Wright Service Corp. News

The Importance of ESOP Companies

Employee ownership is a proven model to build healthy companies and workers who are highly satisfied with their jobs. When employees can see a direct link between the work they do every day and the overall health of their company, it provides a powerful incentive for them to do well so the company does well, which then rewards the employee owner. And this model works. Just ask the 10.3 million employees covered by the approximately 10,000 ESOPs in the United States. Research released in June found that only 1.3 percent of employees with employee stock ownership were laid off in the past year, compared to 9.5 percent of employees without employee stock ownership. That adds up to a big savings of unemployment costs. One analyst found that ESOPs alone save the federal government about $8 billion in 2014. In 2015, these companies, on average, are contributing 11.8 percent annually to the ESOP. More than 40 percent of these companies contribute 10 percent annually to the ESOP and most also have additional retirement and savings plans to supplement the ESOP, providing employees piece of mind today and a piece of mind for the future.

So how do we spread the word to entrepreneurs, innovators and other leaders about a business model that rewards workers with benefits that encourage greater productivity and higher quality, promotes retirement security, and actually saves that government money? You know one answer to that question because you do it every time you relay the message that being an employee owner allows you to share in the success of your company. But we all know that there is more that could be done.

That’s why I support legislation that promotes and encourages businesses to take advantage of the employee ownership model. I’m an original co-sponsor of the bi-partisan Promotion and Expansion of Private Employee Ownership Act, which aims to eliminate barriers faced by businesses and their owners when establishing or expanding the employee ownership stake. The bill will create an office with the U.S. Department of Treasury to foster increased employee ownership. The office would conduct outreach and educational activities to inform business leaders about the benefits of employee ownership. The bill also provides protection for small businesses that wish to take advantage of the employee ownership model and would ensure that these firms could continue to qualify for small business administration programs. Finally, the legislation would allow a company converting to an employee-owned situation to keep its minority-owned, women-owned, Veteran-owned or other similar status from the SBA (Small Business Administration).

Separate from the bill, I’ve also worked with the department of labor to make sure that ESOP appraisers can continue to provide independent, third party objective appraisals of the value of the employee stocks in the ESOPs. That’s important because entrepreneurs who are using the employee-owned business model face the same challenges that other small firms face. They should not be shut out from being able to provide a valuable and valued savings and retirement plan simply because they chose to reward their employees with ownership in the business. We were successful with that rule, and that’s because ESOPs are a critical part of giving businesses the tools they need to access capital, retain workers and higher new ones – all things essential to keeping our economy moving in the right direction.

Thanks again for all you do to help both companies and employee owners succeed.

To watch the full video shown to ESOP Association members at the 2015 Midwest Conference, click here.

Senator Amy Klobuchar (D-MN), gave a welcome address via teleconference while she was in Washington, D.C., to attendees of the 2015 Midwest Regional ESOP Conference that took place in Minneapolis, Minnesota in September. Senator Klobuchar spoke about the importance of ESOP companies and the impact they have on the economy. The message below is an excerpt from her welcome address that was printed in “An Outside Perspective,” a section of the Wright Service Corp. biannual newsletter, The Wright Perspective.