New York State Comptroller Thomas P. DiNapoli released a report today that explains how employee ownership models, which give workers a stake in the companies that employ them, not only help stabilize companies’ bottom lines, but can increase employees’ income levels and improve their retirement security.
“Employee ownership can help improve company performance, increase employees’ morale and strengthen their financial and retirement security,” DiNapoli said. “Giving employees a stake in a company allows employers to convert or sell their business to the employees who helped build the company, and provide opportunities for workers and the communities they live in. State leaders have the opportunity to provide resources on the expansion of employee ownership programs and increase employers’ and employees’ understanding of how they can benefit all stakeholders.”
Employee ownership (EO) is a broad concept describing arrangements in which employees own a defined element of the company they work for. It does not necessarily mean that employees exercise control over the company’s operations. Currently only one in 10 Americans hold equity shares in the companies they work for, and only 12% of the U.S. workforce is employed in companies that are employee owned.
One of the most popular forms of employee ownership is Employee Stock Ownership Plans (ESOP) which combine employee ownership with a qualified retirement plan. New York ranks fourth nationally in the number of ESOPs, and these plans hold more assets than those in any other state. In 2020, companies headquartered in New York sponsored 313 ESOP plans with $287 billion in assets for 1.6 million employees, providing on average $176,000 in retirement savings for each employee, 34% more than ESOPs nationally.
Another employee ownership structure is the Worker Cooperative, which are businesses 100% owned and governed by their employees, and emphasize the goal of empowering employees through collective decision making and democratizing member control. Lastly, an Employee Ownership Trust is a profit-sharing plan that increases employee compensation by distributing company profits directly to employees every year.
DiNapoli said the state should encourage employee ownership more broadly by developing strategies to:
- Expand networks and partnerships of business owners, employees, labor unions, and economic developers to provide technical assistance to and educate potential employee-owners on the benefits and drawbacks of EO;
- Creatively leverage resources or identify new opportunities that can support EO as a way to create or retain jobs and strengthen communities; and
- Develop ways to educate the public on what EO is and which companies around the state and in their local communities are employee owned.
Track state and local government spending at Open Book New York. Under State Comptroller DiNapoli’s open data initiative, search millions of state and local government financial records, track state contracts, and find commonly requested data.