Capitalism for People

By John Case

[The following article was written for a general readership–people who are apt to be unfamiliar with ESOPs. We are reprinting it here because the history and issues it discusses are relevant to the future of employee ownership.]

On November 27, 1973, 46 years ago this month, Louis Kelso and Senator Russell Long, along with two aides, had dinner together in the Montpelier Room of the Madison Hotel in Washington, D.C. By one aide’s account, the meal lasted four hours. Long picked up the tab.[i]

Kelso, then 60 years old, earned his living as a lawyer and investment banker. He favored well-tailored suits and bow ties. He regularly attended gatherings of the elite, all-male Bohemian Grove club near his San Francisco home. But he viewed himself as an economic big thinker, even a revolutionary. He had written several books, including one (with the philosopher Mortimer Adler) bearing the Cold War–inspired title The Capitalist Manifesto. He had given countless speeches and met with numerous political leaders. Though he lived and worked many decades ago, the concerns he expressed sound eerily familiar. He fretted about the gap between the rich and everyone else. He worried that automation would soon put large numbers of people out of work. He had devised several solutions to these problems, and he described them in detail to anyone willing to listen or read. He had arranged the dinner with Long in hopes that the senator would support legislation to implement at least one of his ideas.

Long, who had recently turned 55, was heir to a Louisiana political dynasty. He was the son of Huey Long, the legendary Kingfish, governor of Louisiana from 1928 to 1932, a populist demagogue who promised to make every man a king. Huey later became a U.S. senator, as did Russell’s mother, Rose. In 1948, the year his uncle Earl became the state’s governor, Russell himself was elected to the senate, sworn in just eight weeks and two days after his thirtieth birthday. Unlike his father, Russell wasn’t a soak-the-rich radical. A specialist in tax law who would become chairman of the senate finance committee, he was a powerful southern Democrat in the mold of Lyndon Johnson (who was also elected to the senate in 1948). Measures that Russell Long favored tended to become law, and vice versa.

That night at the Madison, Kelso pitched his ideas to Long, and Long shared his own philosophy. By the end of the evening the senator seemed convinced that Kelso was on to something, and asked him what he was doing to implement his proposals. Kelso’s aide, Norman Kurland, explained that they had helped put several bills before Congress, but the bills were going nowhere. “We need the right person,” said Kurland, “…someone with the courage and the power to take our proposal and convert it into law.” Long, he recalls, looked at him and said, “You bring me something tomorrow morning.”


Thus was conceived, that night, a social invention that is uniquely American, that has proliferated and evolved over the past 45 years, that offers the possibility of a different, more egalitarian form of capitalism, and that appeals (for different reasons) to liberals and conservatives alike. And yet it is an invention that remains obscure, that is often ignored or misunderstood, and—partly because of how it was conceived—that generates only modest interest among many of the policy wonks and political leaders who might be expected to support it. The present moment in American politics hasn’t been conducive to bold economic initiatives, particularly from liberals. But when policy ideas once again become important, here is one that is already working, and waits only to be expanded.


Economic reformers typically tinker around the edges of capitalism. They advocate a higher minimum wage, tighter regulation of business behavior, and fiscal policies that foster a more equitable distribution of income. These are all worthy objectives. But the measures have nothing to say about the most fundamental element of a free-enterprise economy: who owns and controls the companies that make it up.

The socialists of the past did not make this mistake. They understood that ownership matters. People who own companies, or who run them on the owners’ behalf, decide where and how much to invest. They decide how many people to hire, what sort of working conditions to provide, and—within broad limits—how much to pay those employees. All such decisions greatly affect how well an economy serves its various participants. Socialists also saw that ownership structures have a sizable effect on the distribution of wealth and income. They hoped that abolishing capitalist ownership would lead to a more egalitarian society. But socialism is currently comatose, and with good reason. Its preferred alternative, state ownership of most enterprise combined with central planning, turned out to be grossly inefficient. When tried on a large scale, it invariably was accompanied by an authoritarian political system.

