Is it enough to have millions of employee owners with tiny shares of publicly traded companies?
by Michael Keeling
The Democracy Collaborative’s campaign to increase employee ownership to 50 million employee owners by 2050 is an ambitious goal. If successful, 40-plus years of research suggests the campaign could have widespread impact: reversing the trend toward wealth inequality, improving our nation’s productivity, and creating more sustainable jobs.
So how do we get there? To determine the most effective strategy, we need to clarify how many U.S. employees are currently owners where they work and what types of firms they work at. That information should help us clarify the types of firms we want to target for employee ownership conversions.
The transformative change employee ownership advocates envision would not come about with employee owners having a tiny stake that fails to shift company culture.
Among employee ownership advocates, we often claim about 17 million employee owners. (For the most accessible figures on employee ownership, see the National Center for Employee Ownership, By the Numbers). That seems like good news: only about 33 million to go (roughly 1 million per year)! But how do these numbers breakdown? Let’s take a look:
- 14 million employee owners participate in Employee Stock Ownership Plans (ESOPs)
- 3 to 4 million employees participate in stock options, stock purchase or straight stock compensation plans
- 7,000 worker-owners are members of worker cooperatives
Clearly, the vast majority of broad-based ownership is through ESOP participation, so let’s break that down further. The most recent ESOP data collected by the Department of Labor gives us insight into where the 14 million ESOP participants work.
- 10.75 million employee owners, or 73 percent, work for publicly traded companies. Based on filings with the Securities Exchange Commission, on average, these employees in aggregate own 1 percent to 5 percent of company stock.
- 4 million employee owners, or 27 percent, work for privately held companies, most at companies where the ESOP holds over 50 percent of the companies’ stock for the employee owners.
Now we see that the vast majority of employee-owners, nearly 14 million out of 17 million (including those with stock options and stock purchase plans), own less than 5 percent of the shares in the firms where they work. This may provide a monetary benefit, but does it truly accomplish authentic employee empowerment?
Where we have the opportunity to grow meaningful employee ownership is among the two-thirds of U.S. workers employed by privately held companies.
As advocates, we support employee ownership to ensure employees have a voice, that they are treated with respect. For this transformation from standard business practice, firms need to develop an ownership culture.
If, however, we were to achieve 50 million employee-owners, where the vast majority—70 percent or more work in large publicly traded companies, with employees owning 1 percent to 5 percent of shares of their employer—would this outcome yield the transformation that we desire? I don’t think so.
The transformative change employee ownership advocates envision would not come about with employee owners having a tiny stake that fails to shift company culture. We can debate the threshold where employee ownership becomes meaningful—20 percent? 30 percent? 50 percent?—but we shouldn’t let this debate distract from where we should direct our energies.
Publicly traded companies make up only 1 percent of U.S. firms, and employ about one-third of the U.S. workforce. Where we have the opportunity to grow meaningful employee ownership is among the two-thirds of U.S. workers employed by privately held companies.
These numbers should give employee ownership advocates important clarity: our nation has vast room to increase the number of workers owning significant shares of stock in privately held companies. The number now, about 4 million, is a very small percentage of the 90 million workers that work for 99 percent of U.S. businesses.
We don’t need to abandon our commitment to increasing employee ownership in publicly traded companies to a level that can transform the cultures of those companies. In the 1980s, employee share ownership grew in publicly traded companies but then that trend reversed. The reason many cite is a certain tax incentive that existed for only five years or so, but the impact can be debated. That is an example of the kind of discussion our community should have.
At the same time, let’s build on the momentum to grow employee ownership through the transition of privately held companies to employee ownership. Many of our nation’s thought leaders—including some of those seeking elective office—have recognized the benefits of employee ownership as a succession strategy for the silver tsunami of retiring business owners. Can half of workers in privately held firms—45 million—become employee owners by 2050? Maybe so.
We must continue to track progress toward our goal of transforming the economy through broad-based ownership. Only by objectively reviewing our progress and analyzing the data, can we promote strategies and tactics that will achieve 50 million meaningful employee owners by 2050.
Michael Keeling (michael@jmk-way.com) served as president of The ESOP Association, from 1991 to 2019; prior to that, from 1984 to 1991, he served as the organization’s general counsel. The ESOP Association is the nation’s largest advocacy organization for ESOP companies.
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