The Big Benefits of Employee Ownership by Thomas Dudley

According to new research published in May 2021 in the Harvard Business Review, the increased interest in Employee Share Ownership Plans is helping both business owners and employees and is contributing to a “fairer” distribution of wealth.

The Big Benefits of Employee Ownership by Thomas Dudley (co-founder of Certified Employee Owned  and Ethan Rouen was published last month and talks specifically about the ever-growing wealth gap in the United States whereby the top 10 % percent of Americans own 90% of all business wealth. Business ownership is among the most concentrated forms of wealth in the United States, and globally the poorest half of the population accounts for around just 0.25% of all business ownership. Data from the Survey of Consumer Finances shows that the wealthy’s largest asset is the ownership of businesses, business ownership tends to account for over 56% of the portfolio of the top 1% of households.

The study seeks to establish what would happen if 30% of all businesses were owned by employees using an Employee Share Ownership Plan (ESOP). The results showed that the share of wealth held by the bottom 50% of Americans would more than quadruple jumping from just 1.4% of the total net worth to 6.4% and that all wealth quantiles below 90 increasing.

The research also shows that many firms have benefited from the alignment between the financial incentives provided to its workforce as the business increases company performance. The private equity by our firm KKR (one of the largest in the world) recently adopted broad based employer ownership as a standard structure of deals in its industrial’s group because it found doing so produced better returns all around. “Employee-owned companies tend to see the biggest performance advantages when employees think and act like owners.” On this basis many businesses are working to create a culture of ownership and often implement some sort of open book management or bottom-up idea generation system to further improve performance.

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