Meet Colin Birkhead, 2021 Kelso Fellow

Colin Birkhead Kelso

A Conversation with Colin Birkhead

The Employee Ownership Foundation’s 2021 Kelso Fellow


In February, Colin Birkhead, the 2021 Kelso Fellow, chatted on the phone with Paul Pflieger, The ESOP Association's Deputy Director of Communications. What follows is an excerpt of that conversation.

Kelso Fellowships are funded by the Employee Ownership Foundation and are awarded to academics dedicated to studying employee ownership.


Colin, thanks for talking with me today. How did you first become interested in employee ownership?

I became familiar with ESOPs while working at FirstBank in Colorado. FirstBank is locally owned and has a generous ESOP where they’ll give ESOP grants of something like 4% of employees’ salaries each year. As a result, employees tend to be lifers. 

FirstBank is the largest locally owned bank in Colorado—or, at least it was 10 years ago—and consistently ranked in the top 10 places to work in Denver. I worked there for about five years right out of undergrad at the University of Colorado and while I was getting my MA in Management at Colorado State. 

If I had not moved to Seattle for my wife’s job, I might still be a FirstBank—and still be enjoying the benefits of an ESOP!


What motivates you today to keep exploring the world of ESOPs?

I remain interested in ESOPs for two main reasons. First, as a researcher, I think research on ESOPs can make useful contributions to Stakeholder Theory, a perspective that is very much unsettled but is increasingly discussed and debated right now. Stakeholder Theory postulates that corporations and organizations should make decisions based on the outcomes for all entities involved in activities (customers, suppliers, employees, communities, regulatory bodies, shareholders, labor unions, and others). 

This contrasts with Shareholder Theory, which emphasizes firms’ responsibility to shareholders first and foremost and really only considers responsibility to other stakeholders as they relate to shareholders. (For example, “We’ll pay employees more only if we can generate greater profits for shareholders by the benefit productivity exceeding the marginal salary expense.”)

Stakeholder Theory is hotly debated among law scholars, economists, and sociologists right now, but all groups seem to acknowledge this will be a dominant theory in the near future. The details need to be ironed out and I think ESOPs will have a seat at that table.

Second, as a general citizen, the benefits of ESOPs are too hard to ignore. ESOPs almost uniformly make individuals better off by increasing job contentment and personal wealth. ESOPs are a useful weapon against the crushing inequality we have in the United States. 

Also, ESOPs have almost no downside. Even companies that implement ESOPs and don’t see productivity benefits still don’t suffer costs. It’s usually a win-win proposition, or at worst a net-zero proposition.  As someone who cares about minimizing inequality (as we all should), ESOPs can be a powerful tool.


Where did you get the idea for your recent paper on financial transparency?

For a while I’ve had the idea that ESOP companies are somewhat insulated from general managerial and capitalism trends because ESOP shareholders (i.e., employee owners) have different preferences than non-employee-owner shareholders. 

For example, an employee owner may care a tiny bit about increasing earnings per share by $0.01 next quarter, but they’ll care a whole lot more about losing their job or being downsized or something long term like that. For this paper, I had read an Academy of Management Journal article on interim CEOs manipulating earnings, and then (serendipitously) read Freeman, Blasi, and Kruse’s 2010 book Shared Capitalism at Work right after. In the book, they say something like “ESOP companies may be less prone to corporate malfeasance” and a lightbulb went off. I thought I could test that assertion using the methods from the AMJ paper I just happened to have read right before.


Now that you have submitted your paper, what do you hope to accomplish?
My goal is to do this work as a professor at a business school. With good luck and if I can land the job, I would be able to continue this line of research. My paper adds to the list of socially desirable outcomes associated with ESOPs, and it would be very exciting for it to tip the scales and motivate firms to adopt an ESOP of their own.


What do you wish the world knew about employee ownership?

Tough question…I think it would be that ESOP payments are not offset by lowering wages or reducing compensation. That is, a $5,000 ESOP payout is not paid for by reducing wages by $5,000. Comparable workers at non-ESOP and ESOP firms may have the same salary, but the worker at the ESOP firm also gets a quarterly/yearly share, so implementing ESOPs is almost always a homerun for employees.


This is an article from the February 2021 ESOP Report produced by The ESOP Association.