In his books, Kelso proposed a variety of plans to put stock into the hands of people who would not otherwise be likely to own it. Nearly all had the unmistakable aura of impracticality, and many influential people figured that Kelso must be harebrained. (“Kelso: Nut or Newton?” was the title of one magazine profile; the economist Paul Samuelson, on 60 Minutes, called him an “amateur crank.”) As an investment banker and lawyer, however, Kelso was a practical man. One day in 1956, a friend who worked for a small California newspaper company came to him with a question. The owner of the company was retiring, the friend said, and he and his coworkers wanted to buy the business. But none of them had the kind of money that would be required. Did Kelso have any ideas? Kelso did. He proposed to set up a trust to own the company. The trust would borrow the money to buy out the owner, and then repay the debt with the (tax-deductible) earnings of the business. This was essentially the tactic that, a couple of decades later, would come to be known as a leveraged buyout, though conventional LBOs did not get the tax deduction. The difference was that Kelso’s trust then assigned shares to individual employees as it paid off the debt. When the debt was gone, the employees would own the firm.

Louis Kelso

Kelso believed firmly in capitalism, but he focused on what he viewed as capitalism’s tragic flaw: too few people owned capital. Capital, Kelso saw, was in no danger of being put out of work by automation. It generated income no matter where its owners lived. The returns to capital tended to increase over time, and those who owned some capital usually accumulated more. The lopsided distribution of capital was fundamentally unfair, in Kelso’s view, and it made for a lopsided society. “The Roman arena was technically a level playing field,” he famously wrote. “But on one side were the lions with all the weapons, and on the other the Christians with all the blood. That’s not a level playing field. That’s a slaughter. And so is putting people into the economy without equipping them with capital, while equipping a tiny handful of people with hundreds and thousands of times more than they can use.” A latter-day Kelso would find a similar kind of lopsidedness today, despite the proliferation of mutual funds and 401(k) accounts over the last four decades. The richest tenth of American households currently own 84 percent of all US-owned stock, including shares held in 401(k)s and pension funds. About half of Americans own no stock at all.

The idea worked, and in the years that followed Kelso helped to engineer several such plans. Each transaction, however, had to be custom designed, individually approved by the IRS, and financed by often-skeptical lenders. Kelso tried hard to persuade political leaders that this form of ownership by employees should somehow be written into law, thus giving it the government’s imprimatur. For a while he had no luck. Then, in 1973, he arranged for that dinner with Russell Long, and made his sale. Soon the senator was exploring legislative possibilities. Eventually Long was able to insert provisions establishing employee stock ownership plans, or ESOPs, into the Employee Retirement and Income Security Act (ERISA), the landmark legislation that has governed company-sponsored retirement plans ever since its passage in 1974.[ii]

Senator Russell Long

An ESOP works much like Kelso’s first effort, at the newspaper. A company owner who wants to sell part or all of a business establishes a trust. Typically, the trust borrows money to buy the owner’s shares and commits to paying the debt out of the company’s earnings. Company assets may serve as collateral for these loans. As the trust pays down the debt with pretax dollars, it allocates shares to individual employees’ retirement accounts according to a formula. When an employee retires or leaves the company, the trust buys back his or her shares at a value established by an independent appraiser. Subsequent legislation, generally supported by senators and representatives from both parties, has provided additional tax benefits both to the selling owners and to the ESOP itself. Most companies that are 100% owned by their ESOP, for example, pay no corporate taxes.

