Employee ownership is a concept that draws support from across the political and even global spectrum: 

So far the list includes Pope Leo XIV, Tucker Carlson, Jon Stewart & Pete Buttigieg, Jon Stewart again, The Economist, MrBeast, Adam Grant, and Chris Hayes—along with actual supporters Mark Cuban, Kirsten Gillibrand, Scott Galloway, Mike Rowe, Bernie Sanders, Marco Rubio and (in response) Alexandria Ocasio-Cortez.

J.D. Vance has entered the chat. In an interview with Joe Rogan last week, Vance said:

On artificial intelligence, we should “give normal people some power in this system” and “ensure that there’s some broader prosperity from that wealth creation."

What's behind this universal support? For starters, measurable results. Giving employees a piece of the pie is proven to increase job satisfaction and employee retention, and boost production. Studies have shown that employee-owned companies are more resilient through economic cycles. And increasing employee wealth creates a rising tide that does indeed lift all boats.

These inspiring statistics are even more powerful when viewed in the context of the “silver tsunami.” 

Small businesses make up more than 99% of U.S. companies and account for a majority of private sector jobs. More than half of all privately held businesses in America—millions of companies—now have owners over age 55, according to the U.S. Census Bureau, meaning many of those owners will be ready to retire in the next 10 years. [https://www.hbs.edu/bigs/silver-tsunami-employee-ownership]

These retiring business owners are (or soon will be!) looking for ways to transition their businesses. Many of them have an emotional, moral and/or ethical attachment to their businesses. They hope to ensure that what they built with their grit and bare hands will carry their values forward, even when they are gone. They often aren't interested in a sale to private equity or a competitor. Employee ownership as a succession model is often a highly attractive option to these business owners.

One of the most common methods of transitioning a business to employee ownership is the employee stock ownership plan (an “ESOP”). An ESOP is a tax-qualified retirement plan, which means that it is highly regulated by the IRS and the federal Department of Labor. Unfortunately, expansion of ESOPs has likely been chilled by plaintiffs' lawsuits and DOL investigations. In the right situation, though, an ESOP is a powerful tool to reward employees, strengthen companies, and provide company founders with an exit.

An ESOP isn't the right tool for every situation. The good news is that there are several alternatives to explore, such as co-ops, management buy-outs, or an employee ownership trust (EOT). EOTs are quite new to U.S. businesses, but have been commonly utilized in the United Kingdom, and Canada even has legislation encouraging their use. 

An EOT is difficult to describe in a paragraph, precisely because it is NOT highly regulated (and thus has no single legal definition) and is extremely flexible (no two EOTs are alike!). At bottom, an EOT is a purpose trust, meaning that it has no beneficiaries. The purpose of the trust can be crafted by the business owner, and is usually along the lines of sustaining the company's financial health and benefiting its employees. Like an ESOP, the company stock is owned by a trust in an EOT model. Unlike an ESOP, the employees don't own the stock and don't have an interest in the value of the stock at their retirement. Instead, the employees benefit from things like an annual profit sharing bonus. The EOT uses its power as a shareholder in the company to influence the board of directors to act in ways that are consistent with the EOT's purpose.

Intrigued by an EOT? So am I! I am eager to explore how this new, exciting employee ownership model might be a good fit for companies looking for an ownership succession strategy.