A New Take On Shareholder Primacy

Forbes

04-08-2025

Evan Edwards is the CEO of Project Equity, a national nonprofit that helps businesses and communities build wealth through shared ownership.
Much has been written about a shift away from shareholder primacy—the idea that an enterprise's primary duty is to maximize returns for its shareholders—as the top measure of its success. Shareholder primacy traditionally focuses on concentrating power and wealth in the hands of a few. This imbalance leads to many negative business and social outcomes that critics typically highlight—decisions that prioritize quarterly earnings over long-term growth and sustainability, a widening wealth gap between executives and frontline workers and a lack of business resilience in economic downturns.
Critics have pointed out how this approach often leads to short-term decision-making, wealth disparities and even economic instability. In response, many alternative models have been proposed, from stakeholder capitalism to ESG-driven governance. While these conversations are meaningful, they frame shareholder primacy itself as the fundamental problem. But what if we addressed shareholder primacy's potential imbalances by coupling shareholder satisfaction with increasing the overall number of shareholders at the same time? I'm talking about employee ownership (EO).
Beyond Zero-Sum
I spent years working in the tech startup world, where equity ownership was a given. Founders, investors and employees are all expected to have a stake in the company's success. In many ways, tech startups challenge the traditional shareholder model, recognizing that widespread ownership helps attract talent, fosters commitment and drives innovation and productivity. This principle should extend beyond startups.
At Project Equity, we approach these challenges through a different lens. Ownership, management and governance at employee-owned companies are not zero-sum games. Ownership, when broadly shared, can be a tool for alignment, accountability and long-term success. Employee ownership provides a proven way to bring in more shareholders. And by expanding ownership to workers, we can distribute the benefits of economic success more equitably while strengthening the businesses themselves, often in multiple ways.
More Impact In More Ways
One important way employee ownership strengthens businesses is by enhancing their ability to attract and retain talent. For example, Rutgers University found that during the pandemic, employee stock ownership plans (ESOPs) helped retain jobs at a rate of four to one compared to non-employee-owned companies. EO businesses are also less likely to face layoffs during economic downturns, adding to the overall stability of the business.
Take Local Ocean Seafoods on Oregon's central coast, for example. Since completing its transition to an employee ownership trust (EOT) with a loan from our Employee Ownership Catalyst Fund in November 2022, the culinary company's turnover rate has steadily decreased to 40% last year, roughly half the industry standard rate of nearly 80%. Even though they were only an EOT for a few months in 2022, they elected to run a simulated profit share at the end of the year, allocating $122,000 to their team.
Employee ownership often drives this kind of culture shift, where new ideas and collective decision-making are prioritized. Na Young Ma, the founder of Proof Bakery, a business we helped transition to EO, shared this insight with researchers from the University of California, Berkeley. She noted that when the bakery transitioned to employee ownership, it experienced rapid growth, tripling its revenue within a few years following the transition. As the co-op grows, it creates new opportunities to nurture its members' unique contributions and provides a workplace where they can actively exercise their ownership.
Transitioning to employee ownership shifts the mindset from "this is where I work" to "this is what I'm building." We often refer to this shift as an ownership culture, where new ideas are generated among highly motivated and informed people, becoming the norm with EO. I've seen how this change can strengthen workforce retention and engagement, while elevating the recruiting process by attracting motivated individuals who want to create a lasting impact and share in the success they help achieve.
Workers As Shareholders: A Good Idea For All
Ultimately, through employee ownership, incentives can be aligned with traditional shareholder models by prioritizing the interests of both workers and shareholders. It's not an either-or situation.
In working with CEOs as they transition to employee ownership, I have observed that employees are motivated to perform for the organization as a whole, rather than just for their own individual benefit. The beauty of EO as a business strategy is that it recognizes that ownership, operations, management and governance are not at odds. This alignment expands the number of shareholders while creating a more just and sustainable economy.
Shareholder primacy, when viewed through the lens of employee ownership, can form a successful loop that benefits everyone within the economic ecosystem.
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