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The Employee Ownership Update

Loren Rodgers

December 4, 2018

(Loren Rodgers)

ESCA Releases NCEO Research on the Economic Impact of S Corporation ESOPs

A new NCEO research report by Nancy Wiefek and Nathan Nicholson, S Corporation ESOPs and Retirement Security, documents the impact of employee ownership on employees, based on data for 61,000 plan participants at 39 ESOP companies. The survey was conducted online between January and March 2018 among members of Employee-Owned S Corporations of America (ESCA). Among respondent companies, the median number of ESOP participants is 600. Most of the companies in the survey are 100% owned by their employees through the ESOP.

The analysis compares various groups of employees in these ESOP companies to their peers in the workforce as a whole. The table below summarizes the results for different age categories:
Surveyed S corporation ESOP participants All workers in the U.S.
Employee ageNumber of employeesAverage ESOP account balanceAverage non-ESOP retirement balanceAverage total retirement balanceAverage retirement savings
Under 2513,748$3,424$2,213$5,637$2,740
65 or older1,543$233,602$92,039$325,641$108,363
Writing about the report in the Washington Examiner, Phillip Swagel at the University of Maryland's School of Public Policy observed:
S-ESOP employees surveyed have more than twice the national average in their retirement accounts — $170,326 versus $80,339. Those savings don't just make their way to highly compensated workers; they are spread across the ranks. S-ESOP employees making less than $25,000 a year have on average more than twice the retirement savings of similar workers nationally.
The full report includes a number of other findings, such as comparing low-, moderate-, and high-income workers between the surveyed S corporation ESOPs and the U.S. workforce. Beyond retirement wealth, the report also examines other measures of employment. For example, ESOPs are clearly associated with reduced turnover. Respondent companies report quit and separation rates that are more than two times lower than national rates.

50 Largest Employee-Owned Firms in the United Kingdom

The UK's Employee Ownership Association released its list of the 50 largest employee-owned UK companies. The EOA also reports that these 50 companies together had 19.8 billion ($2.5 billion) in annual revenue and employed 171,000 people. Their median change in profit from the prior year was an increase of 9.2%. The largest firm on the list is John Lewis & Partners (retail), followed by the Mott Macdonald Group (engineering and management consulting) and Arup Group (design and engineering consultants). Twenty-one companies on the list have more than 1,000 employees, and the smallest company on the list (Curtins Group Ltd) has 389.

Schwab Survey Shows Equity a Major Part of Employee Wealth in Companies with Stock Plans

The new Equity Compensation Plan Participant Survey (PDF) from Charles Schwab shows that 30% of the net wealth of the 1,000 survey participants came from equity in their company stock plans (mostly stock options, restricted stock, and ESPPs). For millennials, the percentage was 41.5%, probably because younger workers have had less time to build other assets. Thirty-two percent of respondents owned stock in their company in their 401(k) plans as well, and another 41% own stock in their company outside retirement plans. Thirty-nine percent of respondents said that equity compensation was the main reason (18%) or one of the main reasons (21%) they took the job, but 60% of millennials said equity compensation was a key driver.

The participants were in companies served by Schwab's stock plan services, many of whom are in the technology sector. The report does not indicate the demographics of participants other than age, so it is not possible to generalize these findings to the broader population.

Durham Explores Employee Ownership

Writing in the Nonprofit Quarterly, Steve Dubb reports on effects by Durham, North Carolina, to preserve its businesses currently owned by African Americans. The director of Durham's office of economic and workforce development, Andre Pettigrew, says "After the recession, a lot of individual wealth was wiped out, especially in the African American community, where most of the wealth was in our homes... They say the first path to increasing wealth is home ownership—and right after that is being a business owner."

Durham is one of four cities participating in the Shared Equity in Economic Development (SEED) Fellowship, developed by the National League of Cities and the Democracy at Work Institute (DAWI).

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