The American Dream at work

In October a study by Wells Fargo found that 37 percent of people don’t ever expect to retire, but instead said they will have to “work until I’m too sick or die,” and 48 percent are not confident they will be able to save enough for a comfortable retirement.  As Congress continues  discussions of tax reform and other policies that impact business I would encourage them to protect the notion that broadening ownership and boosting workers’ share of capital, through retirement savings or otherwise, helps strengthen the economy, bolster savings and create jobs.

There is a structure that lets workers own their companies and share in the capital.  In 1997, Congress created these structures to eliminate traditional lines between management and owners and give workers “skin in the game.” As a result, more than 2,000 privately held “Subchapter S” corporations in the US are owned mostly – or entirely – by their workers through broad based employee stock ownership plans (S ESOPs). 

{mosads}The data tells a compelling story:  S-ESOPs have vastly benefited employee-owners and the companies they work for.  Nearly a million employees who are part of “S-ESOPs” can boast retirement account balances on average three to five times higher than the average US 401 (k), and the funds invested come from the companies profits, not the workers personal funds.  What’s more, these companies perform better because of the sense of common ownership:  last year a study by American Enterprise Institute economist Alex Brill found that S ESOPs were more resilient in the recent down economy, growing their jobs when U.S. employment as a whole was flat. That makes inherent sense when you consider the power giving employees an ownership stake in the success of the company has on their willingness to reach down for that extra effort when challenging economic times arrive.

There is strength that comes when all oars row in the same direction and ownership is broadened.  The greatest challenge to S ESOP companies now is political uncertainty.  As Congress tinkers with the prospect of “tax reform,” there is real concern that intentional, albeit unique structures like this one could fall to the edit room floor.  In an encouraging development, Maryland Senator Ben Cardin (D) and Kansas Senator Pat Roberts (R), together with 16 bipartisan cosponsors, are touting their Promotion and Expansion of Private Employee Ownership Act, which would make the structure available to more companies and thus benefit more US employees.

As different facets of business policy and tax reform are considered by Congress, I would encourage them to look out for the companies that are not only increasing productivity, but are also creating jobs, showing signs of high employee retention and providing stable retirement savings options for their employees.

S ESOPs are creating the good paying jobs we need to sustain economic growth while doing as Congress had envisioned back in 1997 by broadening ownership, sharing capital and giving workers a secure retirement. This model can continue to grow our economy and help our workers and middle class families. That should be our clear and continuing goal.

Klein is vice president and CFO of Inland Truck Parts Company. He is also chairman of the Board of Directors of the Employee-Owned S Corporations of America.