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The Employee Ownership Update

Loren Rodgers

September 4, 2018

(Loren Rodgers)

A Flurry of Media Coverage for the Main Street Employee Ownership Act

The Main Street Employee Ownership Act became law as part of the John S. McCain National Defense Authorization Act, signed by President Trump on August 13. The bill has been covered by a number of news organizations, including the following:

The Washington Post: The August 30 article by Jena McGregor quotes Joseph Blasi of the Rutgers Institute for the Study of Employee Ownership and Profit Sharing, who called the provision "the most significant policy change on employee share ownership in over two decades." About the bipartisan nature of the support for the policy change, the NCEO's Corey Rosen observed, "We're grasping for ways to deal with economic inequality and pretty much the two sides can't agree on anything—except this."

CNN Money journalist Lynda DePillis reported on the Main Street Employee Ownership Act, noting that employee ownership "has been gaining traction as a way to shrink the gap between people who make money on investments and those who work for a living." She notes that the bill encourages the creation of ESOPs and worker cooperatives, and quotes representatives of regional employee ownership organizations in Pennsylvania and the Rocky Mountains.

The Philadelphia Inquirer ran an op-ed by Joseph Blasi and Douglas Kruse on August 15 in which they announced, "The federal government just made it a lot easier to form an employee-owned business." Blasi and Kruse expect the legislation could "double or even triple the growth of employee-owned companies."

The television station WENY of upstate New York reported on August 30 that SBA Administrator Linda McMahon supports the legislation: "I think any time that employees have the opportunity to participate in those programs, they feel like they have some skin in the game."

The new law updates the process by which SBA can support loans for employee ownership transitions and encourages outreach about employee ownership. The specific provisions are in our article on the subject.

NCEO Research Spurs Chicago Effort to Promote Employee Ownership

In an August 31 Forbes article, A New Push For Employee Ownership in Chicago, Anne Field reports that the Cook County Commission on Social Innovation is working on a variety of initiatives to support more employee ownership as a result of research by the NCEO.
[The research] found, for example, that household wealth of the median employee-owner was 92% higher than the household wealth for the median non-employee-owner. And that was true for everyone from single women to workers of color. "It made us start thinking about the importance of looking at wealth, not income," [the vice chair of the commission, Mark Lane] says.

With that, Lane began looking into backing or otherwise getting involved in a series of initiatives to encourage both employee ownership and worker-owned cooperatives. "We thought that would help people to be a whole lot better off than if we only thought about jobs," he says.
That NCEO research is available at the NCEO's website.

Policy Whitepaper on Employee Ownership

A new policy paper, Expanding Employee Ownership: Toward a Stronger American Economy, builds the case for employee ownership and proposes three rarely explored policy options for creating more of it.

Divestitures: Noting that "In 2016, public companies in the United States divested almost $100 billion worth of subsidiary divisions," the authors argue that a portion of those sales could result in employee-owned companies if legislation created appropriate tax treatment or if Congress established Employee Ownership Investment Corporations to facilitate such transactions.

Private equity sales: Facilitating the sale of the portfolio companies of private equity firms to employees would create another new channel for new employee ownership.

Employee ownership in public companies could be facilitated by improving the tax incentives for broad-based equity compensation plans.

Scotland Announces New Support for Employee Ownership

The First Minister of Scotland, Nicola Sturgeon, announced on August 26 the creation of Scotland for EO, a government-supported organization that will support the continued development of employee ownership in Scotland, saying, "All the evidence tells us that employee ownership delivers benefits to business performance, the people who work in them, and the places in which they are located."

Author biography and other columns in this series

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