The legal details of an ESOP, and the regulations that govern them, can be eye-glazing. And the phrase “employee stock ownership plan” neither trips easily off the tongue nor immediately excites those who are new to the concept. But the effects are easy to understand. When a company owner sells stock to an ESOP, the trust nearly always becomes a significant shareholder in the business. In many cases it owns a majority or all of the shares. A successful business generates considerable wealth for its owners over time, and in an ESOP company much of this wealth redounds to the employees. A Boise-based company called Winco Foods, for instance, operates more than 100 discount supermarkets in eight western states. It is majority owned by its ESOP, and a couple of years ago a reporter spoke with Cathy Burch, a veteran hourly employee. Burch reported that she had accumulated close to $1 million worth of stock in her retirement plan. This number is an outlier, but it doesn’t lie as far out as you might think. Some years ago I visited an Illinois company called Scot Forge, which was 100% employee owned through an ESOP, and spoke with a lathe operator named Leo Szlembarski. Szlembarski, who had then been with the company for 34 years, said it was not uncommon for blue-collar workers to retire with $700,000 or $800,000 in their stock accounts. He himself, he confided, had “a little more.” Scot Forge also paid its employees both profit sharing and dividends on their stock. Employees with at least five years’ seniority averaged 10 percent of salary in profit sharing, or about five additional weeks of pay. A 15-year employee, with more time to accumulate shares, averaged another 12 percent of salary in dividends.

Today, close to 7,000 US companies have established ESOPs. These companies employ roughly 11 million people, or about one in every eleven private-sector workers. In some—mostly large publicly traded companies—the ESOP owns only a small fraction of the stock. More typically, it owns a sizable share, and in an estimated 2,000 companies it is the sole owner. Most of the companies where the ESOP owns a substantial stake are midsize, though some are quite large. (The biggest majority-owned ESOP company, the Florida-based Publix supermarket chain, has 188,000 employees.) They can be found in every state and virtually every industry. W. L. Gore & Associates, the Delaware-based maker of world-famous Gore-Tex fabrics, is a $3 billion high-tech manufacturer. The Davey Tree Expert Company, headquartered in Ohio, is a $900 million tree-care service firm. Both are wholly owned by the people on the payroll. So are many defense contractors, engineering and construction firms, and consumer-products companies, the latter group including King Arthur Flour (in Vermont) and New Belgium Brewing (in Colorado). The National Center for Employee Ownership offers an interactive map that allows you to identify ESOP companies in your state, color-coded by industry group.

A variety of academic studies have found that companies with ESOPs typically outperform similar enterprises with no ESOPs, and that installing an ESOP actually improves corporate results.[iii] This should come as no surprise. Virtually all ESOP companies begin their ESOP lives as healthy businesses. If they were unhealthy, they would not have the cash required to set up what is after all a rather cumbersome legal structure, and banks would be unlikely to finance the deal. Once an ESOP is established, some companies benefit from tax advantages. Some benefit from a new level of commitment and enthusiasm on the part of the workforce—the application of discretionary energy, as management consultants like to say. ESOP companies overall are more likely than others to involve their employees in day-to-day decision making—and employees, because they have an ownership stake, are more likely to invest time and effort in helping the company succeed. Of course, an ESOP is hardly a magic bullet. United Airlines instituted a controversial ESOP in 1995 and filed for bankruptcy five years later.[iv] An ESOP will not protect a company from mismanagement, inadequate capitalization, or many of the other ills that can lead to corporate collapse.


The proliferation of ESOPs over the past few decades raises at least three questions. One is why they have become more numerous and more successful than other unconventional forms of ownership, such as co-ops. A second—the opposite side of the coin—is why, given their tax advantages and their record of high performance, they haven’t made a bigger dent than they have in the ownership structure of the US economy. In other words, why are there only 7,000—and why haven’t more people heard of them? A third question is why anyone should care about ESOPs other than company owners looking to sell their businesses. If ESOPs were to spread, what benefits could we reasonably expect to see?

The first question, about relative success, is easily answered. Think about the process of starting a co-op, for example. Co-ops by definition involve a measure of democracy. So a successful launch requires a group of individuals to agree on the nature of the business, the division of labor, pay scales, and other potentially contentious matters. If the business does get off the ground, it is likely to find that banks are reluctant to finance its expansion. A handful of workers’ co-ops, such as New York City’s 900-member Cooperative Home Care Associates, have been able to thrive and to grow. Their success doesn’t indicate that starting and managing such a co-op is easy; it indicates only that, once in a while, a remarkably dedicated group is able to overcome the obstacles and build a successful business. Overall, there are no more than a few hundred workers’ co-ops in the United States. Nearly all are quite small.

