Will Employee Ownership Models Start to Increase?

As business owners retire, employees could potentially buy these businesses and become owners themselves. This happens—sometimes. But not often enough. For this to change, there must be a fundamental shift in how transitions to employee ownership are financed.

Today, over 32 million Americans—close to one-fifth of the nation’s entire labor force—work at businesses whose owners are over the age of 55 and who will likely want to retire and sell their businesses in the next five to 15 years.

Most owners have no heirs in the waiting and no succession plans. What will happen to these businesses and their employees? Will competitors or private equity buy them? Will communities lose these businesses—and employees lose their jobs—as they close? Or might employees become owners of their places of employment?

There have been some employee ownership gains. Worker co-op numbers have grown rapidly, although numbers remain small—an estimated 10,000 member-owners nationwide. New investment funds to support transitions to employee ownership have formed. Policy gains have been significant, especially at the state level. Philanthropic investments have become more common.

Nonetheless, according to the National Center for Employee Ownership (NCEO), which tracks numbers for employee stock ownership plan (ESOP) companies—the most common form of employee ownership—overall numbers remain flat, with about 10 million employee-owners. If we stay on the present path, the likelihood of getting to 50 million employee-owners by 2050, as one group has sought, gets slimmer by the day.

In 2020, the most recent year available, the same NCEO report notes that 225 companies with a little over 41,000 workers became employee-owners. That’s a lot better than zero—but it is a lot less than is needed if ownership of capital is to be redistributed to workers at scale.