What is Employee Ownership?

In simpler terms, employee ownership is a way for workers to be part-owners of the company they work for. This can be done through various programs, such as stock options, profit sharing, and worker cooperatives. Employee ownership has many benefits for both employees and businesses. For employees, it can lead to higher wages, better benefits, greater job security, and more opportunities for advancement. For businesses, employee ownership can lead to increased productivity, reduced turnover, improved customer service, and enhanced corporate social responsibility.

What are the Forms of Employee Ownership in the US?

There are a variety of forms of employee ownership in the US, including:
  • Employee Stock Ownership Plans (ESOPs)ESOPs are qualified retirement plans that allow employees to own stock in their company. ESOPs can be used to purchase a company from its current owners, or to finance a company’s growth.
  • Worker cooperatives: Worker cooperatives are businesses that are owned and operated by their employees. Employees in a worker cooperative share the profits and make decisions democratically.
  • Employee ownership trusts (EOTs): EOTs are trusts that hold shares of stock in a company for the benefit of its employees. EOTs are similar to ESOPs, but they are not subject to the same regulations.
  • Stock options: Stock options give employees the right to purchase shares of stock in their company at a predetermined price. Stock options can be used to attract and retain top talent, and to motivate employees to improve their performance.
  • Employee purchase programs: Employee purchase programs allow employees to purchase shares of stock in their company at a discounted price. Employee purchase programs can be used to give employees a stake in the company and to encourage them to save for retirement.

In addition to these formal ownership structures, there are also a number of informal ways that employees can have ownership in their company. For example, employees may be given the opportunity to participate in the company’s decision-making process, or they may be given a share of the company’s profits.

What are the benefits of Employee Ownership?

Employee ownership can offer many benefits to both companies and employees. Some of the key advantages:

  1. Financial Participation: Employees have a direct stake in the company’s success through ownership, which can lead to increased motivation, productivity, and a stronger sense of commitment.

  2. Wealth Accumulation: As company value grows, so does the value of employees’ ownership stakes. This can result in long-term wealth accumulation for employees, especially in successful and growing companies.

  3. Retirement Security: Employee ownership can serve as a retirement savings vehicle. When employees retire or leave the company, they can sell their ownership shares, providing a source of income for their retirement.

  4. Employee Engagement: Ownership can foster a greater sense of involvement in the company’s decision-making and overall performance, leading to higher engagement and job satisfaction.

  5. Enhanced Performance: Research suggests that employee-owned companies tend to outperform their non-employee-owned counterparts regarding productivity, profitability, and long-term sustainability.

  6. Tax Advantages: Employee Stock Ownership Plans (ESOPs) and other employee ownership structures often provide tax benefits for both employees and businesses, encouraging the adoption of such programs.

  7. Stability and Succession Planning: Employee ownership can provide a succession plan for business owners who want to retire or transition out of the company while preserving its legacy.

  8. Recruitment and Retention: Employee ownership can be an attractive benefit that helps companies attract and retain top talent. It’s seen as a unique and meaningful perk.

  9. Alignment of Interests: Employee owners are more likely to align their interests with the company’s long-term success, which can reduce turnover and improve overall company culture.

  10. Local Economic Benefits: Employee-owned companies often have a vested interest in the communities where they operate, leading to greater economic stability and community engagement.

  11. Innovation and Creativity: Employees with a say in decision-making are more likely to contribute innovative ideas and solutions, leading to improved competitiveness.

  12. Ownership Culture: An ownership culture can promote transparency, trust, and a shared sense of responsibility among employees.

It’s worth noting that the specific benefits of employee ownership can vary depending on the type of ownership structure (e.g., ESOPs, worker cooperatives, direct stock ownership) and the company’s unique circumstances. Companies considering employee ownership should carefully assess the advantages and disadvantages to determine the best fit for their organization.

Employee ownership benefits

How Many Employee-Owned Companies Are There?

There are more than 7,000 employee-owned companies in the United States, according to the National Center for Employee Ownership (NCEO). The most common type of employee-owned company is the employee stock ownership plan (ESOP), which accounts for over 90% of all employee-owned companies in the US.

Here is a breakdown of the number of employee-owned companies by type in the US:

  • ESOP: over 6,000
  • Profit sharing: 500
  • Worker cooperative: 200

It is important to note that these numbers are estimates, as there is no central database of all employee-owned companies in the US. However, the NCEO’s data is the most comprehensive and up-to-date information available.

Employee-owned companies are found in all industries and sectors, but they are most common in the following industries: Manufacturing, Healthcare, and Professional and business services.

Employee-owned companies range in size from small businesses with a handful of employees to large corporations with thousands of employees. Some of the largest employee-owned companies in the US include:

Employee ownership is a growing trend in the US, and it is expected to grow in the coming years. This is because employee ownership offers a number of benefits for both employees and businesses.