Workers Should be Owners!
Philip Kotler
Most companies exist to make the owners, investors and upper-level managers wealthy. Most of the work is carried on by hired workers who receive a weekly payment called a wage. The wage is often not sufficient to cover the worker’s weekly living costs. To buy more than their wage permits, workers must borrow money. Their credit card helps workers accumulate enough to meet their actual living costs. Of course, this results in the average worker carrying a growing debt.
Are There Ways to Improve Workers’ Incomes?
Some workers take on more than one job to increase their overall income. This comes at a growing cost for their health and welfare.
Other workers try to form a union that will help improve their wages and working conditions. Yet most labor organizing efforts fail.
Some workers favor piece work where they are paid by exceeding quotas. Those who work hardest earn more, again at the cost to their health and welfare.
Some workers are lucky enough to work in a company that gives bonuses to workers when profits are high. These workers get a wage plus a bonus. However, the bonus is not reliable when companies’ sales fall short of their target.
Or the workers might work in a company that encourages or requires workers to acquire some stock in the company. These workers are now partial owners of the company and may show gratitude by working harder.
ESOPs Help Provide Worker Ownership
Worker owners is not a new idea. 250 years ago, some worker cooperatives were formed. And 40 years ago, Ronald Reagan advocated employee stock ownerships plans (ESOPs).
An ESOP (Employee Stock Ownership Plan) is a type of qualified retirement plan that provides employees with an ownership interest in their employer’s company through shares of company stock. ESOPs are established as a trust fund and are primarily used as a business succession strategy for owners of private companies.
An ESOP provides a retirement benefit to employees without requiring them to use their own money to purchase shares. The company sets up an ESOP and contributes cash, contributes shares directly, or the trust borrows money to buy a large block of shares.
Shares are allocated to individual employee accounts, typically based on factors like compensation and years of service. Employees gain an increasing right to the value of these shares through a process called vesting, becoming 100% vested within a few years (usually 3 to 6 years).
When employees leave the company, retire, get disabled, or die, they receive the value of their vested shares, usually as a cash payout or in installments. The company is required to buy the shares back at their fair market value, which is determined by an annual independent valuation.
Benefits of ESOPs
Both workers and owners benefit from an ESOP.
Employees in ESOPs do well. A 1997 Washington State study found that ESOP participants made 5% to 12% more in wages and had almost three times the retirement assets as did workers in comparable non-ESOP companies.
Studies suggest increased job stability, higher wages, and greater productivity due to the sense of ownership.
The employees do not contribute their own funds to the plan.
Original owners also benefit. They have a ready market for the owners’ shares, providing a smooth ownership transition. Also the company’s contributions are tax-deductible. And the company is likely to succeed because the employee interests are aligned with the company’s performance, leading to lower turnover and increased productivity.
Some Companies Want their Workers to be Company Owners
Capitalism doesn’t really work for the working class. The pay is too small.
The billionaire Mark Cuban publicly calls companies to share their wealth with workers. He asks: “Why are we not giving incentives to companies to require them to give shares in their companies to all employees?”
Fortunately, many company owners have gifted their business to their employees. Their intent is to preserve the company’s legacy and benefit the workers. Consider the following examples.
Bob’s Red Mill
On his 81st birthday in 2010, founder Bob Moore surprised all of his employees by transferring ownership of Bob’s Red Mill to them through an Employee Stock Ownership Plan (ESOP). The company, a well-known producer of natural whole grain foods, became 100 percent employee-owned in 2020. Moore cited his long-time employees’ dedication as the reason for his decision, stating, “It was just the right thing to do”. This move secured his legacy and the company’s mission while building generational wealth for the employees.
Fibrebond Corp.
Fibrebond Corp. is a Louisiana manufacturing company with 540 full-time employees. Graham Walker, the 46-year-old CEO, decided to sell Fibrebond Corp to Eaton for $1.7 billion. He carved out roughly $240 million from the sales to be distributed to the Fibrebond workers at an average of $443,000 per worker. This bonus began rolling out in mid-2025 and would go to the workers on condition that they would stay on the job for five more years. The workers’ responses ranged from disbelief to tears. Various employees managed to clear their credit-card balances, pay college tuition, or boost their retirement savings. The payout was somewhat reduced by taxes but fewer of the workers would walk away from hundreds of thousands of dollars.
Ward Lumber
When the owner, Jay Ward, realized the family business would not pass to the next generation, he worked with his employees to convert the 130-year-old New York business into a worker cooperative. This transition was facilitated through financing and support from cooperative development organizations to ensure the business and local jobs were preserved.
South Mountain Company
This design and build company on Martha’s Vineyard converted to a worker cooperative in 1987 to distribute both ownership and control to committed employees, a decision driven by the founder’s desire for a structure that aligned with the company culture.
Publix Super Markets
The founder, George Jenkins, envisioned that associates would own the company, leading to the establishment of one of the largest employee-owned companies in the United States through an ESOP plan that started in 1974.
The Employee Ownership 100
A list of the 100 largest U.S. companies that are employee-owned through an employee stock ownership plan (ESOP) is available from National Center for Employee Ownership (NCEO).
Conclusion
Research on the impact of employee ownership finds that being in an ESOP is associated with higher household net wealth, higher net income from wages, higher retirement savings, and longer job tenure. Much depends on the quality of financial training given to the new owner workers.
A 2000 Rutgers study found that ESOP companies grow 2.3% to 2.4% faster after setting up their ESOP than would have been expected without it. Companies that combine employee ownership with employee workplace participation programs show even more substantial gains in performance.
Researchers estimated that 11 million employees participate in equity compensation plans such as restricted stock, stock options, and employee stock purchase plans (ESPPs). In addition, approximately 10,000 are employed in worker cooperatives, while others are beneficiaries of employee ownership trusts (EOTs). Adding the 14.9 million ESOP participants to all these employees, approximately 18% of US employees have an ownership stake in their employer.
ESOPs are used across a broad representation of industries, from architects to supermarkets to manufacturers. The most popular sector groups for private companies are professional, scientific, and technical services; manufacturing; and construction. For public companies, they are manufacturing, finance and insurance, and utilities.
ESOPs can be found in all kinds of sizes of companies. Some of the more notable majority employee-owned companies are Publix Super Markets (260,000 employees), WinCo Foods (20,000 employees), W.L. Gore and Associates (maker of Gore-Tex, 8,772 employees), and Davey Tree Expert (12,413 employees). Companies with ESOPs and other broad-based employee ownership plans account for well over half of Fortune Magazine’s “100 Best Companies to Work for in America” list year after year.
Another finding: ESOP Stock Prices Outperform the S&P 500 and Russell 2000
My view is that Worker Ownership helps Build a Better American Economy.
