoes
Staff at Softstar Shoes in Oregon have embraced a renewed enthusiasm for resourcefulness and profit growth since becoming owners of the company.
The transition occurred in January when the shoemaking business was sold to its 30 employees.
Tricia Salcido, the former sole owner and chief executive, chose to transfer ownership to her workforce as she prepares for retirement at age 56.
Salcido, who will remain as chief financial officer for the next few years, notes that employees are now actively contributing ideas on business operations.
"I'm getting personal emails from employees saying, 'well, have you thought about this idea?'"
"These are business insights that weren't forthcoming before!"
Salcido is part of a growing trend among US business owners who prefer to sell their companies to employees rather than external buyers.
A 2025 study reported that approximately 600 US firms are sold to their workers annually, with investment funds supporting these deals increasing 78% to $865 million last year from $500 million in 2024, signaling a rise in such ownership transitions.
Employee ownership not only motivates staff by sharing risks and rewards but research indicates these companies tend to be more productive, less prone to layoffs, and offer higher wages.
For Salcido, selling to employees was a strategy to preserve local jobs and keep the artisanal shoemaking process in the US, which she feared would be outsourced by a cost-cutting corporate buyer.
"It's something you put your life's work into… most small business owners really care,"
The Baby Boomer Retirement Wave and Business Transitions
Many US entrepreneurs, like Salcido, face decisions about their businesses as they approach retirement.
According to a 2024 report by consulting firm McKinsey, about six million American small and medium-sized companies owned by baby boomers will see retirements between now and 2035. This phenomenon has been termed a "silver tsunami."
McKinsey describes this as "a once-in-a-generation wave of ownership transitions."
Ethan Rouen, associate professor at Harvard Business School, remarks on the frequency of owners seeking to sell their businesses, noting that many do not have successors among their grown children.
"I don't think a week goes by where I don't talk to an owner who is looking to sell their business."
Rouen and colleagues advocate employee ownership as a viable option to help businesses survive, especially appealing to owners concerned about their employees' futures under new corporate or private equity ownership.
Protecting Legacy Through Employee Ownership
William Stockwell, owner of Stockwell Elastomerics in Philadelphia, chose to sell to employees to safeguard the company his great-grandfather founded in 1919.
He observed negative outcomes when firms were acquired by outside owners, including relocation, shutdowns, or drastic changes that left remaining employees vulnerable.
"The new [outside] ownership might move the business, they might shut it down, or drastically change it in other ways, and the people remaining are stuck,"
Methods of Employee Ownership Transfer
In the US, several mechanisms exist for employees to acquire ownership. Softstar Shoes utilized an Employee Ownership Trust (EOT).
An EOT involves establishing a trust that holds the business on behalf of employees, eliminating the need for them to purchase it directly.
The trust pays the former owner the agreed sale price through installments funded by future profits.
This arrangement means Salcido assumes risk and must wait to receive full payment, dependent on the company’s ongoing success.
"I carry the risk, in that if anything happens, I don't get paid,"
"But I have faith in my team to deliver."
Employees also receive a share of annual profits under this model.
Stockwell chose a different approach, the Employee Stock Ownership Plan (ESOP), where the business is held in trust but employees receive shares they can cash in only upon leaving the company.
Like Salcido, Stockwell accepts a delayed payout, receiving payments over 10 years and acknowledging a "short-term financial sacrifice."
Prevalence and Appeal of Employee Ownership
ESOPs are the most common employee ownership method in the US. In 2023, 6,609 companies operated under ESOPs, employing 10.9 million people and holding assets exceeding $2 trillion (£1.5 trillion).
Another option is the worker co-operative, where employees purchase shares directly.
Rouen notes that employee ownership appeals not only to retiring founders but also to younger workers disillusioned with traditional corporate hierarchies.
"The only way to truly create wealth in this country is through ownership of capital. And this is a way to democratise that,"
Challenges and Growing Support for Employee Ownership
Despite benefits, EOT and ESOP setups are more complex than conventional sales, which may deter some owners. The longer wait for payment and associated risks also pose challenges.
Awareness remains limited, as Salcido remarks,
"No one's heard of them,"
In central Pennsylvania, Paul Silvis is selling his manufacturing business, SilkoTek Corporation, to his employees and expresses confidence in this decision.
"I'm getting ready to ride off into the sunset at some point," says the 71-year-old.
Stockwell advises owners to plan early for employee ownership transfers, as the process can take years.
"It's not something you want to begin the year you want to retire,"
Rouen highlights recent political momentum in Washington to simplify and promote employee ownership. The Department of Labor's new Employee Ownership Initiative aims to encourage this practice and provide guidance.
He adds that bipartisan Congressional support seeks to make employee buyouts easier and more feasible, predicting an increase in successful conversions in coming years.
