This Labor Day weekend, most of us will fire up a grill and toast to American workers.

Here’s a way to do more than recognize them. Sell the company to them.

After 40 years in ESOPs, I keep coming back to the same phrase: employee ownership is a win-win-win. It is worth spelling it out again, because the case has only gotten stronger.

The owner wins. A real exit at fair market value, on your timeline, with the culture and the name you built carried forward by the people who helped build it. The tax code is unusually friendly here, too. A Section 1042 rollover can defer capital gains for a C-Corp seller. A 100% S-Corp ESOP is a tax-exempt shareholder. That changes the math on how fast a deal pays for itself.

The employee wins. A retirement account funded by the company’s success and their own work, not by money out of their own pocket. For most frontline workers, this is the only equity they will ever be handed.

The community wins. This is the part that gets overlooked. Employee-owned companies tend to stay put. The jobs stay. The Little League sponsorship stays. The local supplier stays. Ownership is a powerful way to keep a company rooted where it was built.

The math on who owns America

Here is the part that should bother all of us. The bottom half of American households hold roughly 1% of the country’s equities. Since 1980, the S&P 500 has climbed by something close to 20,000%, far outrunning gains in wages or home values. If you own equity, the last four decades were extraordinary. If you only earn a paycheck, they were not.

Meanwhile, there are fewer than 6,500 ESOP companies in the United States. That’s less than 1% of American companies. We form fewer than 300 new ESOPs (Employee-Owned Companies) a year, and roughly the same number wind down. The pipeline is essentially flat.

That’s not a demand problem. Daily I sit across the table from owners who love the idea the moment they understand it. It’s a plumbing problem. The rules are complicated, the litigation risk is real, and the incentives don’t line up cleanly for every kind of company.

An ESOP is not the right answer for every company

I’ve said this for three decades and I’ll keep saying it. An ESOP is not the right answer for every company. But it belongs in the conversation far more often than it shows up.

The 100% employee-owned model is powerful, and it should be protected. Partial ESOPs would open the door to many more companies and many more workers, and they’ve been in decline for reasons that are fixable. Most of the barriers here were written by people. People can rewrite them.

Something worth celebrating this weekend

Last week, the Expanding ESOPs coalition announced it has grown to more than 100 members. Employee-owned companies, foundations, banks, law firms, advisory firms and advocacy groups, all in the same room, working on the same problem. Two years ago this coalition didn’t exist.

Verit Advisors is a member, and I’m grateful to serve on the board.

ESOPs turn capitalism into a team sport. They build worker wealth, stronger companies and more vibrant communities. A hundred organizations now agree loudly enough to engage.

I’ll leave you with three things to ponder this Labor Day:

 

  1. Check out the new Expanding ESOPs website: expandingesops.com. It was just redesigned, and it’s the clearest explanation of the ESOP opportunity I’ve seen in one place.

 

  1. Read the Voices of Ownership wall. Not my words. Theirs. Machinists, drivers, engineers and administrators describing what it changed for their families. It’s the most persuasive thing on the internet about employee ownership. And don’t miss new first-hand accounts this Labor Day week in papers across the country of the life-changing impact of employee ownership from folks like Karrie Ravert, of Your Building Centers in Pennsylvania, and Dan McGowan, of TVF in Carmel, Indiana. “For me, it’s made possible a life my parents and many of their peers had, but which I long believed was impossible for me and my generation,” McGowan writes in Inside Indiana Business. “Pensions, supplemental health care via union membership, solidly-funded social safety nets like Medicare, and home ownership provided security for my parents’ generation. For my age group – early 40s and younger – those avenues to a funded and financially-cared-for retirement flat out don’t exist.”

 

  1. Join the movement. Whether you’re an owner, an advisor, or an employee owner already, there’s a home for you in this movement.

 

Succession is going to happen at your company whether you plan it or not. The only question is who ends up holding the keys.

Happy Labor Day to everyone who has built and continues to build businesses to be better for themselves, their employees, their customers, and their communities.