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The Employee Ownership Update

Corey Rosen

March 31, 2010

(Corey Rosen)

New Data on ESOP Plans, Participants, and Assets

The NCEO's most recent estimates for the number of ESOP and ESOP-like plans suggest there were 10,800 ESOP companies at the end of 2007, which is slightly lower than our earlier estimate for 2007 (11,000 companies). In that year, ESOP companies had nearly 13 million participants in their plans and over $900 billion in assets. The change reflects the increased number of companies whose completed DOL Form 5500 data is now available.

Estimates after 2007 are based on extrapolation from limited data, but we expect that the number of ESOPs declined in 2009 as many potential ESOPs were postponed until the economic climate improved, and more companies went out of business (ESOP and non-ESOP alike). These numbers are only guesses, however, and should not be taken as more than that. For details on the data, go to our Statistical Profile of Employee Ownership.

Jobs Bill Ties Equity Compensation to Pension Funding

H.R. 4213, the American Workers, State and Business Relief Act, requires that companies seeking amortization relief for defined benefit pension plans must make a contribution to their defined benefit pension plan equal to the amount over $1 million paid to any employee per year. With certain exceptions, all taxable compensation for a year is taken into account for purposes of the $1 million rule. Equity compensation counts, with two exceptions:
  1. Restricted stock, stock options, or stock appreciation rights that are paid or granted under a binding written contract that was in effect on March 1, 2010, are not included.
  2. Restricted stock with at least a five-year vesting schedule granted after February 28, 2010.

New Study Shows S ESOP Corporations' Growth Performance Was Far Better Than the Economy in 2008

A new study for the Employee-Owned S Corporations of America (ESCA) shows that S corporation ESOPs did far better than the average company in 2008 in terms of employment growth, health and retirement benefits, wages, wealth creation, and job creation. The study was performed by Phillip Swagel, a visiting professor at Georgetown University and former assistant secretary for economic policy at the Treasury Department, and Robert Carroll, an executive-in-residence at the American University School of Public Affairs and former deputy assistant secretary for tax analysis at the Treasury Department.

Jobs grew by 1.9%, compared to a 2.8% decline in the economy. Wages grew 5.9%, compared to 3.2% overall, revenues grew 15.1% compared to a drop of 3.4% overall, and retirement plan contributions grew 18.6% compared to 2.8% overall, among other impressive numbers. The average wage was $50,225 in the S corporation ESOP companies, compared to $31,616 overall.

The data came from 49 ESCA member respondents, so the sample is skewed and is probably not representative of S corporation ESOP companies overall. Still, the differences are large enough that the sample problem probably cannot explain them all away.

For a copy of the study, contact Noelle Lundberg at ESCA at

Blog on Senator Sanders' Bills to Promote ESOPs

A new blog ( provides an opportunity for people interested in legislation introduced by Senator Bernie Sanders of Vermont to promote employee ownership. The site allows for comments and has suggestions for what supporters can do. The first bill (S.2909), the Worker Ownership, Readiness and Knowledge (WORK) Act, would create an Office of Employee Ownership and Participation within the Department of Labor. This office would promote employee ownership and employee participation in company decision making by providing education and outreach, training, grants, and technical support for local programs dedicated to the promotion of employee ownership and participation. The bill is co-sponsored by Sen. Leahy of Vermont, Sen. Brown of Ohio, Sen. Lincoln of Arkansas, and Sen. Menendez of New Jersey.

The second bill (S.2914), the U.S. Employee Ownership Bank Act, would provide loans and loan guarantees to employees to purchase a business through an ESOP or a worker-owned cooperative. The federal government currently provides a wide variety of federal loans, loan guarantees, and other technical assistance to American companies as a way to increase U.S. jobs through exports. Providing federal loans and loan guarantees for the expansion of employee ownership would increase and retain jobs in the U.S. and strengthen the U.S. economy. The bill is co-sponsored by Sen. Leahy of Vermont, Sen. Brown of Ohio, and Sen. Menendez of New Jersey.

$100 Off Registration for Great Game of Business Meeting

The Great Game of Business Meeting on open-book management will be held May 5-7. Readers of this update can get $100 off registration by registering online and entering the code "SPECIAL."

The Rise of a New, Employee Ownership-Friendly Conservatism in Britain Highlighted in Seminal 2009 Article

I don't normally spend much time in this column on more philosophical developments in employee ownership, but the recent convergence in the United Kingdom of all three parties around the idea of a dramatic increase in the use of this idea for privatizing social services is potentially a development of major importance. Part of its roots can be traced to a seminal 2009 article in Prospect magazine (February 28, 2009) by Philip Blond.

Blond says that "The intermediary structures of a civilised life have been eliminated, and with them the Burkean ideal of a civic, religious, political or social middle, as the state and the market accrue power at the expense of ordinary people...both 20th-century socialism and conservatism have converged on the market state," by which he means either monopoly capital or a monopoly state. That, in turn, he says, has created a society of atomized, disconnected people with withering ties to family, community, and other institutions that can regulate behavior, leaving only the state as the option.

Blond proposes several decentralizing measures for finance and ownership. For instance, he says there should be a "new class of local investment trusts, dedicated to investing in the cities and villages that they serve." He then argues that "the next step for conservatism is to reverse the old politics of class, by restoring capital to labour" proposing (as the parties now have) "far-reaching extensions to employee share ownership, workers' buyouts and the promotion of equity guilds and asset co-operatives. This would bypass the trade unions as institutions permanently wedded to welfare serfdom, and wed ownership to the earning of wages." The article can be found at this link. In the U.S., columnist David Brooks has strongly endorsed Blond's views in the New York Times.

Author biography and other columns in this series

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