Washington, DC – Today, U.S. Senator Kirsten Gillibrand, Ranking Member of the Senate Armed Services Subcommittee on Personnel, announced that following her push, her bipartisan Main Street Employee Ownership Act was included as a provision in the FY 2019 National Defense Authorization Act (NDAA). This provision would support small businesses that invest in and reward their workers and communities by transitioning to an Employee Stock Ownership Plan (ESOP) or a cooperative (co-op). Co-ops and ESOPs help workers share in the success of companies and reduce the risk of businesses suddenly leaving their communities. The House companion to Gillibrand’s legislation, introduced by U.S. Representative Nydia M. Velázquez, was also included as part of the House-passed version of the NDAA bill.
“Too many hardworking New Yorkers are still struggling to get jobs that pay them enough to take care of their families and save for retirement. I was proud to fight for my bipartisan bill to help companies reward work without sacrificing profit to be included in the NDAA bill, and I am very pleased to announce it will be voted on by the full Senate in the coming days,” said Senator Gillibrand. “Employee-owned businesses have a strong track record of better pay and retirement benefits for workers and a commitment to creating local jobs. I will continue to fight as hard as I can to pass this bipartisan legislation into law to reward work and support employee ownership around New York and the country.”
“I’m proud to join forces with Senator Gillibrand to advance legislation making it easier for workers to own a stake in their workplace. As employee-owned enterprises gain popularity in places like Brooklyn, their success ought to be replicated throughout the country. This bill will empower more employees to invest in firms and coops where they work, raising wages and creating greater economic opportunity. I am pleased that this legislation is on track for approval in both chambers of Congress. I’ll continue working for this bill’s inclusion in the final NDAA bill that will be enacted,” said Representative Nydia M. Velázquez.
There are more than 2.3 million companies, employing one in six workers nationwide, with owners who are at or near retirement. This includes an estimated 181,370 businesses in New York employing 1.6 million workers. As these business owners retire, local economies will experience a massive shift that could trigger the closure of small businesses and loss of jobs and investment. This looming crisis can be turned into a unique opportunity to strengthen small businesses, reward workers, and invest in our Main Street economy by helping these companies transfer ownership to employees.
ESOPs and co-ops have demonstrated that employee ownership is good for businesses, workers, and the local economy. Companies that transition to employee ownership see an increase in productivity by 4 to 5 percent the year the business becomes employee-owned. Employee ownership also rewards workers, paying 5 to 12 percent more and with workers having 2.2 times more in retirement savings as well as greater job stability. Furthermore, employee ownership helps prevent layoffs and creates locally rooted jobs. ESOPs are less likely than comparable businesses to lay off workers in economic downturns, and employee-owned companies are less likely to go bankrupt and tend to stay in business longer.
Gillibrand’s bipartisan Main Street Employee Ownership Act would improve access to capital and technical assistance to transition small businesses to employee ownership and save thousands of small companies and jobs. The U.S. Small Business Administration (SBA) is primed to lead a national effort in expanding small business employee ownership.
Gillibrand’s provision in the NDAA would give the SBA new authority and tools to achieve this goal, including the following:
- Updating the agency’s lending practices to better serve employee-owned businesses
- Facilitating SBA lending to cooperative businesses
- Empowering the SBA to assist small business owners in converting their companies to employee ownership
The Main Street Employee Ownership Act is cosponsored by U.S. Senator James Risch (R-ID), Chair of the Committee on Small Business and Entrepreneurship; U.S. Senator Ben Cardin (D-MD), Ranking Member of the Committee on Small Business and Entrepreneurship; and U.S. Senators Todd Young (R-IN), Jeanne Shaheen (D-NH), Susan Collins (R-ME), and Cory Booker (D-NJ). U.S. Representative Nydia M. Velázquez has championed the House version of this legislation, which was also included as part of the recently-passed House NDAA. The Senate is debating the NDAA on the floor this week.
“The ESOP Association, with nearly 1700 U.S. corporations with employee-ownership via the employee stock ownership plan (ESOP) model, is very appreciative of the Main Street Employee Ownership Act, which will move the SBA to help create more employee owners of our capitalistic economy,” said J. Michael Keeling, President of the ESOP Association. “The General Social Survey indicates that employee stock owned companies are 4 to 8 times less likely to lay off employees than conventionally owned companies over the past 16 years. Data since the last two decades of the 20th Century also shows that the vast majority of employee stock owned companies are more productive, more profitable, providing sustainable jobs with better retirement income than their competitors. Senator Gillibrand’s work to expand ownership will improve job security for American workers, and help address income inequality.”
“The Main Street Employee Ownership Act brings welcome awareness of the employee ownership model and highlights existing federal resources available for ESOPs,” said Denny Scott, Chairman of the Employee-Owned S Corporations of America (ESCA). “With greater investment and outreach, more employee-owned small businesses will be able to utilize the SBA for critical access to capital.”
