Top 10 Reasons to Consider Employee Ownership
We’re not David Letterman, but this subject is really not a joke anyway. The following is an abbreviated version of a very long and complex discussion of all the ways in which employee ownership adds value to modern businesses and to the lives of those who participate in it.
Here are our top ten reasons every business should consider adopting employee ownership:
1. It improves the bottom line.
Study after study confirms that companies that put ownership interests in employee hands improve their performance as a result — and outperform companies that are similar but have no employee ownership.
2. It makes managing the business easier and more fun.
When the employees share a fundamental concern for the performance and success of the venture, it’s easier to get them to do what needs doing. It’s gratifying to be able to share celebrations of successes — and sleepless nights during the rough patches.
3. It supplies the glue with which to build a business-oriented culture.
When everyone in the business shares a strong interest in the financial success of the venture, people pay attention to business priorities and cooperate productively to get things done. People can rely on each other.
4. It makes work more meaningful.
Rather than toiling to build wealth for someone else, people who own a piece of their company can find purpose as part of a team that is competing to succeed in their own right in a meaningful challenge.
5. It serves as a currency for attracting talent.
A young firm that is short on cash can offer equity interests to attract and hire individuals with the talent and experience the venture needs.
6. It facilitates ownership succession in closely held businesses.
Too often, business owners wishing to retire face the prospect of closing the doors and terminating the venture, or selling it to a large buyer who will dismember the business and merge it out of existence. A sale of the firm to its employees using an employee stock ownership plan can keep the firm independent and thriving.
7. It enables business owners to access the value of their equity without paying capital gains taxes.
The federal tax code allows an owner who sells stock to an ESOP to roll the proceeds into other investments and defer taxes that would normally be due.
8. It affords access to a unique form of highly subsidized finance.
Federal and state tax laws provide major subsidies to support the acquisition of company stock through an ESOP.
9. It creates wealth in places it would not otherwise exist.
By more broadly distributing productive capital, employee ownership allows regular employees an opportunity to develop asset value without having to use savings or risk their other assets to get it.
10. From a national policy perspective, it fosters a more equitable and effective brand of capitalism.
It reduces the stark gap between wealthy, capital-owning “haves” and those who depend solely on a paycheck. As Louis Kelso once said, “The only thing wrong with capitalism is that it does not create enough capitalists.” Creating a community of stakeholders means creating a safer, more secure future for all involved.