Participatory Intoxication: ESOP and New Belgium Brewing Company

The workers should own the means of production and enjoy the fruits of the surplus value they create. This has been and continues to be one of the most radical economic demands reverberating from the working and middle classes since the 19th century. Its rationale is simple; a political democracy without democracy in the workplace is a half-formed social entity, one where half of life is lived for the enrichment of others without representation or proper remuneration. The working classes during the 19th century and into the first half of the 20th century saw any selling of labor as wage slavery. Even the pre-Civil War era Republican Party compared earning a wage to slavery, only being different in that one was temporary.

Beginning in the 20th century and continuing into the 21st century is an idea of democratizing capital within certain parameters of the present political economy, whereby workers could and should become owners of the businesses they work at. The model I am focusing on is known as the Employee Stock Ownership Plan (ESOP) and is one more tool the working class can utilize to reorganize firms’ ownership structures along more democratic lines. It is a way to smash illegitimate authority and ravage the centralization of economic power, while acting as a fundamental break on autocratic decision-making, restoring power to the predominantly working-class majority and communities. It could also be accomplished by ethical human beings who own companies and no longer wish to espouse the crude arguments of eternal ownership, economic dictatorship and chasing ever cheaper labor.

The ESOP model has some distinctive features, a lot of which are explained well in Gar Alperovitz’s book, America beyond Capitalism: Reclaiming Our Wealth, Our Liberty, & Our Democracy. Here I provide a brief summary. First, more people work at ESOPs than are unionized in the private sector. Second, it’s a model that makes a business attuned to the needs of the community from which the workers come: they don’t need maximum profit, but sustainable profits. Thirdly, ESOP is a trust receiving and holding employees’ stock on their behalf. Lastly, it has legislative support, as federal legislation in 1974 began providing ESOPs with special tax benefits. So, an ESOP operates through the formal institutional market and government mechanisms of purchasing companies, stock ownership and legislation beneficial to firms operating as ESOP. If we think radicalism is in the streets and on the outside only, this may not be all that radical. But in an era of oligopoly, formally taking back the wealth is a radical act. It could also be a catalyst for more radical acts as the working class gains power once more: just got to fake it till we make it.

With so many of us enjoying imbibing on the sublime elixir of beer from time to time as a rowdy social activity, I figured why not spotlight a brewery for its ESOP model. Plus, with the US beer market worth about $100 billion in 2012 (“After Long Downturn, Beer Sales Are Back”, 10/03/2012), it’s definitely an industry where many workers are having a lot of the surplus value they generate sucked off by the vampire class. Most of that revenue is generated by large transnational corporations, whose beer lacks flavor due to standardization for industrial production and global distribution. This takes away beer’s complexity and the allure of artistry attached to brewing. This article is then as much about supporting ESOP as it is about supporting the craft beer movement that is revitalizing a beverage that had begun to taste more and more like piss-water.

The United States beer market over the last 20 years has begun to see a shift in power dynamics as craft brewing with local and regional focus continues growing. According to the Brewers Association, in 2001 it generated 3.35 billion USD and by 2012 had grown to an economic contribution of 33.9 billion USD. They also point out that early on in the craft beer movement, when beer sales were not growing in general, the craft brewers were getting larger and larger portions of the beer market. By 2012, craft brewers represent 6% of the market by volume (“After Long Downturn, Beer Sales Are Back”, 10/03/2012) and the Brewers Association economic impact study shows that craft brewers are now directly employing 108,440 people.

Now, imagine all of those folks not just as employees, but as owners of the wealth and joy they create in each slowly fermented beer in a wooden cask tasting absolutely scrumptious. The increased economic contribution of craft breweries has increased their economic power leading to market reorganization slowly removing the anti-market monopolizing forces of transnationals. At the same time, this also involves a concomitant de-stratification of firm organizational structures opening up spaces for experimentation with more democratic forms. One company that has started working on a worker-owner model is New Belgium Brewing, operating as a 100% ESOP.

