The Employee Ownership Update
August 1, 2016
New Poll Shows Bipartisan Support for Employee OwnershipA poll of 853 registered voters conducted June 27-28 by Public Policy Polling showed that 68% of those surveyed say that they "support the concept of companies being owned by their employees so that all workers share in their success." Thirteen percent oppose the idea, while 19% are unsure. That support differs by party preference, but a majority of respondents from all parties support employee ownership, as the table below indicates.
Table: Support for the concept of companies being owned by their employees
The poll also found that 58% of Americans would support legislation that makes it easier for employees to own a part of the business where they work, and 50% of Americans think the government should do more to encourage the growth of employee-owned companies. Generally, support is highest among Democrats and those identifying as liberal, but pluralities of most groups are supportive. Younger people are somewhat more supportive than older people.
Republican Platform Supports ESOPsOn July 18, the Republican Party adopted its 2016 platform, which includes this language: "Republicans believe that the employer-employee relationship of the future will be built upon employee empowerment and workplace flexibility. We therefore endorse employee stock ownership plans that enable workers to become capitalists, expand the realm of private property, and energize a free enterprise economy" (page 8).
That language is similar to the 2012 Republican platform, although the 2012 platform used the term "employee ownership" and supported all ESOPs without the limiting qualification in the 2016 platform: "Republicans believe that the employer-employee relationship of the future will be built upon employee empowerment and workplace flexibility, which is why Republicans support employee ownership. We believe employee stock ownership plans create capitalists and expand the ownership of private property and are therefore the essence of a high-performing free enterprise economy, which creates opportunity for those who work and honors those values that have made our nation so strong" (page 7).
The Democratic Party's 2016 platform does not mention employee ownership, but it does include a paragraph titled "Helping More Workers Share in Near-Record Corporate Profits" (page 5).
DOL's Amicus Briefs Focused on Employer Stock During the First Obama AdministrationIn an article in the BNA Pension & Benefits Reporter, Jacklyn Wille notes that the Department of Labor filed more amicus briefs about employee stock than on any other topic. Of the 111 amicus briefs filed by the DOL during the Obama administration, 20 (or 18%) were on employer stock, substantially more than the 13% on the next most common topic, equitable relief. Most of the amicus briefs on employer stock were in the first Obama administration, and most argued against the so-called Moench presumption of prudence, which was struck down by the Supreme Court in 2014.
US News Covers Cleveland's Evergreen CooperativesIn a July 21 opinion piece by David Brodwin, US News and World Report described the Evergreen Cooperatives—three worker-owned businesses employing 120 people—as "an innovative model of job creation with the potential to scale up and improve lives across America." That model is based on creating jobs through organizations that will be profitable and therefore self-sustaining and ensuring that those organizations are worker-owned. The model depends on active involvement by "anchor institutions," such as local hospitals and universities, which provided seed capital and contracts for the fledgling cooperatives.
After its 2008 launch attracted national attention, the Evergreen Cooperatives later struggled, but a new management team and an infusion of capital has led to greater success: two of the three businesses, a commercial laundry and a solar retrofitting business, are now profitable, and the third, a hydroponic farm, is expected to reach break-even this year.
Telling Stories: The ReceptionistRon Gilbert of ESOP Services tells this story:
I received a call from the CEO of a mid-size US Government contractor in the Washington, DC area. He explained that he had been referred by his accountant and he would like to meet to discuss a possible ESOP for his company. He brought his chief financial officer and began by explaining, "I explored a possible ESOP transaction about five years ago, but we never did anything. I had completely forgotten about the ESOP until a few months ago when he hired a new receptionist. She claims that she just left a company called SFA, Inc., with an ESOP account worth over $500,000. Do you think that is really true?"Do you have a story to tell? Send them to Tim Garbinsky (TGarbinsky@nceo.org).
"Yes" I explained, "I was actually on the board of directors of SFA, Inc., which was a 100% ESOP-owned S corporation until about a year ago, when it was acquired by Global. The ESOP was in place for 20 years, and the receptionist worked there the entire time. SFA actually had 14 employees who had ESOP accounts of over $1,000,000."
"I worked at SFA," stated the CFO, who was seated next to the owner. "I left 20 years ago."
If you are working for a successful ESOP company, stick around.