An ESOP does not face the same problems as a co-op. Almost nobody starts a company that has an ESOP from the very beginning. The corporate form is typically too costly and cumbersome for companies with fewer than about 20 employees, so a company that does have an ESOP has a head start—it has already gotten off the ground. Nor does ESOP law mandate a democratic structure like a co-op. While there are exceptions, ESOP companies typically have a self-perpetuating board of directors, a chief executive officer, and (usually) a conventional organization chart. Some ESOPs “pass through” the vote to plan participants on major issues, such as whether to sell the company. Others do not. (Either approach is OK under the law.) The ESOP trustee is typically appointed by the board. He or she is responsible for safeguarding the interests of plan participants but has no other mandate.

So a company with an ESOP is essentially a conventional business enterprise with an unusual ownership structure. The lack of formal democracy in corporate governance seems like a bug to some reformers, who dream of a fully democratic workplace. To me it seems like a feature. Though a government may derive its legitimacy from the consent of the governed, a company derives its legitimacy from the consent of the marketplace.[v] Conventional corporate structures have proven themselves resilient and effective in running businesses. ESOP companies succeed, in part, because they do not aim too high and do not try to change too much. By the same token, the ESOP structure is flexible. If a company wants to move in the direction of more participatory governance or management, it is free to do so, and many ESOP companies thrive with some degree of democracy.

ESOPs have benefited not only from their tax advantages but also from a kind of network effect. They have been around for a while now, and a community of ESOP specialists has sprung up. This community includes attorneys, lenders, investment bankers, valuation experts, consultants, and other specialists. Company owners considering selling their business to an ESOP will find plenty of people willing and able to help with the transaction itself and with the transition to employee ownership. Corresponding networks for other unconventional forms of ownership are much smaller. (They are larger in parts of Italy and Spain, both of which have a thriving co-op sector.)

That raises the second question: why aren’t there more ESOP companies? ESOPs are sort of America’s best-kept secret. Despite the tax breaks, despite the record of  outperformance, despite the specialists, despite advocacy groups and active trade associations, despite periodic (and almost always favorable) articles in the press about ESOP companies, the number of ESOPs seems to have plateaued over the past several years.[vi]

In part, the plateau reflects the logic of the marketplace. Most ESOPs today are created when a company owner decides to sell the business, or in anticipation of that time. But plenty of company owners don’t want to sell to an ESOP. Some can’t get their mind around the idea. Some want to pass the business on to their children. Some prefer to sell to a longtime executive at the company, or to another individual. Business advisors, many of whom remain poorly informed about ESOPs, often recommend those options, which may generate higher fees for the advisors. They also may encourage owners to seek out a so-called strategic buyer, typically a larger company in the same industry that can capitalize on the acquired company’s capabilities or customers, in hopes of realizing a higher price than other buyers might pay. The tax advantages of selling to an ESOP aren’t negligible—an owner selling at least 30% of the business to an ESOP can defer capital-gains levies—but in some cases they are insufficient to make up for the price differential. By law, the ESOP must pay a price determined by a third-party appraiser, and the Department of Labor watches pretty carefully to be sure that it isn’t inflated. All that said, of course, the potential for creating ESOPs by this route has hardly been exhausted. Advocates point to the “silver tsunami” of baby-boom company owners who are soon to retire, and who presumably might be interested in selling to an ESOP.

