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The Employee Ownership Update

Loren Rodgers

February 1, 2013

(Loren Rodgers)

Employee Ownership and the Costs of Unemployment

In a joint project with the Employee Ownership Foundation, the NCEO found that employee ownership averts a substantial amount of unemployment and saved the federal government over $23 billion in 2010. Data from the General Social Survey shows that in 2010, for instance, 12.1% of all working adults in the private sector reported having been laid off during the prior 12 months from being asked, compared to just 2.6% of those respondents who said they own stock in their company through some kind of company-sponsored employee ownership plan. This dramatic difference remains even after adjusting for different conditions faced by employee-owners and non-employee-owners.

Unemployment causes the federal government to pay unemployment benefits and forgo payroll tax revenue. The GSS data indicate that if employee ownership did not exist, almost 1,800,000 more workers could have lost their jobs in 2010. This would have increased the number of layoffs economy-wide by 15% and cost the federal government over $23 billion in unemployment insurance and in forgone taxes. The annual cost in non-recession years is somewhat lower. The estimated annual cost to the federal government for the period from 2002 to 2010 is $13.7 billion. The implied savings for ESOPs and stock bonus plans alone is $13.7 billion for 2010 and $8.1 billion per year for the 2002-2010 period.

[The figures above have been corrected. They were erroneously reported in the original version of this column.]

The report is available on this site at this link (PDF format).

Employee Ownership Legislation in New Jersey

Assemblyman Upendra Chivulula, the deputy speaker of the New Jersey State Assembly, has introduced A3626, a bill to exclude from taxation any gains on the sale of at least 30% of a company to an ESOP or eligible worker cooperative (as defined by Section 1042 of the Internal Revenue Code). Unlike federal law, the bill includes sales to ESOP in S corporations.

CEPI Symposium on Equity Compensation: March 26

The Certified Equity Professional Institute (CEPI) at Santa Clara University is hosting its 9th annual symposium, with topics that include balancing the expense and perceived benefits of equity compensation programs, tips for getting a job in the field, working with mobile employees, administering an ESPP and much more. More about the symposium, including a field for registration, is available at the CEPI's Web site.

UPenn Program for ESOP Company Executives

The Center for Organizational Dynamics at the University of Pennsylvania will again host "the first and only program anywhere formally addressing the relationship between the distinctive nature of ESOP companies and the effectiveness of leaders." The program consists of two week-long sessions, one in June and one in November. Topics include the challenges and opportunities unique to leading an ESOP company, practical ideas to promote employee engagement, implications of recent research, and strategies for building a high-performance ownership culture. Attendees will also leave the program with a network of peers at other ESOP companies. More about the program is available online or by contacting the program's academic director Ginny Vanderslice (215-292-4865, virginiv@sas.upenn.edu).

Author biography and other columns in this series

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