Study Finds Benefits of ESOPs for Employees and Employers

A survey of 1,500 working Americans conducted by the Rutgers Institute for the Study of Employee Ownership and Profit Sharing and funded by the Employee Ownership Foundation (EOF) found 72% want to work for a company owned by employees.

The study pointed to the benefits of employee stock ownership plans (ESOPs) for employees. Workers with employee ownership experienced layoffs six times less often than those without employee ownership last year. In addition, employee owners had more bonuses over 9% of their pay.

Previous research found workers in employee-owned companies also have more retirement savings, more training and involvement in the business and more profit and gain sharing.

Employee ownership also helps businesses. The survey found that when choosing between two similar jobs, 61% of respondents said they would take the job that offered them employee ownership. In addition, employee turnover can be three times lower in employee-owned companies.

Thirty-eight percent of respondents said they are more likely to buy from businesses that are employee-owned than from those that are not.

Preference for employee-owned companies transcend ideological and partisan divides, with 74% of Democrats, 72% of Republicans, and 67% of Independents voicing a preference for employee ownership. The ESOP Foundation says this finding aligns with the bipartisan support for the Main Street Employee Ownership Act, signed into law last August.

Among other things, the legislation focuses on increasing the role of the Small Business Administration (SBA) in facilitating ESOPs by allowing the SBA to make loans to companies that they can then re-loan to ESOPs. It also allows ESOP loans to be made under the SBA’s preferred lender program and updates the definition of ESOPs so that they do not have to have full voting rights to qualify.