ESOPs also suffer from an incentive problem. Individual owners do have an incentive to consider an ESOP because of the tax advantages, and because it may offer the best chance for the company they have built to survive intact, perhaps with the founder’s name on the door. But think of all the other sellers of businesses. Large corporations divest themselves of thousands of smaller companies every year, typically selling them to strategic buyers, management groups, or private equity firms. Private equity firms themselves do the same, selling their portfolio companies or taking them public. These sellers may ensure that the buyer’s management team—the people at the top—own shares, because such an arrangement is thought to produce better corporate performance. But none has an incentive to consider an ESOP, and virtually none does. The situation is similar with publicly traded companies. Any company’s management is free to set up an ESOP as a retirement plan if it so chooses. An estimated 700 public companies have done so, for a variety of historical reasons. But what’s the incentive for a company to set one up today? If it assigns new shares to the ESOP, it dilutes existing stockholders. If the ESOP borrows money to buy shares, the company must divert some of its revenue to repay the loan. To be sure, the ESOP might contribute to greater commitment and loyalty on the part of employees, and thus to better business performance. But conventional bonus or profit sharing plans might have the same effect, and would be a good deal easier to establish. Spreading the ownership of capital is not high on most corporate executives’ agendas.

So it seems unlikely that ESOPs will realize their potential without additional incentives or other forms of government support. This brings us to the third question: why should anyone care?

The answer goes back to what Louis Kelso saw so clearly: the pressing need for a more inclusive form of capitalism. If 7,000 ESOPs are now spreading a bit of the wealth, 20,000 or 50,000 could spread a great deal more. (The US has about 620,000 firms with 20 or more employees.) Unlike profit sharing or stock option plans, ESOPs hold stock in employees’ names for the duration of their time with a company. They are a semi-permanent form of distributing the benefits of capital ownership to broad groups of the population. Imagine a situation in which the pay system at Scot Forge was common. So long as the company was moderately successful—and most established companies are—employees at every level would build up sizable nest eggs, and would receive dividends on their shares along the way. This is a powerful step toward greater equality.[vii] It puts both money and stock in the hands of people who have otherwise seen their incomes stagnate and their retirement security jeopardized.

ESOPs also tend to alter a company’s priorities in ways that are socially beneficial. A series of studies have shown that pay scales are generally higher than at non-ESOP companies, and benefits more generous. Layoffs rates are substantially lower. More ESOP companies pursue what has become known as a “good jobs” strategy. The difference shows up in the fact that ESOP companies are represented in vastly disproportionate numbers on the various “best places to work” lists that appear regularly in the business press. They often transform work in other ways as well. Many corporations these days have discovered the benefits of participatory management, in which employees at all levels have a say in decisions that affect their work areas, or in decisions where they have relevant expertise. The tools of this approach—self-managing teams, frequent communication about business issues, quick feedback about results, and so on—are well developed and effective.[viii] An ESOP company has a built-in incentive to move farther and faster in this direction than a conventional company, since both managers and employees are likely to expect it to do so. They all have more of a reason to engage with the business and to care about the outcomes of their work. After all, the company (or a big chunk of it) belongs to them, not to some rich family or absentee investors.[ix]

Finally, and perhaps more controversially, an ESOP might help rein in the salaries of CEOs and other top executives, thus lessening inequality on that front as well. The recent explosion in executive pay has many sources, but it partly reflects the decline of the labor movement. No 1960s-era corporate chieftain whose staff had to negotiate with union leaders could pay himself tens of millions of dollars a year with impunity. The presence of a large employee-oriented shareholder right on the premises—the ESOP—might have the same effect as the collective-bargaining table. We don’t have much recent data on relative pay rates at ESOP and non-ESOP companies, but it’s not hard to imagine that an ESOP would place at least some restraint on today’s skyrocketing salaries. 

Given all these benefits, why have political leaders not made this form of employee ownership their own? ESOPs do garner bipartisan support in Congress and state legislatures, but the support is usually limited to tweaking tax legislation. Where is the politician who is prepared to make this form of people’s capitalism a centerpiece of his or her economic policy, proposing incentives and support for companies and company-sellers of all sorts to consider establishing an ESOP? Given employee ownership’s track record, there seems so much to gain and so little to lose.

