EMPLOYEE OWNERSHIP
SITUATION:
Need for sweeping initiatives for employee ownership to be adopted nationally.
There is a stark racial wealth gap in the United States. Philadelphia is example.
Need to reduce the racial wealth gap in the city.
Guaranteed employment coupled with significant increase in the minimum wage.
Involves baby bonds, Medicare, postal banking,& Congressional reparations.
SIGNICANCE:
Businesses survival from pandemic & owned by people of color short-lived.
Daunting task to reduce racial wealth gap & preserving the beacons of hope.
To provide successful minority-owned businesses requires immediate action.
Urgent need to enhance financial conditions of low-to-moderate workers.
Particularly the incomes of Black & brown American workers.
Cannot wait for the highly unlikely passage of more sweeping policy changes.
SOLUTIONS:
ESOPs are one solution for addressing issues is employee stock ownership plan.
ESOPs can be a vital tool for increasing the wealth of Black and brown workers .
Need to provide region’s business owners with an opportunity to get liquidity.
At fair market value from their businesses and diversify their assets.
Philly stakeholders can begin to close racial wealth gap & legacy businesses.
By promoting and supporting employee ownership through ESOPs.
MORE SOLUTIONS:
ESOP provides opportunity for increased wealth, higher income, & stability.
Creates new employee owner options for brown & black workers.
Promotes and supports Impact of Funds Dedicated to Employee Ownership.
MBE-Certification Orgs & Congress to allow employee-owned companies:
Creates certification criteria to expand wealth creation opportunities for workers of color.
What is an ESOP?
ESOP is a tax-qualified retirement plan that invests in employer’s stock.
ESOPs companies formally enabled by Employee owners gain liquidity.
Companies did so by selling their ownership interests to the ESOP.
ESOP transaction is funded with debt financing obtained by the company.
Secured primarily by the assets and equity value of the business.
ESOPs do provide business owners with an opportunity for liquidity;
Has transformative impact for employees, companies, business owners, & communities.
ESOPs also provide companies with several tax advantages,
STATS:
Number of African Americans business owners dropped by 41%.
Number of Latina business owners fell by 32% in COVID-19 pandemic.
76% of the business owners of color did not have written succession plan. There were 6,300 ESOPS in 2018.
ESOP participants 4X more likely to get laid off during 2008 -2009 recessions.
ESOPs hold over $1.4 trillion in assets and have just over 14 million participants.
ESOP Examples In Philadelphia Area:
Wawa, Publix Supermarkets, W.L. Gore & Associates, and Sheetz.
New Age Industries, Pennzoil, American Refining Group, & Graham Company.
BACKGROUND:
Philadelphia’s status as poorest large city in the U.S.
Cause: Discrimination in opportunities for well-paying jobs & underperforming schools.
Remote bi-partisan support required to make changes the law.
To date, non-existent & COVID 19 lockdowns only exacerbated conditions.
SOURCES:
1) Report entitled “Ten Solutions to Bridge the Racial Wealth Divide.” [Report proposed various solutions to by Hamilton, director of the Institute on Race and Political Economy at the New School,]
2) Guest column was written by Sean Tamba-Matthew, shareholder at Stevens & Lee/SES ESOP Strategies. It was originally published in Impact PHL Perspectives
3) “Reducing racial wealth inequality and preserving beacons of hope through employee ownership “ – https://generocity.org/philly/2021/05/27/reducing-racial-wealth-inequality-and-preserving-beacons-of-hope-through-employee-ownership/
4) https://www.nceo.org/articles/employee-ownership-1
