Cooperatives and Employee Stock Ownership Plans (ESOPs) Help Workers Share in the Success of Companies and Reduce the Risk of Businesses Suddenly Leaving Their Communities
Gillibrand has Previously Met with Employees Currently Working at Cooperatives and ESOPs to Inform Her Legislation Supporting Employee Ownership Across the Country
North Syracuse, NY – U.S. Senator Kirsten Gillibrand visited Syracuse Label & Surround Printing, which supports worker-owned co-ops, to announce her bipartisan legislation the Main Street Employee Ownership Act, which would support small businesses that invest in and reward their workers and communities by transitioning to an Employee Stock Ownership Plan (ESOP) or a cooperative (co-op).
ESOPs and co-ops have demonstrated that employee ownership is good for businesses, workers, and the local economy. Companies that transition to employee ownership see an increase in productivity by 4 to 5 percent the year the business becomes employee-owned. Employee ownership also rewards workers, paying 5 to 12 percent more and with workers having 2.2 times more in retirement savings as well as greater job stability. Furthermore, employee ownership helps prevent layoffs and creates locally rooted jobs. ESOPs are less likely than comparable businesses to lay off workers in economic downturns, and employee-owned companies are less likely to go bankrupt and tend to stay in business longer.
“Too many hardworking New Yorkers are still struggling to get jobs that pay them enough to take care of their families and save for retirement. I am proud to announce this bipartisan bill to help companies reward work without sacrificing profit,” said Senator Gillibrand. “Employee-owned businesses have a strong track record of better pay and retirement benefits for workers and a commitment to creating local jobs. I will continue to fight as hard as I can in the Senate to pass my bipartisan legislation that rewards work and supports employee ownership around New York and the country.”
“Working for an ESOP company promotes a positive company culture and working environment and each member has a stake in the outcome. The success of Syracuse Label & Surround Printing is proof that Employee Ownership increases productivity, strengthens small business and rewards workers. I’m encouraged by the Main Street Employee Ownership Act and believe it is a step in the right direction to support this business model,” said Kathy Alaimo, President, Syracuse Label & Surround Printing.
“ESOPs and cooperatives function fundamentally like any other business in providing products and services. Yet due to their democratic structures, they increase local worker wealth and retirement security, while keeping jobs anchored to communities. As economies transition, such as we have seen in the former industrial belt of CNY, employee-ownership will build a sustainable long-term economy aided by the Main Street Employee Ownership Act which will utilize existing resources such as the SBDC to provide the technical assistance needed,” said Frank Cetera, Onondaga Small Business Development Center.
“Small and medium sized companies are the backbone of this region’s economy,” said Christa Glazier, Vice President of Communications at CenterState CEO. “Many owners of these small business lack an exit strategy or succession plan for their retirement. This legislation holds the potential to change this, as it will expand SBA resources that will enable more owners to choose an employee stock ownership plan (ESOP). We know ESOPs hold great potential and put our full support behind this legislation because we believe it will help retain the very businesses that are its economic engine. We thank, Senator Gillibrand, for her leadership role in this effort to support local jobs, companies, and generate wealth and growth for our regional economy.”
There are more than 2.3 million companies, employing one in six workers nationwide, with owners who are at or near retirement. This includes an estimated 181,370 businesses in New York employing 1.6 million workers. As these business owners retire, local economies will experience a massive shift that could trigger the closure of small businesses and loss of jobs and investment. This looming crisis can be turned into a unique opportunity to strengthen small businesses, reward workers, and invest in our Main Street economy by helping these companies transfer ownership to employees.
Gillibrand introduced the bipartisan Main Street Employee Ownership Act, which would improve access to capital and technical assistance to transition small businesses to employee ownership and save thousands of small companies and jobs. The U.S. Small Business Administration (SBA) is primed to lead a national effort in expanding small business employee ownership.
Gillibrand’s legislation would give the SBA new authority and tools to achieve this goal, including the following:
- Updating the agency’s lending practices to better serve employee-owned businesses
- Facilitating SBA lending to cooperative businesses
- Empowering the SBA to assist small business owners in converting their companies to employee ownership
Gillibrand also supports two bipartisan bills that would encourage employee ownership of companies. The Promotion and Expansion of Private Employee Ownership Act would eliminate barriers to establishing new small business ESOPs and ensure that small businesses eligible for SBA programs would remain eligible if the company becomes an ESOP. The Small Business Employee Ownership Promotion Enhancement Act would encourage small businesses to become employee-owned by providing technical assistance to help companies transition ownership to workers through an ESOP. Gillibrand also co-led the United States Employee Ownership Bank Act, which would provide $500 million in federal low-cost loans, loan guarantees, and technical assistance to support ESOPs and worker-owned cooperatives.