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Continuity and Change over 25 Years of Ohio ESOP Companies: Examining the Much Discussed but Little Studied Mysterious Life Cycle of Employee-Owned Companies 

by: Logue, John; Yates, Jacquelyn
Source: Ohio Employee Ownership Center, Prepared for the Beyster Symposium 

In the last 30 years, employee ownership, which was virtually unknown in the United States prior to legal changes recognizing Employee Stock Ownership Plans (ESOPs) as qualified pension plans in 1974, has become a significant factor in the American economy. According to the National Center for Employee Ownership's statistics, which are generally the most reliable national statistics available, there are today about 11,400 partially or wholly employee owned companies through ESOPs, stock bonus, and profit sharing plans, investing primarily in employer securities with 13.7 million employee owners who hold about $925 billion in equity in the companies they work for as of the end of 2006 (National Center for Employee Ownership 2009).

The intent of Congress in establishing ESOPs was to create financial assets for company employees, not to promote employee involvement or participation in corporate governance. Senator Russell Long, the author of every major piece of ESOP legislation from 1973 until he retired from the senate in 1987, put it succinctly, 'Our capitalistic system should have a great many more capitalists. From where are they to come? Logically, from the ranks of employees.' (Long 1989: vii). ESOPs were designed to achieve this end.

This longitudinal data provides the opportunity to investigate the key question of the long-term viability of participatory employee-owned firms. It also offers the opportunity to explore what drives changes in employee-owned companies. How does law affect them? Is there a 'natural' development process among ESOP companies apart from change driven by changes in law? Do they tend to communicate more extensively, to train more actively, to become more participative on the shopfloor and more democratic in firm governance? Or do they backslide? We wonder if they tend to include more of their employees in the ESOP, and what has been the fate of unionorganized firms. And we are interested in changes in levels of payroll contribution as ESOP firms finish paying off their acquisition debt: do they continue to make significant contributions to build accounts for new employees? Or do they restrict ownership primarily to the original employee owners?


Link: None
Publication Date: 2009-07-23
Pages: 69