How do employee-owned companies fare in the wider economy? How do they compete in the dog-eat-dog world of business?…
Many years ago, back in England and long before my conversion, I stumbled upon a book called The Man Who Gave His Company Away. It was a biography of Ernest Bader, a very successful entrepreneur in the polymer industry who, prompted by his Christian conscience (he was a Quaker), transitioned ownership of his company to his employees. Many thought he was mad and predicted that the new company, the Scott Bader Commonwealth, would come to an ignominious end. How wrong they were. Since its founding in 1951, the producers’ cooperative has gone from strength to strength, not only surviving but being one of very few such companies in the polymer industry that has not fallen to either bankruptcy or to acquisition by a global corporation.
The example of Ernest Bader came to mind when I heard about Gellert Dornay, a successful entrepreneur in Seattle who gave his company away to his employees last September. Intrigued, I reached out to him to discover more.
Mr. Dornay’s father was born in Hungary and immigrated to Seattle with his family in the wake of the anti-Soviet revolution in 1956. His mother was born in Seattle as was he. He and his wife, Elizabeth, also a Seattle native whose parents were “cultural” Jews from New York, were married at twenty and had their first child nine months later. This set the pattern for the years to come—one child every other year. They now have ten children ranging in age from twenty-one to two. Committed and Tradition-oriented Catholics, they attend a parish run by the Fraternity of St. Peter in Seattle. Mr. Dornay, a daily Mass-goer, serves on the advisory board of the Priestly Fraternity of Saint Peter for North America.
Mrs. Dornay is now in her twentieth year of homeschooling their children, indicative of the care that the Dornays take in passing on the heritage of Christendom to the next generation. Such concern for authentic Christian education is nothing new to Mr. Dornay, whose mother started her first Montessori school in Seattle in the late 1960s in response to the rapid decline in the quality of education and its secularization.
The Dornays live on Mercer Island, in the middle of Lake Washington, between Seattle and Bellevue. Mr. Dornay had grown up on Capitol Hill, near the downtown area of Seattle. His father was a policeman. In the 1980s, all the big Catholic families disappeared from this part of town due to rising real estate costs and the moral degradation of the community.
At the age of nineteen, Mr. Dornay began roasting coffee for Java Trading Company, which created proprietary coffee brands, such as Seattle Mountain coffee for Costco, Java Paradise for Wal-Mart, and Kivu for Kroger. He worked his way up in the company’s hierarchy, finally becoming President of Java’s international business. He worked with some of the largest companies in the world, including Wal-Mart, Costco, Ahold out of Amsterdam, and Lotte in Japan and Korea. In 2006, the board decided to sell the company to a private equity group out of New York. “I was the only one to leave as I didn’t trust Wall Street,” Mr. Dornay says, adding that he believed the board’s decision was short-sighted and would not benefit either the company, its shareholders, or its employees. “I would have run the business with a longer term approach,” he explains. “All the employee stock option holders lost everything on the next sale seven years later, getting zero.” This experience taught him to ask serious questions about the very nature of the economy. “I began to suspect an economic system controlled by gigantic corporations that did not take into great enough consideration the impact to employees, customers or communities, in addition to driving profit for shareholders.”
During his years as a jet-setter, he became interested in the Church’s Social Teaching and also in the distributist ideas of G.K. Chesterton and Hilaire Belloc. “As I was flying around the world I began to think more about economics. I came across a true understanding of Catholic Social Teaching and of course distributism of which I quickly became a big fan.” After his resignation from Java Trading Company, he was looking for ways of putting his business experience into practice while conforming to the Church’s social teaching. He met his business partner through Legatus, the organization for Catholic business leaders established by Domino’s Pizza founder, Tom Monaghan. “We were looking for examples of successful Catholics who had built successful companies while at the same time developing their Catholic faith,” Mr. Dornay explains. “We primarily found folks at the end of their careers and rediscovering their faith.”
Far from being of retirement age and feeling strongly that one needed to find ways of living one’s faith in the workplace, Mr. Dornay and his partner founded Axia, a mortgage loan business.