New Belgium has been at the forefront of the craft beer movement beginning operations in 1991 in Fort Collins, Colorado. Recently I have been communicating with their propaganda director, Bryan Simpson, a swell fellow who has given me a good description of how their ESOP model functions, their participatory decision-making structure, its links to building a “sustainable” company, and how a business is built with the workers, instead of parasitically living off of them. The last part I should quote Bryan on, that “at the end of the day, making great beer can be meaningful in and of itself, but it’s a lot more profound if you can try to figure out ways to reimagine business as a force for good.” Now, typically I am aghast at businesses making a statement like that, but New Belgium is making material what is normally nice words and a smokescreen. Here’s how it’s working.

First off, from the start, they have envisioned employees being owners. Kim Jordan was a social worker and had background knowledge in the importance of ownership as a way for employees to connect to the business. People just seem to care about things more when they have rights and responsibilities to it beyond the soul-crushing selling of labor power. It’s the Chomsky paraphrase of Wilhelm von Humboldt:

“Consider a craftsman who builds some beautiful thing. Humboldt says if he does it under external coercion, like pay, for wages, we may admire what he does but we despise what he is. On the other hand, if he does it out of his own free, creative expression of himself, under free will, not under external coercion of wage labor, then we also admire what he is because he’s a human being.”

And is not a brewer a craftsman par excellence, and ownership of the company a reduction of the coercive power of the wage labor apparatus? I would wager an affirmative on both accounts.

At first, Bryan explained, they had a phantom stock plan, which in 2000 became an ESOP, with 42% initially employee owned. Now, Bryan said that ESOP became more viable, which is a fancy way of saying the proper legislation and incentives were in place, which made it economically a better option. As pointed out above, ESOP has a history of a somewhat beneficial regulatory and legal framework, because it has crossed ideological lines. By 2012, the founders decided to sell their remaining shares to the ESOP making New Belgium 100% employee owned; probably a main reason for the 93% employee retention rate. This ESOP model is paired with an open book policy on the company finances, because everyone should be in the know about what is being done with the money. On top of that, there is an elected committee that educates employees on how the ESOP operates, employee rights and responsibilities, and how to read their company’s financial statements. It’s democratizing the wealth and knowledge, producing transparency, and creating a working class with expertise in financial and organizational matters; a kind of liberatory pedagogy for business.

At New Belgium, decision-making in the past operated in a more direct democracy, consensus format, with employees employing a thumb up, down, or sideways voting method. As the organization has expanded in size, they have had to reduce the direct democracy method. There are still multiple channels for employees to make, as Bryan put it, “inputs throughout the decision-making process”, after which, “ultimately a team or individual will have to make the decision.” The channels include a once a year all staff retreat where Bryan described, “people talk in groups, all the data points are collected, and our strategic plan is derived from all co-worker comments.” Also, there is an “internal intranet site, the Mothernet, where there are forums for people to express opinions and there is a monthly all-staff meeting.” A more democratic decision-making model means employees get to insert their ideas, morals, ethics, and concerns into the process.

Running a business on the ESOP model makes sure New Belgium isn’t beholden to some anonymous stockholder class with a disdain for the “tree hugging” sustainability agenda New Belgium pursues. This means they don’t have to run rampant pillaging the Earth to maximize every single cent, but can produce sustainable profits based on long-term planning. Since before the company’s founding, when Jeff Lebesch homebrewed at home, they have been focused on reducing their environmental impact. Bryan told me, “We always design to minimize impacts – daylighting, active and passive solar, closed heat loops and recycled rinse water.”

