Pandemic in the Workplace: ESOP Companies Are Superior at Retaining Jobs & Pay, Protecting Employee Health
Pandemic in the Workplace: Employee Owned Companies Are Superior at Retaining Jobs and Pay, Protecting Employee Health, Study Shows
Washington, DC, October 26, 2020—In the midst of the pandemic, companies that are owned by their employees are dramatically outperforming other firms in such key areas as securing employees’ jobs, and maintaining work hours, salary, and workplace health and safety. Those are the findings of a new study conducted by Rutgers University and SSRS, and funded by the Employee Ownership Foundation.
Some of the study’s key findings show that, compared to other businesses, employee owned firms were:
- 3-4 times more likely to retain non-manager and manager employees.
- 3.2 times more likely to retain staff—even when other businesses received funding through the Paycheck Protection Program and the employee owned firms did not.
- Significantly less likely to reduce employees’ hours or pay.
- More likely to send employees home to work during the pandemic—and did so earlier.
- More likely to provide employees with personal protective equipment, such as gloves and masks.
From an economic perspective, employee owned businesses “kept considerably more money in employees’ hands—and in the economy” than other firms, the study finds.
“This study confirms that employee ownership is an outstanding business model that works to assure the continued success and safety of both employees and the business,” said Cindy Turcot, Chair of the Employee Ownership Foundation's Board of Trustees. “This research expands the growing body of knowledge showing that employee owned businesses excel at surviving the most difficult economic conditions, while also excelling at retaining and training employees. With the right business model, this study shows, company survival and employee retention are not mutually exclusive.”
One of the study’s most exciting findings relates to the relative effects of the PPP and employee ownership on retention. The fact that employee owned businesses retained employees at a higher rate—even when other businesses had the benefit of PPP funding and the employee owned firms did not—is particularly striking.
“From a policy perspective, this study shows that the employee ownership model far surpasses emergency measures like the Paycheck Protection Program as a means of ensuring job stability and retention during crises as well as normal times,” said Jim Bonham, President and CEO of The ESOP Association. “Those findings do not diminish the value of the PPP, which served its purpose as a short-term emergency measure. But as we recover from COVID and this economic crisis and examine what policies to adopt to make future episodes less painful for our nation, the role of broad-based employee ownership clearly must part of that equation.
“Employee ownership is built on the notion that capitalism is ideal when income producing assets are widely owned; that businesses and employees work best when they work together, sharing the risks and rewards of ownership,” said Bonham. “When this happens, employees work collaboratively and proactively, finding new ways to improve business efficiency and outcomes. Employees are then recognized as creators of solutions to difficult problems—not expenses to be slashed when revenue declines. The result—as this and other studies have shown—is that when economic challenges arise, employees are more likely to keep their jobs and businesses are more likely to survive. Increasing the number of employee owned companies ensures greater business and job security for our nation—which makes good sense and good policy.”
For the complete results of this survey, see the 11-page research summary available on the Employee Ownership Foundation website.
An ESOP is a retirement plan that purchases shares of a company and holds them on behalf of employees who participate in the plan. When the company share price rises, plan participants share in the financial gains. When the share price falls, plan participants share in the loss. When the employee retires or leaves the firm, she or he is paid market value for their ownership stake in the business.
For this reason, employees at ESOPs are known as employee owners—because they share in the risks and rewards of ownership. An important element of ESOPs is that in the vast majority of cases employee owners incur no out-of-pocket expense to acquire shares in the company.
For more information about employee ownership and ESOPs, see the Employee Ownership Foundation’s blog and research pages, and the page titled “What is an ESOP?” on The ESOP Association website.
The Employee Ownership Foundation partnered with Rutgers University’s Institute for the Study of Employee Ownership and Profit Sharing and the SSRS survey firm to survey majority employee-owned ESOP firms and other firms about their responses to the COVID-19 pandemic. The survey included 247 executives from ESOP Association member companies and 500 executives from an SSRS business panel constructed to be representative of U.S. companies with 50 or more employees. In this study an employee-owned firm refers to a firm that is majority or 100% owned by its workers through an Employee Stock Ownership Plan (ESOP).