Employee-Owned Dansko: Values and Profits

CEO and Co-Founder Mandy Cabot Shares Dansko’s Experience with Employee Ownership

Mandy Cabot

Dansko CEO Mandy Cabot is creating a new family-business legacy.
Photo courtesy of Dansko

  • Mandy Cabot: Co-founder — with her husband, Peter Kjellerup — and CEO of Dansko.
  • ‘Danish Shoe’: A Danish clog in a tiny store in Europe inspired Dansko, which now offers a full line of footwear.
  • Stepping Up: Dansko grew from a $7,500 investment in 1990 to annual revenue of more than $150 million.
  • 100 Percent Employee-Owned: Cabot and Kjellerup sold the company to an employee trust in 2012.

Mandy Cabot has guided Dansko through decades of rapid growth while preserving the company’s rigorous values. She spoke with B Magazine about the challenges of remaining mission-focused.

How did your family’s history in business shape the way you run Dansko?

I come from a long line of businesspeople — not in the bootstrap entrepreneurial sense; more like textbook capitalists. My dad, his dad and his dad before him were like robber barons and Robin Hoods, each spending 50 years of his life accumulating as much wealth as possible only to give most of it away after he retired.

When I started my own business, I wondered whether there wasn’t a better model in which the business itself — by its very structure — could make a lasting, positive impact.

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Starting Dansko allowed me to do everything that was important to me: share a great product; provide opportunities for our employees, our customers, and everyone in our supply chain; and build lasting relation­ships in the communities where we operate. It was never about the money, though profitability would surely be required to keep all the promises I intended to keep. It was about finding a better way to make a difference in the present.

Why did you decide to become 100 percent employee-owned, despite lucrative offers to sell to other buyers?

We reached a growth threshold, and I had a crisis of confidence about whether I could take Dansko to the next level. Selling to a larger player in our industry seemed like the best — and, at the time, the only — way to gain the expertise and resources we would need.

Debt-free and an industry darling, Dansko was courted by some of the best-known companies in the business. After 10 months of deliberation, I realized that I could never live with choosing to sell because of my lack in confidence. If we sold, Dansko as we knew it would cease to exist. Jobs would be lost, priorities would change — Dansko’s individuality and very raison d’être would be at risk.

So, we found another way. We brought expertise in-house to teach us what we didn’t know, and we set up a trust fund — an employee stock owner­ship plan — to provide a financial and cultural safety net for the day we’d no longer be leading Dansko. The ESOP would be our ultimate expression of sustainability and preserve our moral compass for the company’s future generations of leadership.

Selling our shares to the ESOP also allowed me to reconcile being a capitalist in a time of record-high wealth inequality, distrust of big business and profound economic malaise. I think that broad-based employee ownership is a way to establish equality of opportunity and a more democratic form of capitalism — not as a system for capital, but as a system of capital.

Dansko employee-owners

The 175 employee-owners of Dansko pose near the company’s headquarters in Pennsylvania.
Photo courtesy of Dansko

The point is not to do away with wealth, but to change the system design that lets only the rich get richer. People are far more likely to become better stewards when they have a personal stake in the economic system, with all the rights and responsibilities that implies. The new era of social and economic justice has to start with people being empowered, engaged and invested.

As a business recognized multiple times as one of Inc. magazine’s fastest-growing companies, how has Dansko maintained its values?

We could easily stay true to our values as a small, privately owned company. Profits were reinvested into the company year after year, so we grew from our initial investment of $7,500 in 1990 to annual revenue of more than $150 million without incurring debt and with no one else to answer to but ourselves.

Ironically, the challenge came when we created our ESOP in 2012. For the first time in its history, Dansko borrowed money in order to purchase shares from the founding shareholders. Employees weren’t on the hook for the debt, but future company profits and growth would be. In giving ownership shares to our employees, we created an expectation, if not an imperative, for continuous growth.

You might think that having 175 co-owners would be a tremendous relief, but I took the additional responsibility of their future nest eggs seriously. Our employees became the investors Dansko reported to. While I’d always paid attention to share values, we now had to look at every decision — product design, distribution channels, new sourcing partners — through­ a financial lens that considered the impact on share values first.

What challenges have you encountered since Dansko’s transition to an ESOP?

We set five-year goals for 2020. Our goals included a jump from $150 million in annual revenue to $250 million — a huge leap. After we set that goal and changed our ownership structure, an industrywide retail slump started, and Dansko experienced a decline in top-line sales and share price. Although newly formed ESOPs commonly experience “growing pains,” retail sales have been soft in many industries, ours included.

Because our employees were now our shareholder-owners, we were horrified to not only be facing slower growth than in previous years, but to be sharing news of a downturn as well. We struggled not to focus solely on a single bottom line — profit — rather than the multiple bottom lines, which include the environment and stake­holder communities.

About a year ago, I realized we could have prosperity without growth. Growing for growth’s sake and only concentrating on known best-sellers instead of innovating and taking risks wouldn’t bring us success in the market. We don’t have to be a $250 million company; we’re a damn good $150 million company.

We’ve come back around to our original mission: to be our stakeholders’ favorite shoe company. That keeps us in balance.

Dansko lasts

Foot-shaped forms, called “lasts,” are used to design and shape Dansko’s signature clogs.
Photo courtesy of Dansko

How are you and the company adjusting to your new role as CEO?

Operationally, not much has changed since I passed the mantle of president on to Jim Fox, our former chief financial officer. Jim keeps a close watch on sales, operations and finance, and I still keep an eye on product development and marketing.

My focus now is to facilitate a successful transition from a “founder-centric” business to a “vision-centric” business. I want to engage the passion and vision of Dansko’s next generation of leaders who can move the company through time and seize new opportunities. That’s why the ESOP model made so much sense to us — not as an exit strategy, but as a succession plan.

Do you have advice for female entrepreneurs?

I wouldn’t say I have “women-specific” tips. I can’t think of any time in my career when I was treated differently as a woman, or when expectations of me were different from those of my male counterparts. I’ve never participated in women-only groups, and, in my opinion, men and women competing, collaborating and creating together is more productive and truer to real-world scenarios and challenges.

What do you still want to improve at Dansko?

I want to design and produce consumer goods that cause no environmental harm in their production nor in their ultimate disposal. Although we’re constantly striving to have a lighter footprint, consumer-goods businesses are far from

We once partnered with a footwear developer in Germany on a line of compostable shoes, but we lacked the necessary research and development capabilities to meet our comfort, wearability and durability criteria.

We still hope that the foot­wear industry will uncover ways to reduce waste and environmental risk throughout our supply chains and repurpose what’s left after our products’ useful life cycles. We’d love to give consumers ways to extend the lives of their shoes.
Perhaps we could repurpose old shoemaking and shoe-repair equipment and even incorporate some of the newer technologies and opportunities associated with 3-D printing. Who knows?

This interview originally appeared in the Luminaries department of the Summer 2016 issue of B Magazine. Read Cabot’s advice for entrepreneurs in Entrepreneur Advice for Business Success.

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