Employee Ownership Blog

Timothy Garbinsky

Private Equity Continues to Make Inroads into the Employee Ownership Space

Since as far back as at least 2017, we've long been tracking the increased activity of private equity firms in the employee ownership space. Their foray into the world of ESOPs, broad-based equity, stock purchase plans, and the like, is, by now, somewhat old hat, but that doesn't stop it from being a frequent point of conversation, even contention, in employee ownership circles. But the fact remains that, no matter how you feel about their motivations or their methods, they are here, as evidenced by a feature on KKR, Pete Stavros, and Ownership Works on tonight's episode of 60 Minutes.

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Corey Rosen

Wisconsin Bill Would Provide Tax Incentives for Employee Ownership Feasibility and Conversion

Wisconsin Assembly Bill 1217 would have provided that the “Wisconsin Economic Development Corporation may certify a business to claim a nonrefundable income tax credit for an amount equal to 70 percent of costs related to converting the business to a worker-owned cooperative or 50 percent of the costs related to converting the business to an employee ownership trust or an employee stock ownership plan. The credit is limited to a maximum amount of $100,000.” The bill would also have provided a state capital gains tax exemption for sales to ESOPs, worker cooperatives, or employee ownership trusts.

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Corey Rosen

Bipartisan Bill Extends ESOP DoD Procurement Program to All Agencies

In 2022, the National Defense Authorization Act created the first-ever government contracting program to specifically encourage ESOPs. Section 874 of the new law created a Department of Defense (DoD) pilot program to allow companies that are or become 100% ESOP-owned to receive noncompete follow-on contracts for their work. The award is contingent on finding that the contractor’s performance is satisfactory or better. The program will run for five years, and the Government Accountability Office is required to provide an assessment of it within three years of the program’s enactment.

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Nancy Wiefek

University of Minnesota Extension Research Provides Insights on Rural Business Owners

There are interesting and helpful resources and research coming from Michael Darger and others at the University of Minnesota Extension program. Most recently, they conducted a rigorous survey of the state’s business owners that offers real insights into how employee ownership fits into their plans.

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Timothy Garbinsky

ESOP CEO Authors White Paper Encouraging EO in Healthcare Industry

Increasingly, private equity (PE) is becoming a bigger part of American life through its unceasing ability to acquire businesses across all sectors of American life. Operating on the principle of aggressive growth, PE firms often seek to maximize their investment by ruthlessly cutting costs wherever possible while trying to, at a minimum, sustain their revenue, meaning that companies often end up charging the same or more for their goods or services while their quality declines. The inevitable outcomes in these situations are concerning enough in the publishing and entertainment industries, but what happens when the service that's replaced is essential and life-saving healthcare?

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Timothy Garbinsky

Harvard Social Impact Review Publishes Article on EOTs and Purpose Trusts

On April 2, Harvard Social Impact Review published the article “Rethinking Ownership: Putting Purpose at the Center,” which explores trust ownership, including employee ownership trusts and perpetual purpose trusts (EOTs and PPTs respectively). The authors, Jenny Everett, Mark Hand, and Natalie Reitman-White, note the growth in the number of companies using this form and also suggest that given the still-small size of the field, "now is the time to invest in the field-building infrastructure necessary to develop and scale the purpose trust ownership legal form."

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Corey Rosen

Twenty-Eight of the Largest 200 Private Companies Have EO or Similar Plans

By my estimation, twenty-eight of the Forbes 200 largest private companies (by revenue) appear to be partially or wholly employee-owned or have employee ownership-like plans. Two are companies with profit-sharing plans invested in company stock, one is a broad-based partnership, one offers phantom stock to all employees, one is an ownership trust, one grants stock awards, eight are minority-owned by ESOPs, and fourteen are majority-owned by ESOPs:

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Timothy Garbinsky

NJ Exploring Development of Statewide EO Program

Following the lead of Colorado and Washington State, New Jersey appears to be mulling a potential state program for employee ownership. Today, the New Jersey Economic Development Authority (NJEDA) issued a formal Request for Information on developing a program, seeking insight from individuals and firms alike on what such a program might look like. The interest in employee ownership was spurred by the Governor's Wealth Disparity Task Force, which highlighted employee ownership as a potential initiative on which to focus.

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