June 30, 2020

The Pandemic Will Change the Ownership of American Companies

Two prominent writers, Timothy Wu and Robert Reich, have articles in the New York Times about COVID-19’s effect on ownership patterns among U.S. corporations.

In the June 30 opinion article American Companies Are Sick. Here’s How to Cure Them, Dr. Wu, a law professor at Columbia and a former member of the National Economic Council, writes that threats to the sustainability of businesses across the country may lead to “a wave of buyouts and mergers.” He argues that these transitions, “though seemingly better than letting struggling companies die, would only intensify the economic inequality that has become this country’s curse.

The third of the four solutions Dr. Wu proposes is government encouragement of worker buyouts. He writes, “While worker buyouts have been rare and are overly complex, Congress could encourage them by allocating some of the recovery funds to equity investments by employees looking to acquire their company.” The NCEO’s research and publications suggest that worker buyouts are neither rare nor more complicated than other ways of selling a business. Two easy introductions to employee ownership are Who Should Own Your Business After You? (PDF) and Employee Ownership: Building a Better American Economy (PDF).

On June 25, former Secretary of Labor Robert Reich wrote the New York Times opinion piece When Bosses Shared Their Profits. In it, he advocates a fairer economy in which employees receive a share of corporate profits, and the first example he cites is Sears Roebuck’s 50-year commitment to employee ownership through profit sharing. Reich notes that at its peak in the 1950s, workers at Sears owned a quarter of its shares, and noted if Amazon workers today had that plan, each would own shares worth nearly $400,000. He closes with the observation that:

“It’s impossible to predict what kind of America will emerge from the crises we’re now experiencing, but the four-decade trend toward higher profits and lower wages is unsustainable, economically and politically. Sharing the profits with all workers is a logical and necessary first step to making capitalism work for the many, not the few.