Posted by:
Steve Dubb
President voices support for ESOPs in town meeting
Here at Community-Wealth.org, we have long highlight the important wealth building role of Employee Stock Ownership Plan (ESOP) companies. As noted by the National Center on Employee Ownership (NCEO), as of the end of 2007 there were 12.7 million Americans who were employee-owners of about 10,500 companies owned in whole or part by ESOPs, with an estimated total value of $901 billion in asset holdings. Yet despite their size, ESOPs rarely receive public attention. An exception to that rule occurred late last month. On September 29, 2010, Tom Roback, Managing Director of Blue Ridge ESOP Associates, located in Charlottesville, VA, had the opportunity to attend a town hall meeting with President Obama held in Richmond, VA and asked a question of about whether Obama would support legislation making it easier for small privately held companies to sell part of their companies to employees through an ESOP; President Obama responded that his administration “would be absolutely interested in taking a look at it.” A video of the exchange is available here. Below, courtesy of the Employee Ownership Foundation, is a transcript of the exchange. A press release from The ESOP Association is available here.
Transcript
Tom Roback: Thanks, Mr. President. I manage a small business. We serve ESOP companies—hundreds of ESOP companies. And I’ve just found it extraordinary in visiting many of these ESOP companies with the culture that they’ve developed, and the productivity and competitiveness, and it’s a good model for keeping jobs here in the U.S.
President Obama: You want to just explain to everybody what ESOPs are? These are employee-owned businesses—I just want to make sure everybody understands.
Tom Roback: Exactly, exactly. And I wanted to just—the ESOP laws that have been in place for over 35 years have allowed employee owners to share a piece of the action of the business while not having to get in their—dig in their own pockets for that, so it’s helped them get to retirement, which is tough these days long term.
My main question is just, with your good initiatives—you’re for focusing on small business in the new act—will you consider encouraging or expanding the law to help more small privately held companies look to the ESOP model? Thank you.
President Obama: I would absolutely be interested in taking a look at it. The idea behind these ESOPs is that if employees have a piece of the action—they’re essentially shareholders in these companies—then you are aligning the interests of workers with the interests of the company as a whole.
Now, what that means is, is that when a company has a tough time, workers have to take a hit because they’re owners, essentially. On the other hand, when things are going well, they’re getting a share of the profits. And so theoretically, at least, it’s something that can help grow companies, because the workers feel like they’re working for themselves, and they’re putting more of themselves into their job each and every day.
I think that it’s something that can be encouraged. I have not seen specific proposals that are out there legislatively, but I’m sure you can share them with me.
Tom Roback: Yes, there actually has been a lot of strong research recently.
President Obama: Good. So I’ll be interested in taking a look at that stuff.