It is extremely important to reuse and reduce water usage, because as the study, “New Belgium Brewing Company: Brewing with a Conscience” (Jan 2003), points out, “most breweries typically use 7-8 gallons of water for every gallon of beer produced.” The study discussed how New Belgium built an onsite wastewater treatment facility that “would not only pre-treat the brewing waste to reduce solids before release in the city sewer, but also the methane generated in this process can be captured and used to co-generate electricity at the brewery.” That methane now powers about 15% of New Belgium’s on-site power needs. On their website, they have a part showing their sustainability goals for water, waste and emissions, and how close or far they are from the goal. They even source their ingredients.

Electric power has been another large part of moving to a more sustainable production process. Their original consensus method was used in 1998 when they switched the brewery over to wind-power electricity. The employees made a conscious long-term decision to use bonus funds in order to reduce the amount of carbon in their production process. They get to vote, and they voted with their conscience. They also advocate certain positions for healthy watersheds and smart transportation alternatives. When you care about your company, you reinvest in it and continuously upgrade. Or, you can pull a Wal-Mart and send production back to the stone-age sweat shop style.

Bryan also gave me a few other recent examples, which include “the Merlin whirlpool kettle in our brewhouse using thin film plate technology that cuts energy consumption by up to 50%; recycled water usage in the rinse bath of our bottling line; conversion to plug-in electric Nissan Leafs for our local sales fleet.” And as they build their new facility in Asheville, North Carolina they are going for LEED certification and a holistic model for sustainability, instead of the piecemeal one currently operating at their Fort Collins facility.

Now, of course there are political limitations to this model. New Belgium wasn’t exactly birthed in the furnace of struggle, a battle pitting brave workers against a spiteful capitalist ending in expropriation of the means of production. They aren’t exactly pushing revolutionary syndicalism, although certain of its roots can be found there when we think of workers owning the means of production. It maintains a capitalist discourse focused on business and isn’t talking in terms of class struggle. And they try to separate out ideological politics from their focus on sustainability and the ESOP model. As Bryan put it:

“Interestingly, there are groups out there who are counter to the very basic tenet of trying to operate an economy that is in harmony with nature. Those folks would probably say we are political, and they’ve certainly expressed displeasure with some of our positions in the past…Since virtually everything in this country is politicized right now, the second you open your mouth or your checkbook it becomes political. That doesn’t mean we have a political agenda – we have a sustainability agenda that seeks to balance the needs of business, our community and the planet.”

Furthermore, New Belgium has a board of directors with Kim as CEO. We know from a study of Mondragon, possibly a tad too pessimistic, The Myth of Mondragon: Cooperatives, Politics, and Working-Class Life in a Basque Town by Sharryn Kasmir that postulates that whenever there are managers and workers, a certain tension does remain, a level of conflict however diluted by the democratic structure. This is not the Argentine factories operating “sin patron” documented in the book by the same name; although, even there, they had examples of collectively owned factories with workers and managers.

Also, with all this democratization of the business structure, there is still inequality of salary. I was not privy to the data and neither are the employees. I was told that stock allocation is based on salary. Certain employees earn more stock, but all employees are still owners regardless and no one is a majority stock holder. Even with the unequal salaries, the stock allocation plan functions as a much better retirement plan than a 401k being sucked dry by Wall Street. And hell, they do get full health and dental coverage with extensions to a spouse of opposite or the same sex, a trip to Belgium at 5 years, and a sabbatical at 10 years. I know guys busting ass for minimum wage who don’t own anything, haven’t got a single benefit, will never have a trip out of the country or a rest till the day they die.

So, there is a good and a bad here from the radical socialist perspective. It is not absolute equality, but this may in itself be a pipe dream or merely a useful utopian idea. It also shows room for where radicals can apply pressure for even more egalitarian forms of business structure. What would be problematic is if it was dismissed out of hand based on some fantasy of pure anti-capitalist political economy. We exist in this world and we should take every line of fight out of the maddening system we can, any opportunity to weaken the stranglehold centralized wealth holds over the people. We must utilize multiple tools for realizing this demand of worker control. ESOP may not have the heroic martyrdom story of 19th and 20th century class struggle, but it is a weapon to be wielded.