Posted by:
Steve Dubb
Technical assistance, loan guarantees proposed for employee-owned companies
On December 18, 2009, Senator Bernard Sanders (I-VT) introduced two new bills that would seek to expand employee ownership in the United States. The first bill, the Worker Ownership, Readiness, and Knowledge (WORK) Act (S. 2909) would create an Office of Employee Ownership and Participation within the Department of Labor. This Office would promote employee ownership and employee participation in company decision making by providing education and outreach, training, grants, and technical support for local programs dedicated to the promotion of employee ownership and participation, such as the Ohio Employee Ownership Center and the Vermont Employee Ownership Center. The work of these two centers is a large part of the reason for the prominence of employee ownership in Ohio and Vermont. The opening of similar centers in other states could ease access to the wealth-building and job creation benefits of employee ownership in those states.
The second bill, the U.S. Employee Ownership Bank Act (S. 2914), would provide loans and loan guarantees to employees to purchase a business through an employee stock ownership plan (ESOP) company or a worker-owned cooperative (51 percent worker ownership would be required). The bill would also mandate giving employees a chance to purchase a plant that was being shut down if they could raise sufficient funds and would make bank lending to start-ups of worker cooperatives and ESOPs an eligible Community Reinvestment Act activity.
The bills are co-sponsored by Senator Patrick Leahy (D-VT), Senator Sherrod Brown (D-OH), and Senator Robert Menendez (D-NJ).
J. Michael Keeling, President of The ESOP Association praised both bills. “S. 2909 seeks to expand programs that several states have established to help business owners create employee-owned companies,” Keeling said. “S. 2914 is a bold new approach proposing, for the first time, a Federal loan guarantee program to save jobs in certain situations when the result of the financing would be a company owned 50% or more by the employees.”
Corey Rosen, Executive Director of the National Center for Employee Ownership, noted in this column that, “NCEO research on the programs in the late 1980s showed that [state employee ownership technical assistance centers] increased the incidence of employee ownership plans in the states by about 20% to 33% above what would have otherwise been the case. I have long believed that these kinds of programs are the most cost-effective way to move employee ownership forward given the existing tax benefits the plans already have.”
As the One Stop ESOP Blog pointed out, Senator Sanders, in introducing the two bills, gave three primary reasons for promoting greater federal support for ESOPs. These were:
1) The economy benefits because, absent employee ownership, many businesses would close down or ship jobs overseas; With employee ownership, businesses stay open and employ American employees;
2) Retiring small business owners find buyers for their businesses [the employees], compensating them for years of hard work; Employee owners retain their jobs, share in future profits, and have greater control over their own vocation; and
3) Company performance is often improved through increases in productivity due to employee ownership and participation; and the community benefits from having the company more deeply rooted in the community.