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Bloomberg – Unlikely Pioneers: A machine shop takes a new approach to employee ownership

From Bloomberg (pdf):

Unlikely Pioneers: A machine shop takes a new approach to employee ownership

David Baird knows machines. With almost 30 years’ experience running lathes, drills, and grinders, he can tell if a piece of equipment needs a tune-up by listening to its hum. Despite being a skilled craftsman, Baird figured he’d always be a blue-collar wage slave. “Guys like me can make some good money,” says the 47-year-old machinist, “but we rarely get the chance to manage something, own something, to be part of something bigger.”

Last September, Baird got his chance. He became one of eight employee-owners of Select Machine, the Brimfield (Ohio) company where he has worked for seven years.

Many small businesses become employee-owned through Employee Stock Ownership Plans, or ESOPs, which let owners gradually sell their stakes to employees and roll over capital gains. But Select Machine was too small to handle the costs of an ESOP. Instead, it formed what may be the first employee co-op to get tax advantages similar to those of an ESOP: the selling owners get deferred capital gains, and the co-op buys out the owners with pretax money.

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