This is the point at which many ESOP advocates shake their heads in dismay. But of course there are reasons for the reluctance, which in this case turn on the history and politics of the idea.

Historically, Kelso and Long may have overreached, spawning a variety of ESOPs and ESOP-like entities before legal practice and governmental supervision had evolved to oversee them. A 1975 law gave employers a tax credit on certain capital investments if they contributed a corresponding amount of stock to an ESOP. A 1981 law provided tax credits for any stock given to employees. An act passed in 1986 provided incentives for banks to lend to ESOPs. (“When Louis Kelso burps, Russell Long puts it in the Internal Revenue code,” complained one congressman.) These provisions were subsequently reversed, in part because ESOPs had garnered some bad press. Several large companies, including Simmons Mattress, Burlington Mills, and Charter Medical, used ESOPs as a means of transitioning from public ownership to private. “Some of these did not work out very well,” remembers Corey Rosen, who is one of the nation’s leading experts in employee ownership. “Some, like Simmons, took on too much debt and then the economy turned down. At others, like Burlington and Charter, the deal makers used egregious financing techniques that led to lawsuits. Things could be much better structured today, but I think people may look back and say that ESOPs are trouble.” Other large-scale ESOP-related debacles—United Airlines, Enron, the Chicago Tribune—didn’t help the cause, either, though each failed for reasons that have little to do with the kind of well-structured ESOPs that are common today.[x]

Christopher Mackin, an employee ownership expert who teaches at Rutgers, has analyzed the politics of ESOP support and points out that the idea also has a pedigree problem. Brainchild of the iconoclastic Kelso, offspring of a conversation between Kelso and one unusually powerful senator, ESOPs emerged “outside the orbit of accepted policy conversation.” Liberals in particular initially regarded them with suspicion, as did some union activists. “ESOPs appeared to be a labor idea, ostensibly benefiting workers, that was hatched outside the labor movement by people friendly to and wishing to provide incentives to ‘capitalists.’” Senator Long’s decision not to make ESOPs more democratic “fueled additional suspicions that ESOPs represented faux ownership.” Mackin believes that these concerns are fading in policy circles, pointing to the recent sponsorship of major—and favorable—studies by Washington think tanks.[xi] Unions, too, are less opposed than they once were. And many conservatives support ESOPs because, in effect, they create more capitalists. So the political support for the idea may be growing.


Louis Kelso died in 1991, Russell Long in 2003. Since their time, no national political leader has made employee ownership his or her priority. Yet it’s not hard to imagine that one could do so. As I have written elsewhere (in the New Republic and the Atlantic), a visionary politician could rescue the idea from the murk of tax legislation and put it on a whole new plane. Imagine a major policy initiative, perhaps dubbed Capitalism for People or a true Ownership Society (unlike George W. Bush’s half-baked version). The program’s purpose is to increase the number of ESOP companies. Administration officials celebrate exemplars like W.L. Gore and Scot Forge. The government provides financing guarantees for ESOP transitions, and incentives for corporate sellers to consider an ESOP. It extends preference in its purchasing to employee-owned companies, just as it does now for small businesses owned by minorities, women, and disabled veterans. An Office of Employee Ownership in the Commerce Department develops programs to stimulate more ownership, and funds state-level centers of research and advocacy (which already exist in Ohio, Vermont, and a handful of other states).

And why stop there? Universities could do more research on employee ownership and egalitarian capitalism. (Some, such as Rutgers University and the University of California at San Diego, already are deeply involved in these subjects.) A public-private marketing partnership could help consumers identify employee-owned companies to buy from. (An organization called Certified EO has already taken steps in this direction.) Rutgers professor Joseph Blasi and his coauthors, in their book The Citizen’s Share, advocate setting benchmarks and targets for employee ownership, symbolizing a long-term national commitment to the idea; they also propose a host of other measures that would help an incoming president get started. Right now, of course, the specifics matter less than the idea itself. Visionary politicians, like visionary CEOs, need big, bold ambitions to get people excited and mobilized. “Employee ownership” may not get anybody excited, but Capitalism for People or The Ownership Society might. Maybe we would even reach a point where employees could vote on whether they wanted an ESOP, much as they can now vote on whether they want a union.

