Employee Ownership as an Economic Competitiveness Tool

By David Gonzalez, Jr. | Director, Economic Initiatives & Advocacy

With estimates indicating that, across the United States, over the next eight years, 4 million companies will undergo some form of alteration to their operations, be it restructured or sold because of retiring ownership or ceasing existence altogether, due to a lack of undefined transition plans. Employee ownership plans can be a powerful tool for improving business retention. The most common form of employee ownership is an Employee Stock Ownership Plan (ESOP), where an owner can sell up to 100% of their business to their employees, and in turn, employees can receive stock, via a trust fund, in the business that may be cashed out when they leave or retire from the business.

Broader Data about ESOPS

• Across 320 businesses, there are 529,000 ESOP participants in Pennsylvania.

- York County has one of the state’s highest clusters of ESOPs at 21.

• The collective value of ESOPs across the state is $68.5 billion.

• Transaction costs for businesses to become an ESOP range from $80,000$500,000, largely dependent on the size and complexity of operations.

• Typical ESOP loan lifespans are 10 years, where the business finalizes its transition.

What are the benefits of an ESOP?

• ESOPs offer 33% higher wages than other business types.

• ESOPs average 12% higher productivity than other forms of business models.

• Owners receive fair market value for their stake in a company, and they can either manage a portion of ownership or sell the business altogether.

Interested in learning more about employee ownership?

PaCEO has positioned itself to promote the values and benefits that employee ownership can bring. The Baker Project, an initiative operated by the nonprofit, is a resource to aid businesses in understanding the process of becoming employee-owned and determining if this is the right path for them.

The Pennsylvania Center for Employee Ownership (PaCEO) is a statewide nonprofit working to educate businesses, advisers, and the public at large on the benefits and solutions that employee ownership offers.

“ESOPs continue to prove to be an economic competitiveness tool, as they experience fewer layoffs when compared to other business structures,” shares Kevin McPhillips, Executive Director of PaCEO. “They drive more productivity; reduce income inequality; and support business retention.”

Learn more at ownershippennsylvania.org and bakerproject.org