“Far too often, small businesses grow successfully year after year, only to falter soon after their founders retire and sell their shares to new owners. As baby-boomer business owners retire and their companies change hands, this legislation will make it easier for those business owners to exit their businesses by selling to a different kind of buyer — their employees. Instead of a multinational holding corporation or a distant financial buyer, the companies will still be rooted locally in their communities, and decades of research shows that employee-owned companies are not only more productive and more likely to create new jobs, but they also build up the assets and the job quality of working Americans. Employee-owners are not only active participants in the economy, they also general have dramatically higher household net worth, more job stability, and important benefits like flex time and tuition reimbursement. This legislation will spread the benefits of employee ownership to more workers, more companies, and more communities,” said Loren Rodgers, Executive Director of the National Center for Employee Ownership.
“We applaud this important legislation. It facilitates the creation of worker-owned companies by providing greater access to the funds and training needed to get up and running. The effect will be stronger businesses that keep jobs and economic activity in communities and that build more wealth and retirement savings across all income levels,” said Christine Blackburn, Policy Director, American Sustainable Business Council.
“The Democracy at Work Institute celebrates the passage of the visionary and game-changing Main Street Employee Ownership Act. Employee ownership offers a vital solution for small business owners across the U.S., and the Small Business Administration cab and now will play a critical role in creating greater awareness and more opportunities for broad-based ownership of small business. We applaud this commitment to provide education, microloans, and training through the SBA, which will cultivate healthy business successions to employee ownership, saving critical business assets and keeping our communities strong and prosperous,” said Melissa Hoover, Executive Director of the Democracy at Work Institute.
“As the national grassroots membership organization for democratic workplaces across the country, the United States Federation of Worker Cooperatives (USFWC) celebrates the passage of the Main Street Employee Ownership Act. As we work to advance worker-owned, -managed, and -governed workplaces, we believe that this bill represents an important step toward broader awareness and use of employee ownership as an opportunity for workers and businesses owners in need of a strong succession strategy. We are encouraged by Senator Gillibrand’s ongoing commitment to small business and employee ownership and we look forward to increased interagency efforts to support this work,” said Esteban Kelly, Executive Director of the U.S. Federation of Worker Cooperatives.
“Hats off to Senator Gillibrand and the additional cosponsors of the Main Street Employee Ownership Act for this great advance in spreading employee ownership to more Americans. Employee ownership is a proven strategy that delivers on broad-based prosperity, and it’s great that America’s small business lending infrastructure is now becoming more aligned with the clear benefits to workers and communities it provides,” said Jessica Rose, Director, Fifty by Fifty Network and Director of Employee Ownership Programs at The Democracy Collaborative.
“As a lender to cooperatives nationwide, we recognize the need for access to capital for employee and consumer owned businesses. The Main Street Employee Ownership Act will help meet this need in important ways. Thank you to Senator Gillibrand for being the champion of cooperative businesses in New York and throughout the country,” said Charles E. Snyder, President and CEO of the National Cooperative Bank.
“Serving as a lifeline for thousands of companies, Senator Gillibrand’s Main Street Employee Ownership Act will improve access to capital and technical assistance to aid in the transition of small businesses to employee-owned cooperatives,” said Doug O’Brien, President and CEO of the National Cooperative Business Association. “NCBA CLUSA applauds this effort and stands ready to work in tandem with the implementing partners.”
“The Main Street Employee Ownership Act is an important breakthrough to address the dual issues of small business closure and income and wealth inequality in our country. Our research has documented that millions of small businesses and nearly 25 million jobs are at risk, if these companies close due to lack of a successor or buyer as baby boomer business owners retire. The Act preserves small businesses by making employee ownership a more viable succession option, given that family succession rates are at an all-time low, and it supports business owners to learn about employee ownership succession and removes barriers to financing and technical assistance. By passing the Main Street Employee Ownership Act, the Senate will make a big difference for small businesses and their workers,” said Hilary Abell, co-founder of Project Equity.
“One of the ways that the average American can build wealth is through business ownership. Worker cooperatives create an opportunity for workers to participate in the wealth creation that is provided by their hard work. Traditionally, access to capital has been one of the challenges for cooperative start-ups and businesses wanting to convert to a worker cooperative. This legislation will help mitigate some of those challenges,” said Halisi Vinson, Executive Director, Rocky Mountain Employee Ownership Center.
“This legislation will make it easier for small business owners to sell their businesses to their employees when they retire. This will definitely save jobs in cities and towns, particularly in those areas where there is no other likely buyer,” said William Castellano, Executive Director of the Rutgers NY / NJ Center for Employee Ownership.
“This is the most important development in employee ownership law in recent time and it marks the beginning of a new and much deeper Congressional focus on this important issue. Research suggests that this legislation will dramatically increase the opportunities for modest income workers nationwide to build wealth by purchasing their own companies through an ESOP or a worker cooperative,” said Joseph Blasi, Professor and Director, Institute for the Study of Employee Ownership and Profit Sharing, Rutgers University.