Becky Hummer’s blog is a must read for business owners and managers on improving performance using common sense communication techniques. Check out her blog here… https://www.dbzinc.com/2018/04/16/do-you-want-to-work-in-tall-buildings-the-art-of-good-business-communication-by-rebecca-l-hummer/
MoreEmployee ownership is still a great way for capitalism to impact the economic divide. Check out Becky Hummer’s Blog entry. https://www.dbzinc.com/2019/04/28/employee-stock-ownership-plans-are-more-common-than-ever/
MoreAlthough the United States has a rich history of allowing and encouraging employee ownership, our nation is not the only one in the world with laws that enable and govern employee ownership of companies.
Even the former USSR countries have gotten into the action and formed employee ownership privatization plans. Not to be outdone, socialist China has followed suit and has put together some options regarding employee ownership as well.
According to the 2009 PEPPER IV Report that focused on employee ownership in twenty-seven Eurogroup states and two candidate countries, the movement toward employee ownership is on the rise in Europe.
The UK is a different story. For reasons that are not entirely clear, employee ownership hasn’t caught on in the UK like it has in the USA and in the expanding economies of China and Southern Africa.
The Two Main Employee Ownership Models at Play on the Global Stage
When one moves beyond privatization plans, there are basically two models functioning across the world today.
These two models fall short of the ESOP advantages found here in the USA and as a result, in the vast majority of employee ownership plans worldwide, the employees own only a small portion (less than 10%) of the shares in a company.
Why?
Because these more basic models do not have the functionality that share pooling in a USA ESOP trust has. The result is that employees – even if they do have a share purchase option – will not buy shares because they don’t have the cashflow to do so. Still, some employees do choose to participate. But because employee shares are not in a trust where they accumulate in value until their departure the employees are more likely to buy and sell them at a higher frequency. This cycle of share purchase and sale ends up not being as beneficial for the employees because they do not gain the benefit of being invested over the long term.
Given this low employee participation rate and high stock turnover, the countries that do have laws encouraging employee ownership do not see their companies largely benefit from the ESOP trends we see here in the USA such as:
If countries globally desire to see employee ownership takeoff and be effective, they cannot depend on employees to take from their take-home pay to buy shares – even if the company puts up some matching funds or incentives for them to do so. Instead, foreign countries must focus on creating strategies in which it is advantageous for companies to allow pool ownership of shares.
France leads Europe in innovation when it comes to broad-based employee ownership. In their model, the company backs a bank loan for the employees to buy their shares. When combined with discounts and little to no risk for the employees, this option is very popular and a model for other European countries to copy.
What countries in the world have some form of legislation that encourages or at least governs employee ownership?
While each of these countries has their own “take” on how employee ownership should be implemented, formatted, maintained, and governed, it is encouraging to see that nations are recognizing the legitimacy of employee ownership programs.
Want to know more about ESOPs or find an ESOP Advisor or a Director for your privately-owned company? We have the family of websites to meet these needs and more.
Explore your ESOP Advisor options at ESOPMarketplace.com and find the right Director for your business at DirectorsMarketplace.org
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Employee-owned companies have existed in the United States in one form or another since the mid-1800’s. In those early days, companies like Sears & Roebuck and Railway Express Agency were visionary in their actions and compassionate in their intent to give their employees an avenue for retirement income.
Since those initial businesses blazed the trail, many others have followed their important first steps. Today, companies like Publix Super Markets, King Arthur Flour, and Swales Aerospace are numbered among the 6,669 ESOPs in the USA. (2015 – most recent statistics available from DOL)
While the answer to how many ESOP companies are in the United States is relatively simple, there are significant observations that one can make when a deep dive is made into the numbers behind the aggregate number of 6,669.
Stand-alone ESOPs make up the bulk of that number (5,505) with KSOPs topping up the remaining 1,164 spots.
As we take a closer look at the 5,505 stand-alone ESOP companies in the United States, more details emerge.
Another way to measure ESOPs is the assets of the ESOP plan. If one totals the ESOP plan assets of the privately held ESOP companies in the United States, he or she will come up with a number around $107,481,000,000.
Again, the size of the company drives the ESOP plan assets inside of our statistics. The large ESOP private companies had an accumulated total ESOP plan asset worth of $95,356,000,000 while the small private ESOP company’s total combined ESOP plan assets were $12,124,000,000 in 2015.
Where does the ESOP model thrive?
By surveying the entirety of ESOPs across the United States, we can begin to make some educated observations about what kind of companies historically and currently operate well within the ESOP framework.
Our latest data suggests the following.
The services industry and manufacturing overwhelmingly lead the way in the adoption of the ESOP model. The services industry makes up 28% of all ESOPs and manufacturing comes in a close second at 22%.
Why is this?
Historically, these are two industry sectors where workers have seen lower wages and fewer benefits. As a result, the ESOP model was attractive for employee-friendly employers as well as employees hungry for change. Once the ball was rolling in these sectors, the ESOP model was more readily adopted by others within the same industry.
