NBC News: Employee Ownership Provides ‘Better Benefits And A Chance To Build Wealth’

For Immediate Release:

February 3, 2022

Home News NBC News: Employee Ownership Provides ‘Better Benefits And A Chance To Build Wealth’

WASHINGTON – As record numbers of Americans quit their jobs in what has been dubbed the “Great Resignation,” NBC News reports that workers at employee-owned private businesses are “staying put and reaping rewards” in a sharp contrast with the “deep disaffection among workers” at many traditional companies.

NBC News reports:

“Research shows that employee turnover rates are lower at these [employee-owned] companies — a 2018 study indicated quit rates at employee-owned companies were half that of traditional concerns. The study also found that employee-owned companies are also more resilient in crises. During Covid, these companies added rather than cut workers, a new study for the Employee-Owned S Corporations of America or ESCA shows, and they are likely to offer more generous benefits packages, including child care and tuition reimbursement plans.

Median wages among workers aged 28 to 34 were 33 percent higher than at companies not owned by employees, 2017 research by NCEO shows, while workers of color at these companies have family net worths averaging 79 percent higher than workers of color at those that are not employee-owned.

“Also compelling: retirement accounts of workers at employee-owned companies are on average twice as large as those held in 401(k)s at traditional companies — $132,000 versus $64,000, according to the new ESCA study. Retiring with six- and seven-figure payouts is not uncommon, managers of some of these companies told NBC News. Most employee-owned companies also offer 401(k)s in addition to their stock plans. Unlike 401(k)s, however, which employees contribute to, workers in employee-owned companies don’t pay for the stock they wind up owning in the operations.” 

The new study – conducted by the National Center for Employee Ownership (NCEO) on behalf of the Employee-Owned S Corporations of America (ESCA) – finds strong, measurable evidence that having an employee stock ownership plan (ESOP) in place prior to the worst of the Covid-19 crisis helped employee-owned businesses not only to survive but also take better advantage of growth opportunities than their conventional, non-ESOP counterparts.

The study’s key findings include:

  • Businesses with an ESOP in place provided greater financial security for employees heading into and during the pandemic, and job retention at the firm level compared to comparable conventional firms.
  • The average ESOP account balance going into the pandemic was dramatically higher – more than double –than the average 401(k) account balance ($132,000 vs. $64,000) at a non-ESOP company.
  • Controlling for size, industry, and location simultaneously, the S ESOP advantage is an estimated $67,000 more in retirement security – especially remarkable, given that just over half (50.5 percent) of American families have a retirement account at all. Among those that do, the median account value was $65,000.
  • The average employer contribution to the S ESOP was more than 2.5 times that of companies offering only a 401(k), and 94 percent of total contributions to ESOPs came from the employer, compared to 31 percent for 401(k) plans.
  • Notably, most ESOP companies also offer traditional retirement benefits such as a 401(k), in addition to providing employees with an ownership stake in the business as a benefit of employment.
  • Using active participants as a proxy for employment, and controlling for company size, industry, and region, being an ESOP is associated with retaining or adding an additional 6 employees from 2019 to 2020, compared to non-ESOP employers.

To read and watch NBC News’s full reporting on employee-owned businesses, CLICK HERE.

To read the new study’s full findings, CLICK HERE.

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