We decided to start a company committed to Catholic Social Teaching and consecrated to the Sacred Heart. Not many know this as very few in our company are practicing Catholics, but the principles of Catholic Social Teaching do resonate with the human heart, and our 300 employees (now also owners) love the way we run the business and incorporate their considerations in the decision making.
Although he and his business partner share a belief in distributism, they take radically different approaches to what it means to be a distributist. “My friend started having kids early in our venture and literally bought a farm in Idaho and raises milk cows and pork. He ran with Fr. McNabb’s ideas and I more with Chesterton. I like cigars and drinking.”
Mr. Dornay is passionate about putting his Catholic faith at the forefront of his life. Since founding Axia in 2007, he has focused on building a sustainable company that helps families fulfill their dreams of homeownership, itself a foundational principle of distributism.
Formed in the aftermath of the collapse in the price of real estate, Axia set out to restore the ability of people to achieve the freedom of sustainable homeownership.
Our mission has been to help borrowers make decisions that are in their long-term best interest through ethical and individualized lending solutions. A high level of sustainable homeownership has been a proven way to improve the quality of life in a community, and it is our passion to work towards that end.
Having proved successful in helping the company’s clients attain the freedom of homeownership, Mr. Dornay then set about putting the same principle of ownership into practice with regard to the company’s employees. Through the adoption of an employee stock ownership plan (ESOP), he set about transitioning the company so that the employees would become owners. This was achieved on September 2, 2016, when Axia’s ownership passed into the hands of its employees and management, “the ones really responsible for the success of the company.”
Mr. Dornay is extremely eloquent in his arguments for this radical model of ownership, comparing employee stock ownership to homeownership. “We are very familiar with the positive effects of homeownership on families, neighborhoods and the economy,” he says. “Neighborhoods with fewer rentals see a higher percentage of children graduating from high school and families have a greater tendency to stick together. In such neighborhoods, properties are better maintained and values are more stable. No one washes their rental car.”
It is not merely about ownership or even the economy. It is about building a community. There is “tremendous value in families planting roots in a community and making a lasting commitment by investing their taxes in local schools, mowing their lawns and looking out for their neighbors’ kids.” And, Mr. Dornay argues, what is true of homeownership is equally true of employee ownership of the place at which they work.
If homeowners care more for their yards than tenants do, doesn’t it follow that perhaps employees will care more about the company they own than companies for which they merely work? If homeowners move less frequently than tenants, isn’t it likely that employee-owners will move less often than employee-tenants?
So much for the principle but, as all good skeptics will insist, the proof of the pudding is in the eating. How do employee-owned companies fare in the wider economy? How do they compete in the dog-eat-dog world of business? Unfazed by such skepticism, Mr. Dornay has the answers. “An ESOP rewards employees who contribute to a company’s success by allowing them to share in the company’s future increase in value. Studies show that employee-owned companies experience increased employee satisfaction, retention and productivity gains.” He cites a 2003 study by economists at Rutgers University and the New York Institute of Technology which found that employee-owned companies outperformed other companies in terms of productivity and profitability by 2.4 percent per annum. Another study found that ESOPs compensated their employee-owners between five to twelve percent higher than non-ESOPs.
Although Gellert Dornay has blazed a trail by transitioning ownership of his highly successful company to his employees, he is still very much involved. As chief executive officer, he hopes to make Axia sustainable, and he plans “to build $100 million in retirement for our team that they would otherwise not get.”
For those of us who take the Church’s Social Teaching seriously, advocating subsidiarity and solidarity in accordance with the encyclicals of popes, such as Leo XIII and Pius XI, it is highly encouraging to discover pioneers, such as Gellert Dornay, who are putting the Church’s business principles into practice. Long may he prosper, and long may he be a beacon of encouragement to others.
Books on the topic of this essay may be found in The Imaginative Conservative Bookstore. This essay originally appeared in Latin Mass Magazine (2017) and is republished with gracious permission from the author. The Imaginative Conservative applies the principle of appreciation to the discussion of culture and politics—we approach dialogue with magnanimity rather than with mere civility. Will you help us remain a refreshing oasis in the increasingly contentious arena of modern discourse? Please consider donating now.