January 22, 2020

Center for American Progress Issues Report Recommending State Employee Ownership Efforts

Executive Director

The Center for American Progress, a progressive think tank, issued a report on January 20 titled Building Workers’ Wealth in Cities and States. The Center worked with the Hillary Clinton campaign on its economic policy.

The report's author, Karla Walter, opens with an overview of the benefits of employee ownership and profit sharing:

Every year, millions of Americans benefit from employee ownership and broad-based profit-sharing plans that ensure workers receive a share of the wealth that they help create. These programs—which reward workers based on a company’s collective performance rather than workers’ individual performance—help raise wages and boost wealth among American workers. Moreover, research shows that broad-based sharing programs support the long-term stability and profitability of local businesses and even do a better job boosting firm-level productivity than does performance pay for individual workers.

None of the policies proposed by the report involve major government expenditures, but they could have a significant impact on the growth of employee ownership:

  • Creating and funding state and local employee ownership and profit sharing centers: There are now active state centers in Vermont, California, New Jersey, Ohio, Colorado, Pennsylvania, and Massachusetts, with a new one starting in North Carolina. Only some of these get state funding, and their level of activity varies widely. Several cities have recently set up employee ownership outreach programs. The centers focus on outreach and education.
  • Financial support: The report suggests that a community economic development corporation be established that would help provide loans, loan guarantees, and evaluate whether to provide equity financing for transitions to employee ownership. For example, Newark’s economic development authority partners with private investors willing to take a more modest return, government, or both.
  • Requiring government-supported technology startups to share ownership or profits with employees when the company is sold or goes public: The value provided to the top five executives would have to be equal to or less than that shared with 80% of the workers.
  • Ensuring that set-aside status does not preclude ESOPs: Companies where the trustee is a qualifying individual or individuals and enough of the beneficiaries of the trust meet the set-aside rules (such as minority, female, or veteran) would continue to qualify for set-asides.

The report draws on research by the NCEO, Project Equity, and scholars affiliated with the Beyster Fellows Program at Rutgers. The NCEO has also published a report on this topic, Economic Growth Through Employee Ownership, which contains similar proposals.

State employee ownership legislation has been very bipartisan. It is an area where those interested in promoting employee ownership can make a major difference. A number of our members have been working on this; if you want to join that effort, contact Tim Garbinsky or Corey Rosen at the NCEO.