The Rutgers School of Management and Labor Relations announced the launch of a new center to assist businesses exploring the prospect of employee ownership, a job-saving alternative to liquidation for the “Silver Tsunami” wave of retiring founders and entrepreneurs.
“Many business owners don’t realize they can sell the company to their employees instead of selling it to a private equity firm or closing up shop,” said Associate Professor Bill Castellano, Executive Director of the New Jersey/New York Center for Employee Ownership. “Selling to your employees saves their jobs and helps to keep the business and the local economy going.”
Research by the Rutgers School of Management and Labor Relations finds that employee-owned firms tend to have higher productivity, lower turnover, and more stable employment, and that employee-owners can build significant wealth over time—enhancing the economic security of the middle class.
The New Jersey/New York Center for Employee Ownership will provide advice, technical assistance, and management and employee education to business owners interested in three forms of employee ownership:
- Employee Stock Ownership Plans (ESOP) are the main vehicle for broad-based employee ownership. ESOPs typically use credit to buy a company’s stock on behalf of its employees. As the company repays the loan, the employees receive shares without having to buy them.
- Equity Compensation is an employer’s grant of stock (or its equivalent) to its employees.
- Worker Cooperatives are enterprises solely owned and governed by their workers.
“Employee ownership can be a game changer for employees and organizations,” said Jim Terez, Associate Director of the New Jersey/New York Center for Employee Ownership. “We hope to strengthen the prospects of employee ownership by letting organizations know that it is an option and then helping them navigate the process.”
A 2014 analysis by the Rutgers School of Management and Labor Relations found there were 115 closely-held (not publicly traded) ESOP firms in New Jersey with 56,846 employees and $11.5 billion in employee ownership assets—an average of $202,459 per employee. New York had 260 closely-held ESOPs with 299,457 employees and $40 billion in assets – an average of $133,478 per employee.
Congressman Leonard Lance (R – N.J.) said, “Employee stock ownership programs allow hard working employees to be a part of the financial success of the business. It is a proven way to increase employee morale and engagement and help ensure a future for those who enjoy the work and want to stay in business. I commend Rutgers for establishing a center to assist local employers explore this ownership structure.”
Congressman Frank Pallone (D – N.J.) said, “Employee-owned businesses are an incredibly effective way to ensure stability, worker satisfaction, and long-term success for American businesses. I am proud to support legislation to encourage the employee-owned business model, and I am thrilled that Rutgers has taken a leadership role in launching the New Jersey/New York Center for Employee Ownership. I look forward to the guidance, instruction, and advice this center will provide to New Jersey businesses.”
New Jersey Senate Democratic Majority Conference Leader Robert Gordon said, “As a state senator, addressing income inequality has been one of my priorities. In addition, I am focused on helping Main Street USA and small businesses in New Jersey. I see my bill, S3159, as a way to address both issues through employee ownership. I would like to congratulate Rutgers on opening the center!”
New Jersey Senate Republican Leader Tom Kean Jr. said, “As the Baby Boomer generation enters retirement, a large number of small businesses owned by Boomers will face an uncertain future. Transitioning to employee ownership can be an effective way for owners to cash out without liquidating or breaking up a business that took decades to build, while protecting the interests of employees and customers alike. Many may simply need guidance on how to plan and structure this kind of turnover. The New Jersey/New York Center for Employee Ownership will surely prove to be an important resource.”
Upendra Chivukula, a Commissioner on the New Jersey Board of Public Utilities, former Deputy Speaker of the New Jersey Assembly (D), and co-author of THE 3rd WAY: Building Inclusive Capitalism through Employee Ownership, said, “As we address the widening gap between affluent and less affluent, one cannot ignore the importance of owning capital wealth acquired through capital income offered as employer ownership. Employers need to become catalysts for promoting employee ownership to their employees to acquire income for their retirement as well as supplementing their wages. It is an area where the very much needed bipartisanship is relevant.”
Veny W. Musum, a Bernards Township Republican Municipal Committee Member and co-author of the book THE 3rd WAY: Building Inclusive Capitalism through Employee Ownership, said, “Employee ownership is one of those rare issues on which many Republicans and Democrats can agree. For business owners thinking about retirement and succession planning, employee ownership is a way to preserve what you’ve spent a lifetime building. It’s also an excellent option for larger companies seeking to increase performance and retain talent. This new center is the ideal starting point to help all businesses navigate the process.”
Ken Wigg, Senior Engineer and ESOP Committee Chair at Moretrench, an employee-owned underground construction company in Rockaway, N.J., said, “Our Employee Stock Ownership Plan (ESOP) is much more than a retirement benefit. It allows you as an employee to own a stake in Moretrench. The longer you are with the company and the more successful the company becomes, the larger that financial stake grows. There is a pride of ownership you get here that pushes everyone towards success and growth of the company. You are not just working for a faceless corporation, you are working for yourself and your co-workers.”
The New Jersey/New York Center for Employee Ownership is an affiliate of the National Center for Employee Ownership, a 501(c)(3) public benefit corporation. Based in the Levin Building on Rutgers University—New Brunswick’s Livingston Campus, the Center is led by Rutgers School of Management and Labor Relations faculty and supported by volunteers from employee-owned companies, service providers, and educational institutions.