The Employee Ownership Update
May 15, 2019
New Research from Rutgers: In-Depth Interviews with Employee-OwnersA Rutgers University-led team of researchers conducted a qualitative study of the asset-building impacts of employee ownership. The team conducted 195 interviews with employee-owners at 21 ESOP companies from June 2015 through August 2018. Among this group, 141 shared their income information, and 92 of them are low-to-moderate-income.
The report, Building the Assets of Low and Moderate Income Workers and their Families: The Role of Employee Ownership, was funded by the W.K. Kellogg Foundation and provides preliminary findings related to the core research question, "Can ESOPs contribute to building the assets of low- and moderate-income employees, and if so, how?"
The rich interview data provides a wealth of examples in employees' own words of the impact of ESOPs in their daily lives, while the report details the mechanisms by which ESOPs help build financial assets. This work is a valuable and enriching addition to quantitative studies such as ours (see www.OwnershipEconomy.org and S Corporation ESOPs and Retirement Security) in giving voice to the often voiceless and broadening the conversation about the benefits of employee ownership.
Here are some of the voices from the report:
- "It [the ESOP] changed my life. And, it's a really big help because sometimes we, the employees, can't save for retirement or save money in general because they can't afford to." ("Marta," in her 50s, divorced with adult children, working as a heavy equipment operator.)
- "When I started here I didn't have much at all. I guess you can call it, I was a poor man by today's standards. I think I'm pretty well off right now, considering. I've come a long way. And ESOP has done good by me." ("Joe," an African-American man with a high school diploma and three young children. He has been at the company for 11 years, earns $25 per hour, and has an ESOP account valued at $180,000 and $40,000 in his 401(k).)
- "If there's another quality job that opens up later on, which they're thinking that there should be because we're growing so fast here, then I can go for it and have a good chance of getting it. . . They arranged for the class for us. They're paying for it." ("Loretta," a 20-year employee.)
- "Things changed when the company became employee-owned. There is more of a sense of community....I am much more secure than my family was when I was growing up, and I have tried to communicate to my kids the importance of finding security." ("Claire," a divorced hospital aide with children in her early 40s.)
DOL Secretary Acosta Expresses Support for ESOPs, Notes Decline in EnforcementOn May 1, in response to a question noting the benefit of ESOPs for retirement security from Rep. Brett Guthrie (R-KY) at a House oversight hearing on the DOL, Secretary of Labor Alexander Acosta said, "I strongly support ESOPs I think ESOPs are of benefit to employees." Acosta went on to say that "The industry is conforming much more closely to the law and so, I think enforcement actions peaked sometime around 2013 and have been declining since as industry becomes integrated with...what pension laws require."
NCEO data on DOL enforcement actions confirm that there has in fact been a sharp decline in enforcement activity, although others have pointed to a decline in staff budgets as the cause. Acosta also said he agreed with Rep. Guthrie that more guidance from the DOL on compliance would be useful.
Maine Legislator Introduces Pro-Employee Ownership BillMaine State Senator Nate Libby (D-Lewiston) introduced L.D. 1520, which would provide state-level tax incentives for businesses that establish employee ownership, defined to include ESOPs and worker cooperatives, as well as consumer cooperatives and affording housing cooperatives. The bill would shelter from Maine's income tax up to $750,000 of gains on a qualifying sale. The bill would also assign Maine's Department of Economic and Community Development responsibility for support and outreach about employee ownership and would exempt interest income earned from financing the sale from state tax for sellers and Maine-based lenders.
One person who spoke in favor of the bill is Michael Newsom, the owner of The W.J. Wheeler Insurance Agency. Worried that if he sells to an outside buyer, they would "eliminate our pro-family workplace culture and maximize the profits to be had," he instead would like to sell to employees: "They'll preserve our culture as a business, they'll be its best stewards, since its success will mean their success, and they'll make investments in themselves as owners and in the community as a whole." Sen. Libby's bill would, he said, help close the gap and make a sale to employees possible.
Maine citizens with an interest in employee ownership could contact their elected officials about this bill.
ESOP-Owned Company MEC Goes PublicOn May 9, shares of the metal fabrication company Mayville Engineering Company (MEC) began trading publicly on the New York Stock Exchange as company CEO Bob Camphuis rang the market's opening bell. The MEC ESOP had owned 100% of company shares from 1985 up until the initial public offering, and ESOP participants will retain their shares.
Camphuis said ""Employees continue to have a stake in the company... The only difference is, now there's a public market [for the price] versus an annual valuation process," in an interview with Yahoo! Finance.