As a tool of economic reform, ESOPs have their limitations. They do nothing for people who don’t have jobs, or who work for very small companies. They don’t affect public-sector workers or employees of companies that choose not to have an ESOP. So they are a complement to other methods of building a more egalitarian capitalism, not a replacement for them. The advantage they offer is that they could affect the economic lives of tens of millions of employees—and that very little stands in the way of expanding the ESOP sector. ESOPs have proven their worth as ownership vehicles for successful businesses, and their very presence in the economy tends to expand the sense of what is possible. Because they “make haves out of the have-nots without taking it away from the haves,” as Russell Long once put it, they are one thing that liberals and conservatives can agree on.

There’s an irony in all this, of course. It was Marx who originally focused on restructuring ownership and control of the means of production, and it was mostly socialists who carried the idea forward. An ESOP is a form of capitalism, not socialism; that’s why Louis Kelso called his first book The Capitalist Manifesto. But capitalism is what we have, and the challenge is to make it work for everyone, not just for the few. Employee ownership through ESOPs—capitalism for people—is a practical way to do exactly that.

John Case, editor of Employee-Owned America, is author or coauthor of six books on business and economics. His articles have appeared in Harvard Business Review, Inc., The New Republic, and numerous other periodicals.

[i] See “Norman G. Kurland, “Dinner at the Madison: Louis Kelso Meets Russell Long,” Owners at Work, Winter 1997-1998.

[ii] A longer account of this history appears in Corey Rosen, John Case, and Martin Staubus, Equity: Why Employee Ownership Is Good for Business (Harvard Business School Press, 2005)).

[iii] The nonprofit National Center for Employee Ownership summarizes the data on corporate performance here. See also Joseph Blasi, Douglas Kruse, and Richard Freeman, “Having a Stake: Evidence and Implications for Broad-based Employee Stock Ownership and Profit Sharing,” published in 2017 by Third Way and available here.

[iv] For a full account of the UAL debacle, see Equity, chapter 4, and Christopher Mackin’s excellent paper “United It Was Not,” available here.

[v] I owe this turn of phrase to Jack Stack, CEO of a large and thriving employee-owned company in Springfield, Missouri.

[vi] The number of participants continues to grow, in part because many ESOP companies, flush with cash, have acquired other businesses and incorporated those companies’ employees into their ESOPs.

[vii] A common critique of ESOPs is that employees have all their eggs in one basket: both wages and retirement funds are dependent on the health of the company, and if the company goes belly-up the employee loses everything. That’s essentially what happened at Enron. Today, most ESOP companies address this risk by establishing diversified 401(k) plans in addition to the ESOP. By law, moreover, employees with 10 years or more in an ESOP who are at at least 55 can diversify up to 25% of their company stock; five years later, they can diversify up to 50%.

[viii] See Dennis Campbell, John Case, and Bill Fotsch, “More Than a Paycheck: How to Create Good Blue-Collar Jobs in the Knowledge Economy,” Harvard Business Review, January-February 2018.

[ix] Some ESOP companies take participation to its logical conclusion, essentially treating employees like partners in the business. They systematically share full financial information and feedback from customers, and they expect employees to take full responsibility for their work, including coming up with ideas for improvement. Managers at these companies act more like player-coaches than like supervisors. They do typically retain the power to fire people who do not fit in, though they may solicit the advice and consent of the individual’s coworkers before they do so.

[x] For an analysis of each one, see Chris Mackin, “Property not Pay: Restoring the Middle through Ownership,” unpublished paper prepared for the Institute for Work and the Economy Conference, The Many Futures of Work: Possibilities and Perils, Chicago, October 5-6, 2017.

[xi] Ibid.