How ESOPs Contribute to Job Creation

A study out of Matrix Global Advisors has found that private employee stock ownership plans (ESOPs) organized as S-corporations have increased employment by 60 percent over the past decade while the overall private sector has remained flat. Since a change in the U.S. tax code in 1998, thousands of ESOP-owned S corporations have appeared and employed millions of people. ESOPs drive participation and engagement by aligning the employee’s interests with that of the company.

“The unique strengths of employee ownership drove company gains and jobs in the past decade, while helping insulate S-ESOP businesses from the adverse effects of the recent recession,” wrote Alex Brill, chief investigator for the report. The study, which assessed the 10-year performance of S-ESOP companies, also found the following key findings:

• S-ESOP companies experienced must more employment growth pre-2008 than private businesses.

• S-ESOP companies regained their momentum quicker than the rest of the private sector post-recession.

• The S-ESOP structure particularly benefited the manufacturing sector which helped to buffer manufacturers through the worst of the economic crisis.

These striking benefits were attributed to the effects of employee ownership where employees are much more invested in the economic success of their workplace. Access the full report, entitled An Analysis of the Benefits S-ESOPs Provide to the U.S. Economy and Workforce.