Employee-Owned: Part of the Solution | Commentary

Posted February 12, 2014 at 3:00am

Now more than ever, employee-ownership can help address the serious and growing inequities for American workers through secure retirement accounts and opportunity for upward mobility.

The indicators are there: a Harvard study saying it’s no easier to climb the income ladder now than it was 20 years ago. The president reporting to the country that half of our workers don’t have retirement accounts and most new middle-class retirees will outlive their savings. The lack of retirement security for workers is a problem. Something needs to be done.

Employee-ownership can be part of the solution. There are thousands of privately held “Subchapter S” corporations in the U.S. that are owned mostly, often entirely, by their workers through broad based employee stock ownership plans (S ESOPs). Congress created these structures to eliminate the traditional lines between management and owners, giving workers “skin in the game.”

Opportunity is created for workers in the S ESOP structure because companies invest their capital in people — making employees the owners. Everyone rows in the same direction and has a stake in the company’s success. Unlike half of American workers, employee-owners have a secure retirement account with balances on average three- to five-times higher than the average U.S. 401(k) and a chance for upward mobility.

These S ESOP companies are also growing the economy and creating jobs. Last year, a study by economist Alex Brill found that S ESOPs were more resilient in the recent down economy, growing their jobs when employment as a whole was flat. And total direct and indirect output from these companies is nearly 2 percent of gross domestic product.

Congress should support a bill sponsored by Sens. Benjamin L. Cardin and Pat Roberts, with 16 co-sponsors, that would make the structure available to more companies. This model grows the economy, creates jobs and perhaps most importantly, gives workers a chance to move up the ladder through retirement savings and shared opportunity to succeed.

Stephen Smith is vice president-general counsel and secretary at employee-owned Amsted Industries and recently elected incoming chairman of the Employee-Owned S Corporations of America.