In the minds of many entrepreneurs, taking a company public, with shares trading on a public stock exchange, represents the pinnacle of success–a dream come true. For EA Engineering founder Loren Jensen, that dream proved a nightmare.
Located in Hunt Valley, Maryland, EA Engineering, Science and Technology is an environmental consulting firm with 500 employees and $140 million in annual revenue. For more than a decade, the firm traded on NASDAQ, but after initial success the company cycled through three presidents, saw morale plummet, and found itself in trouble with the Securities and Exchange Commission over accounting misstatements. Pressure for aggressive growth had clashed with the company’s scientific culture, damaging its environmental mission.
Jensen led a move to buy the company back in 2001. He then worked with new president Ian MacFarlane to transition to 100 percent employee ownership through an Employee Stock Ownership Plan (ESOP). MacFarlane also organized the firm as a benefit corporation, embedding in its DNA a commitment to the environment and community.
The company has prospered ever since. Its design keeps its environmental mission in the hands of genuine stewards, employees, rather than in the hands of absentee owners removed from the organization’s life. “Now we focus on who we are and what we’re doing. We returned immediately to the task of understanding environmental problems and knowing what to do about them,” Jensen said. “Nobody buys stock except in the hope of a good return on investment. The problem this poses for a company like EA is you confuse the goals. It was very difficult to manage in that environment.”
EA Engineering is one of multiple companies examined by my organization, the Democracy Collaborative, in research aimed at answering questions critical to 21st century enterprise design and the future of our planet: Are mission-controlled, employee-owned companies better environmental stewards than conventional finance-controlled corporations? Could these be the harbingers of next generation enterprise design?
If our goal is to design an economy that lives within planetary boundaries, we need to better understand the relationship between enterprise design and sustainability outcomes. Environmental advocates generally make the “business case” for sustainability, but research by the Massachusetts Institute of Technology found that such steps resulted in commercial benefits for only 37% of firms.
As U.K. sustainability consultant Carina Millstone observes in Frugal Value, true sustainability cannot be driven purely by commercial concerns. It requires moral decision-making. What enterprise designs enable and encourage moral decision-making?