Two senators introduced a bill this week that aims to expand the availability of employee stock-ownership plans in S corporations.
Employee stock-ownership plans, or ESOPs, allow the owner of a company to transfer ownership to their employees rather than sell to a private equity firm or competitor when they leave. ESOPs come at no cost to the workers, and provide them with retirement savings through their investments in their employer’s stocks. They get their shares reimbursed when they retire.
The bill would provide technical assistance to companies forming an ESOP, protect ESOP businesses from losing their SBA certification when they expand ownership to employees, and preserve the ESOP structure in the tax code. The senators behind the bipartisan bill said they hope the bill will promote adequate retirement savings.
The bill’s introduction coincides with a recent study that found that employee-owned companies demonstrate higher productivity and economic resilience. The study, from Matrix Global Advisors, found the ESOP structure in particular has been shown to lead to greater firm longevity, job stability and higher wages, among other things.
Successful ESOPs in the past few years include Oregon-based Bob’s Red Mill Natural Foods and Sawbones Worldwide, a small business in Washington State whose owner gave his employees the company for Christmas.
To learn more about employee stock-ownership plans, check out Inc.’s FAQ page on ESOPs.