Employee Ownership Could Be Coming to a Company Near You
Wealth inequality is gearing up to be a major issue in the 2020 election and one possible solution growing in popularity is the idea of employee ownership.
Presidential hopefuls including Sen. Elizabeth Warren (D-Mass.), Sen. Bernie Sanders (I-VT), and Sen. Kristen Gillibrand (D-NY) are turning to the idea of expanding worker ownership in corporations as a means of addressing wealth inequality.
Expanding employee ownership could dramatically change the economy’s power structure, as millions of workers would gain influence over decisions traditionally made by shareholders and executives. Supporters believe greater employee ownership would increase wages and incentivize long-term planning, while critics argue it would deter entrepreneurship and discourage investment.
“We can move to an economy where workers feel that they’re not just a cog in the machine — one where they have power over their jobs and can make decisions,” Sen. Sanders said in an interview with the Washington Post. “Democracy isn’t just the opportunity to vote. What democracy really means is having control over your life.”
What is Employee Ownership?
Employee ownership can mean many different things, from employee stock ownership plans (ESOPs), to codetermination, where workers have voting power to elect board members. Sen. Warren introduced legislation last year that would give workers in corporations the authority to elect 40 percent of corporate board members, while Sen. Sanders reintroduced measures to encourage employee-owned business models on Friday.
While Sanders’ policy details have yet to be ironed out, inclusive ownership funds have proven popular among the American public. According to a poll by the Next System Project, 55 percent of Americans said they supported “a policy requiring companies with over 250 employees to put 10 percent of their shares into a workers fund, which would pay dividends out to the company’s employees,” while only 20 percent opposed it.
The idea’s growing traction is likely a result of extreme inequality, as the top one percent of the population currently owns more wealth than the bottom 90 percent combined. Supporters of expanded employee ownership argue severe wealth inequality compounds itself in a democratic system where campaign donations and lobbying are powerful influencers of public policy, and believe democratizing corporate decision-making would lead to a more just distribution of societal influence.
Capitalism is ‘Dead’ Without Share of Ownership
Rutgers economists Joseph Blasi and Donald Kruse strongly support employee ownership models, arguing higher wages and employee-owned stock increases worker commitment and boosts productivity. The most extensive and recent meta-analysis of employee ownership finds a small positive effect on business performance, and research by Blasi and Kruse provides evidence of other benefits like diminished gender and racial wealth imbalances.
“With real wages being flat, looking at employee ownership and profit-sharing is a compelling way for the middle class to get a share of the benefits of ownership,” Blasi told the Post. “If we don’t find a way to include the middle class in share of ownership, then capitalism is dead. That’s basically it.”
Critics argue the government’s intervention into the market would lead investors to take their capital overseas. Jim Kessler of Third Way, a centrist think tank, argues the plans would ignore contracted workers who are not full employees, a growing percentage of the gig economy.
Not Everyone is On Board With Employee Ownership
The New Statesman’s Mathew Lawrence argues worker ownership could actually expand wealth inequality if poorly executed, as significant differences between sectors could result in vastly different benefits, noting “Google employees would likely benefit from a greater payout than Walmart workers.”
Loren Rodgers, executive director of the National Center for Employee Ownership, told the Intercept that employee ownership plans can cause tension with labor unions. “In the auto industry, the threat of strikes is really important, and it’s harder to get people to strike against something when that might hurt the value of the shares in their retirement account,” Rodgers explained.
The new employee ownership proposals represent an expansion in the debate on economics in the political mainstream. By giving workers more of a say in how their earnings are distributed, supporters believe expanded ownership will help address the most pernicious effects of income inequality.
“Employee-owned companies will not provide starvation wages to workers and huge compensation packages to CEOs. They will not allow for unsafe working conditions,” said Sanders. “In fact, study after study has shown that employee ownership increases employment, increases sales and increases wages in the United States.”