Inner-City Baltimore, Unionized, 100% Employee-Owned Company Provided Good Jobs and Self-Determination for 29 Years
MBC VENTURES CASE STUDY CATEGORIES:
Employee Stock Ownership (ESOP): S-Corp, leveraged ESOP has provided maximum tax benefits providing cash for fast growth
Union Led: USW Led buyout of divesting subsidiary and retained jobs for 15 years
Effective Employee Participation (Participative Workplace): 1 vote per person on most key issues & local & international union board representation
Effective Workplace Democracy (Workplace Democracy): 1 vote per person on all shareholder issues & slate voting so that union people and management pick their own representatives and jointly choose neutral member
This case study is a collaboration between Len Shindel, a retired Bethlehem Steel USW member who served as a neutral member of the MBC Board, Jim McKay who wrote two stories on MBC for the United SteelWorkers membership publication USW@Work, "Worker Made Worker Owned" Vol. 13/2 in 2018 and "Maryland Brush ESOP Sold after 29 Years" Vol. 15/1 in 2020, and Deborah Olson, MBC ESOP counsel.
Maryland Brush Company (“MBC”) and its worker-owners should be remembered as a positive example of employee ownership.The company stood out among Employee Stock Ownership Plan (ESOP) companies for its embrace of democracy; its strong partnership with the union; its willingness to seek out and experiment with new products when old products lost market share; its 29 years of successful operation; and the diligence and care with which it handled the company sale to benefit the workers.
MBC is located in a very old, large facility in Baltimore’s inner city which has been operating since 1851. In the early 1990s, Pittsburgh Paint divested MBC, a full-service manufacturer of industrial and paint brushes for a variety of industries worldwide focusing on brush-critical, niche industries. Local management and the United SteelWorkers Union members decided to purchase the company through an ESOP. With the continuing assistance of Deborah Groban Olson, ESOP counsel since 1998, MBC established and maintained its place as a manufacturing leader, a desirable workplace for 29 years.
The MBC ESOP provides one vote per person on shareholder issues and worker-owners participate in making decisions about the business on a regular basis. The United Steelworkers Union played an active role on the company board, and cooperation between the company and union has been continuous and strong.
“There’s a familial feel to the place even today. ESOP brought changes “It’s a good place to work. Everybody gets along. We’re like family,” said Colleen Caldwell, a machine operator who acts as a team leader on the manufacturing floor. Caldwell has been with the company for nearly 46 years, 25 of them operating a “cut and bunch” machine that cuts wire or synthetic fibers to the correct length and gathers them into a bunch that will ultimately end up as a brush. The ESOP changed how the company operated on the shop floor. Before the ESOP, each employee had an assigned job and didn’t stray from it. As work slowed and the staff shrunk, existing workers were cross-trained and now pitch in where needed. “ USW@Work, "Worker Made Worker Owned" Vol. 13/2
As an S Corporation ESOP, MBC was for 29 years uniquely positioned to compete in the global economy, establishing the company as one of the most progressive employers in the industry, the majority of who do not offer similar programs. In 2000, the tenth year of the ESOP, MBC had experienced increased sales for the five preceding years and its stock value had increased by 133% since becoming an ESOP. Through 2008, the company’s stock consistently met or exceeded the earnings charted by the S&P, completely turning around MBC’s financial picture and its prospects going forward.
“Being employee-owned definitely gives you a different mindset,” William Huddleston, an 11-year veteran, said as he welded the metal core of a brush. “You don’t just come to work and get a paycheck …You try to do the extra to make the company strong.” USW@Work, "Worker Made Worker Owned" Vol. 13/2
Since 2008, the maturing market for industrial brushes caused MBC to seek out new product lines. The tax exempt status due to MBC being a 100% ESOP owned S corporation, enabled this small company to accumulate the cash of over $1 million it needed to embark on a transition to a new product line.
In 2010, MBC invested in a start-up company that made skylights which are also solar collectors, Bright Phase (BP), in exchange for manufacturing rights. It later decided to buy all the intellectual property rights to the BP technology, now called “Skylouver” in order to ensure successful management of the commercialization process. The Skylouver project was intended to shift MBC’s product focus from a mature shrinking market to a dynamic growing one to increase employment, employee ownership and profits.
In September 2010, the US Department of Energy in conjunction the State of Maryland’s Clean Energy Initiative (CEEDI) grant program, provided $770,000 to Maryland Brush to retool an existing production line at its Baltimore facility to manufacture the innovative Skylouver solar thermal-power-and lighting modules. Maryland Brush Company estimated that this project would result in 10 jobs in Baltimore during the first year. To accommodate its new product and market expansion, the company’s name changed to MBC Ventures, Inc.
Unfortunately, the Skylouver product required greater ongoing research and development costs than anticipated. It never reached a sufficiently large market. In 2018 the employee owners determined that they could not keep investing in Skylouver. MBC CEO, Steve Mullan said “If we had deeper pockets, maybe we could have made it work.”.No one pointed fingers of blame. “That’s not our style,” USW Local 12978 President Rich Benton said in 2018. “We made the decision to invest in the venture together. Failure hurts, but our focus was on moving forward, not casting blame.”
In 2019, a significant portion of their market share was taken by foreign competitors. After much research and consultation, the employee owners determined that it was in their best interests to sell the company and its assets to preserve the remaining value for the employees as retirees.
The company and its worker-owners should be remembered for their success as a successful, unionized employee owned company that retained local jobs for 29 years after its parent company divested it.
