16th Annual Business Ethics Awards
Living Economy Award
For exemplifying the living economy with practices of employee ownership, fair wages, and environmental stewardship.
Now in its third year, the Living Economy Award was created to recognize companies that are bringing into being the new economy we seek—the living economy, where firms are locally rooted, human scale, stakeholder-owned, and life-serving. To the people at Chroma Technology of Rockingham, Vt., being such a firm came naturally, almost by accident.
“I prefer the term ‘sustainable economy,’ or an economy that keeps us living. And that’s what Chroma is all about,” said Paul Millman, CEO of the fastest growing technology company in Vermont for the past five years. “We are 100 percent employee-owned and started out that way from the very beginning.” While other companies practice outsourcing, Chroma remains locally rooted, with virtually all 68 employees living within a 50-mile radius. Most unusual is the firm’s flat pay scale, where no employee makes less than $37,500 and no one more than $75,000. Thus no top-level specialist makes more than twice anyone on the shop floor.
Millman credits the business environment in Vermont for nurturing Chroma’s value structure. “Vermont is the prototypical state for the creative economy,” he said. “This was the first state to abolish slavery. Outcasts from the ‘60s and ‘70s came here and created communes. This is where Ben & Jerry’s started.” Vermont, along with Ohio, boasts the greatest concentration of employee-owned companies.
If Chroma feels like a living tribute to the ’60s, it is also a global, high-tech manufacturer for the 21st century. Founded in 1991 by six people with $180,000 in financing, Chroma is today a premier manufacturer of optical filters for microscopes used by the world’s top biologists. It is the major supplier to three of the four major microscope manufacturers in the world (Zeiss and Leica from Germany and Nikon from Japan). Chroma is also the second source for Olympus of Japan and was recently chosen as primary supplier to Motic, an emerging Chinese microscope company. The company is expecting sales of $16 million in 2004.
When it began, Chroma had a policy of paying everyone the same wage—pegged to the local living wage. By the time the firm grew to 17 employees in the early 1990s, everyone was making an identical $30,000 per year. “If we would have changed our wage structure at that point, we would have had a revolution,” said Millman.
In 1996, Chroma instituted the policy that tenure would determine pay. “The criterion is longevity, rather than job description,” Millman explained. Today the maximum salary of $75,000 is the same for everyone, though new employees can start higher than the minimum of $37,500. The disadvantage of this flat pay structure, he said, is that some people with graduate degrees or business experience won’t work there, because they’ll be paid the same as someone in production. The advantage, he countered, is the cooperative atmosphere, the self-direction, and the lack of a managerial class.
At one time the company made decisions through a Quaker meeting format where consensus ruled, though that’s being revisited now that there are more employees. Still, there are no designated managers at Chroma, and employees occupy all seats on the board of directors. More than 95 percent of company decisions are made on the shop floor. “We call it full exposure management,” said Gabe Capy, a member of Chroma’s shipping department who has been with the company eight years. “It is peer pressure that then encourages people to perform.”
On the environmental front, Chroma recently invested $130,000 to make its new 28,000-square-foot factory energy-efficient. The company will recover those costs in less than two years through savings in electricity and propane costs. “They have gone far beyond the efficiency measures associated with standard building practices,” said Gabe Arnold, technical coordinator for Efficiency Vermont, a statewide energy efficiency utility. While most companies focus on lowering costs, he said, Chroma showed an innovative willingness to invest heavily up-front in efficiency.
Because employee-owners intend to pass this company on to future generations, it is virtually impossible for Chroma to be sold. After the founders leave, no single employee will own more than 5 percent; a super-majority is needed to sell the company.
The structures of employee ownership and involvement contribute significantly to the high-quality products that are Chroma’s trademark. “Other companies can build these filters quicker and cheaper,” concluded Millman. But because Chroma has educated the biologists who actually use the microscopes about its optics, it has developed strong customer loyalty. “That adds to the romance of our product,” he said. “We now have three Ph.D. biologists on our staff, and that is no happy accident. No other optical filter company can say that.”
At this company where committed employees lead naturally to loyal customers, being local goes hand-in-hand with being global. Chroma Technology shows it’s possible to make a mark in the global economy and do it in a way that is sustainable and humane.
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