Rutgers study touts benefits of ESOPs

The average worker at companies that offer an Employee Stock Ownership Plan has accumulated $134,000 from his or her stake, a new Rutgers study found.

Researchers Joseph Blasi and Douglas Kruse of the Institute for the Study of Employee Ownership and Profit Sharing at the Rutgers School of Management and Labor Relations shared the study, which has yet to be published, with Sen. Kirsten Gillibrand, D-N.Y., during the drafting of the Main Street Employee Ownership Act.

The bill, co-sponsored by several senators including New Jersey Democrat Cory Booker, would make it easier for retiring business owners to sell their business to their workers via an ESOP. The bill passed in the House of Representatives on May 1.

“The Main Street Employee Ownership Act will significantly expand the number of middle class citizens who have a shot at a meaningful financial ownership stake in the company where they work through an ESOP or a worker cooperative,” Blasi said in a statement. “It will improve the ability of the Small Business Administration to be a full partner in developing employee share ownership in the economy through lending and technical assistance to facilitate the sale to the employees.

Blasi and Kruse analyzed data on 6,000 companies that sold ownership to employees via ESOPs from 1974 through 2014. The companies had a total value of $7 billion and employed approximately 2 million people. While the average worker in those companies had accrued $134,000 in wealth from the ESOP, those with 20 or more years of experience accrued significantly more.

“One of our most remarkable findings is that employee ownership companies had only half the layoffs of otherwise similar companies in the last two recessions,” Kruse said in a statement. “This means that employee ownership may help to stabilize communities and the larger economy by maintaining employment and consumer purchasing power.”

Half the nation’s small businesses are expected to change hands in the next 10 years due to a wave of retiring baby boomers, according to the Institute for the Study of Employee Ownership and Profit Sharing at the Rutgers School of Management and Labor Relations.

Original article published: http://www.njbiz.com/article/20180517/NJBIZ01/180519831/rutgers-study-touts-benefits-of-esops