Following Services and manufacturing, the industries with the next highest percentage of ESOP companies are:
From there, the numbers drop off dramatically and are taken up by industries such as transportation, communications/information, utilities, agriculture, and mining.
C Corporations and S Corporations
While C corporations make up the majority of ESOPs at this time (3,477 of total ESOPs), S corporations are not far behind (3,192 of total ESOPs).
What Area Of The Country Has The Most ESOPs – And Why?
The mid-west wins the ESOP national race with 32% of the total ESOPs in the United States. This is closely followed by the South with 30% of the total ESOPs.
The numbers of ESOPs begin to fall when we look at the western states (only 23%), and the northeast pulls up at the back of the pack with only 16% of ESOPs.
Why? The answer is again found in history. As we mentioned earlier, the ESOP model found fertile ground in the industries of services and manufacturing. The mid-west and the south simply had more of these types of companies earlier on, and so the acceptance of the ESOP model was stronger through the south and midwest where employees were hungry for change and employers were looking to give it to them.
Your ESOP company is already listed among the thousands of proud USA ESOPs on ESOPB2B.com. Claim your listing now by clicking HERE and upgrade your listing to get more visibility and more leads.
Every ESOP looks for efficiencies to improve productivity on the administration side of the business and to enhance communication with employees. So you need to consider an Administration Services Platform that integrates your employees’ 401(k) and ESOP information. It is put together by Jackie Salmon and her team at OneAmerica®, an Indianapolis-based financial services company, that can trace their roots back over 140 years.
OneAmerica offers a solution to meet your needs and is led by Jackie Salmon, field vice president of consulting service. Jackie, with 27 years of ESOP experience and a member of our group since 2015, has taken the time to break down the benefits of this new Administration Services Platform.
The ESOP advantages OneAmerica provides are:
Want to cut to the chase and speak to Jackie Salmon and her ESOP consulting team now? Pick up the phone and call 317-285-6540 or send an email to jackie.salmon@oneamerica.com to schedule an appointment.
Leaning on the vast actuarial and employee benefits experience of the ESOP team, the design and depth of this solution weaves the power of administrative efficiency with the kind of industry-leading support that you have come to expect from OneAmerica.
OneAmerica can accommodate servicing multiple plan types while offering a single experience for plan sponsors and participants. Their technology was built for the specialized needs that ESOP and 401(k) plans require.
Consider the following advantages:
Having one central point of contact with a wealth of experience in both ESOP and 401(k) benefits is an efficiency that is included in the Administration Services Platform approach. Having a single individual available to you that understands the scope and detail of your company’s interaction with employee ESOP benefits and 401(k) plans and can assist you in answers to questions is invaluable.
Having one Plan Manager includes some of the same advantages we spoke about regarding having a single Relationship Manager for both ESOP and 401(k) plans. There are efficiencies in communication and narrowing of administrative overhead that allow for more stability and a streamlining of needed contacts. If needed, your Plan Manager can call in high-level consultants for answers to the big questions of distribution, diversification or re-shuffling.
Along with the Integrated Administration Services Platform comes a web portal that allows your employees, once logged in, to see everything from the value of their ESOP holdings to the performance of their 401(k). This kind of instant availability of information gives employees confidence and further cements their feelings of ownership in the company and control of their own futures.
While separate statements were always made available to employees of ESOP companies, the combination of these statements within the Administration Services Platform and the instant availability of account balances within the dedicated web interface simplifies the process. By utilizing your web portal, your employees can access the vital information in both their ESOP and 401(k) plans at the same time.
Let’s face it. Employees will always have questions about their plans, and your office doesn’t have time to field those calls. OneAmerica has solved this issue in a way that gives employees someone knowledgeable to answer statement questions or talk about eligibility and ESOP payouts so your administrative staff can continue their work uninterrupted.
The OneAmerica ESOP consulting team averages more than 20 years of experience per person, and has helped hundreds of ESOP plans to understand their ESOP options and their employee benefits. They understand your business’ unique needs and tailor planning to give you options you can be confident in.
OneAmerica has been recognized for overall strength from A.M. Best, and Standard & Poor’s, the industry’s leading credit rating agencies. These agencies provide independent, third-party evaluations of the financial strength and claims paying ability of the insurance companies of OneAmerica. (Read more on the OneAmerica website.)
Enjoy the simplicity of dealing with just one provider for your ESOP AND 401(k) plans!
OneAmerica gives your employees the ability to access their plan balances and details online or over the phone through their knowledgeable U.S. based call center!
Want to know more? Call Jackie Salmon and the OneAmerica ESOP consulting team now at 317-285-6540 or send an email to jackie.salmon@oneamerica.com to schedule an appointment.
*OneAmerica is the marketing name for the companies of OneAmerica.
Products issued and underwritten by American United Life Insurance Company® (AUL), a OneAmerica company. Administrative and recordkeeping services provided by McCready and Keene, Inc. or OneAmerica Retirement Services LLC, companies of OneAmerica which are not broker/dealers or investment advisors. Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. ESOP Marketplace is not an affiliate of any OneAmerica company. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
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