Recovery AND Broader Ownership

Recovery AND Broader Ownership: Build Back Better

Recovery AND Broader Ownership: Take Action

Economic recovery AND broader ownership can be ours. We need a nation of employees who more fully share and participate in a healthy recovery through ownership. Support legislation introduced by Republicans and Democrats:

  • S 4236, [Senator Ron Johnson (R-WI) and Senator Tammy Baldwin (D-WI)] inject working capital into American companies through stock grants to employees.
  • HR 6851 by Rep Ocasio-Cortez (D-NY-14) requires major corporations getting COVID-19 help to provide annual grants of equity to employees.

Recovery AND Broader Ownership: Wealth Gap

Over 20% of Americans have no net wealth. 40% can’t cover a financial emergency. The median savings for families with wage earners between 50 and 55 years old is only $8,000. For those between 56 and 61, it’s $17,000, reports the Economic Policy Institute.

The net worth of a typical white family is nearly ten times greater than that of a Black family. About 60% of white families have retirement accounts vs 30% of Black families. Median ownership of stock by white families is nearly eight times as high as Black families. Housing equity is about 2.5 times greater among white than Black families. While the differences are less stark for Hispanic families, those disparities are also very large. (source)

Recovery AND Broader Ownership: S 4236

Major corporations that receive COVID-19 aid would make annual equity grants to employees. That would write off their federal aid.

Major corporations are those with a market value of $75 million.

Grants must be in whole shares. They can’t be conditioned on the purchase of company stock or employee performance evaluations. Voting and dividend rights must carry the rights of the highest class of stock.

Our economy, devastated by COVID-19, will remain fragile as long as 1% own 40% of corporate assets and the top 10% own 84%. The Temporary Federal ESOP Grant Program Act (S 4236) would help rebuild American’s economy on a stronger foundation of broader ownership. Please take action by writing your Senators.

S 4236: Grants to Support Employee Ownership

S 4236 would provide cash grants from the federal government to support the purchase of up to $20,000 worth of shares per ESOP participant and up to $50,000 to cover business administrative expenses. For example, a company with 100 employees could receive a grant of $2,050,000. The bill would allocate unused money from the business stimulus bill and would end on September 30, 2022.

S 4236: Stimulus Impact

Under the bill, a company would use the grant to make a contribution to an ESOP trust. The trust would use the funds to purchase newly issued or treasury shares, not pre-existing shares. Proceeds must be for “replacement and maintenance of fixed assets, including manufacturing equipment and tools, computers, land, buildings, facilities, health and safety equipment, and other similar investments.” The dilution of non-ESOP owners’ shares would be offset by company investments that increase overall value.

S 4236: Suggested Amendments

As currently worded, writes Loren Rogers of the National Center for Employee Ownership (NCEO), the bill could be read to allow the company or ESOP to buy shares from existing owners, instead of newly issued shares, as intended. Rogers suggests including a provision stating, “grant funds must be used toward the purchase of employer securities issued by the company for this purpose and not currently held by any other owner.”

Additionally, the bill requires valuation “by an independent valuation expert utilizing generally accepted valuation approaches” or “by the trustee of the employee stock ownership trust if such valuation is certified by such an independent valuation expert.” NCEO believes these provisions are unnecessary because existing regulations require purchases of new stock by an ESOP be “risk-adjusted” to reflect the health of the company. Referencing existing valuation standards would reduce potential confusion.

NCEO also suggests better defining company investments to maximize the stimulative effect and to ensure service companies, which have less potential capital investment per employee, can fully participate. The bill currently requires grant recipients to increase the percentage shares owned by an ESOP. That would be impossible to meet at companies fully owned through an ESOP. So, amend to include worker cooperatives and companies that are already 100% ESOP-owned. (See The Temporary Federal ESOP Grant Program Act: An Overview. I also lifted the above graphic from NCEO.)

Recovery AND Broader Ownership: HR 6851

This bill requires a major corporation that receives federal aid related to COVID-19 (i.e., coronavirus disease 2019) to make an annual grant of equity to its employees until all such federal aid is repaid.

A major corporation is a corporation has an aggregate market value of $75 million.

Similar to S 4236, grants must be in whole shares. They can’t be conditioned on the purchase of company stock or employee performance evaluations. Voting and dividend rights must carry the rights of the highest class of stock.

Recovery AND Broader Ownership: Benefits

NCEO has a vast libary of research (sample) demonstrating the beneficial impacts of employee ownership.  NCEO found ESOP participants have 2.2 times as much in retirement plans and 20% more financial assets overall compared to non-ESOP company employees.

A 2017 report conducted by the NCEO with support from the W.K. Kellogg Foundation compared workers early in their careers, ages 28 to 34, with employee ownership to their peers without. Being in an ESOP was associated with 92% higher median household net wealth, 33% higher median income from wages, and 53% longer median job tenure.

Other studies found firms with ESOPs significantly outperform firms not offering ESOPs. Further, on average, as ESOP participation increases within organizations, so too does firm profitability. A 2019 survey found that 72% of Americans prefer to work for an employee-owned company than one owned by conventional shareholders or the government. Employee ownership can also dramatically lower turnover rates.

A study at Rutgers University in 2019 found that “employee stock ownership plans (ESOPs) increase family assets, shrinking—though not eliminating—gender and racial wealth gaps.” Many ESOP companies offere employees an increased voice in how their work was organized, providing a level of personal agency lacking in most jobs.

Because ESOP companies often have some form of open book management, employees not only learn about corporate financial issues, but also personal financial planning. (Employee ownership, the wealth gap, and the current crisis)

A more recent survey found being employee-owned has a positive effect on handling he COVID-19 pandemic. Many said their ESOP has created a sense of common purpose and cohesion, a sense of being “all in this together,” that is helping the company adapt. “Employee-owners may have more trust in management than they would at another company that did not share ownership, allowing the company to be more nimble and creative in changing course. (How Having an ESOP Is Helping Companies Weather the Pandemic)

Recovery AND Broader Ownership: Act Now

S 4236: Ask Your Senators to Support

Go to find your Senators, click on their links and ask them to spport S 4236. Here’s what I wrote to mine.

Please support S 4236 [Johnson (R-WI) and Baldwin (D-WI)]. It would authorize grants of up to $20,000 per ESOP employee and up to $50,000 for administrative costs. Our economy, devastated by COVID-19, will remain fragile as long as 1% own 40% of corporate assets and the top 10% own 84%. A nation of employee shareholders will create a healthy recovery on a solid foundation. The Temporary Federal ESOP Grant Program Act (S 4236) would help American’s economy build back better.

HR 6851: Ask Your Congressional Rep to Support

Go to find your Congressional Representative, click on their link and ask them to spport HR 6851. Here’s what I wrote to mine.

Please support HR 6851 by Rep Ocasio-Cortez (D-NY-14). It requires major corporations getting COVID-19 to help to pay America back by providing annual grants of equity to employees. As long as 1% own 40% of corporate assets and the top 10% own 84%, our economy will remain fragile. A nation of employee shareholders will create a healthy recovery on a solid foundation. HR 6851 would help rebuild American’s economy on a stronger foundation of broader ownership.

Employee Ownership: History of Bipartisan Support

More on the wealth inequality. See also $1,000 ‘Baby Bond’ Proposed in N.J. in Bid to Narrow the Wealth Gap. I generally like the idea but would allow investment in passive index funds, which would result in a much bigger payout.

   

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