ESOPs help build ownership society
The following is a Counterpoint column:
By Michael Dougherty
Though I find myself at odds with parts of President Bush's agenda, I wholeheartedly support his vision to bring broad-based ownership to all Americans. Aside from his Social Security proposal, he has yet to clarify the details of this new ownership society. Will Bush's ownership benefit a precious few: those who enjoy the spoils of ownership already?
Not if Bush remembers there is a tool within our current tax code that holds the greatest promise for the average American to be a true owner: Employee Stock Ownership Plans. ESOPs require no changes to be legislated through Congress. They exist in the tax code today and are readily available to all sized companies, from Fortune 500 to the smallest of entrepreneurial firms. ESOPs grant each employee some ownership of the company for which they work and, therefore, provide direct accountability or profitability if the company fails or succeeds. Successful ESOPs build net worth for employees and are exceptional retirement savings vehicles.
The fastest way to create more significant ownership for a large number of Americans is expansion of ESOPs. Research has proved over and over that employee ownership builds successful, competitive businesses while creating equitable wealth for employees.
Yet, fewer than 10 percent of U.S.-based companies offer ESOPs; less than 1 percent have the vision to allow employees to own the company in its entirety. Since 2002, Kindermusik International has been proud to be 100 percent employee-owned, one of a very small number of wholly-owned ESOP companies in North Carolina.
By making the average-pay employee an owner in the business where she works, we can greatly speed the expansion of ownership President Bush has so repeatedly endorsed. And there is perhaps a more significant economic byproduct. Widespread employee ownership of businesses is a more sustainable form of capitalism. To use the words of President George H. W. Bush, employee ownership is a "kinder and gentler" form of capitalism more likely to spread wealth and bring prosperity to average-pay employees.
As an executive who chose employee ownership over less inclusive forms of capitalization for Kindermusik International, I felt overwhelmingly that it was simply the right thing to do. Class divisions in our country are deep and widening under the policies of President Bush.
An embrace of employee ownership by our president might reverse this trend and bring a future of broad-based, inclusive prosperity in which we can all participate.
The writer, who lives in Greensboro, is chairman and CEO of Kindermusik.
Comments (2)
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No question ESOPs are a great wealth builder for employees of successful companies. I was a beneficiary of ESOP and management stock ownership at Blue Bell in 1986-87.
And I have applied that principle to the company I now own, I have shared thru stock options and grants 64% of the shares of my co to others. My remainder is worth more in $ value than if I had kept all 100%.
BUT, that is individual CHOICE....what BUsh is trying to do is establish the principle of ownership throughout American society. Replacing the moribund SS system with a system of (partially) privately owned accounts is a HUGE first step in the right direction. This will spread the concept of ownership MUCH faster and in a more comprehensive manner than relying on individual companies to do it.
Posted on March 1, 2005 10:19 PM
Everything I have heard from investment strategists suggests one should NOT put too much of your own money into where you are an employee. If the company goes under, you lose job and income from the investment. The old eggs in one basket rule.
As for Bush's "ownership" ideas: sounds great, except that, again, investment gurus warn people to diversify, and have a good chunk in safer treasury bills, etc. In our lottery-happy society, do you think most young people will split their newly-turned over portion of the SS tax into some safer investments, or just gamble away? They'll lose billions (not everyone will get those promised higher returnrs, you know), and then will we just cut them loose when they are old? You and I won't, we'll be dead. But our grandbabies will have to bail them out. Unless you prefer the sight of tens of thousands of old, sick and poor in the newly third-world republic of the USA.
Frankly, rather than being AGREED to be a little Social in our promise for some Security in an investment for seniors, Bush and company want GREED to rule among the brokers who despise anything remotely sacrificial of Almighty Capital.
Wealth without Work is one of the Deadly Sins.
Posted on March 2, 2005 5:53 PM