If you work for a company that has an Employee Stock Ownership Plan (ESOP) in place you have the opportunity to buy stock in that company while paying off the loan for your capital assets using future earnings (from dividends instead of your savings account or second mortgaging your home) and with pre-tax dollars (which speeds up the pay-off dramatically). In investment circles this strategy is known as leveraging a buy-out (an LBO for short).
As the result, once the loan is paid off, you’ll have two streams of income, one from your wage or salary, and a second from dividends yielded by your newfound ownership. This either increases your take home pay, or it allows you to accumulate funds for retirement, college for the kids, or to have a rainy-day fund in case the corona virus strikes again. In a well-run employee-owned company average workers often retire with plenty of money in the bank.
Even More Upside…
So, what does employee ownership do for the company? For starters, since everyone’s an owner, it eliminates the worker vs. management conflicts that often undermine the efficiency of conventionally organized companies. You’ve effectively united on the ownership side of the ledger so that traditional conflicts between workers, managers, and owners become non-sensical. Lack of conflict tends to strengthen and stabilize the company going into the future.
It also democratizes the workplace. It systematically counteracts and impedes concentrated wealth. That is to say, since workers are also owners, they have the right to a say so in how the company operates through voting their shares for representation on the company’s Board of Directors. In well-run employee owned companies you won’t find CEOs who are being paid 300, 400, or 500 times what the lowest paid workers back in the warehouse are being paid.
There’s still the need for executives in management. However, there’s much more participation in planning, problem solving, and decision making by front-line workers than in conventionally run companies. All this results in higher levels of mutual respect and higher company profits.
It Pays for Everyone to Pull Together!
And since everyone’s an owner, the financial incentives quite literally pay everyone to pull together, in the same direction, at the same time, toward the same goals. When the company wins, everyone wins, not just the few at the top. And when the company loses, everyone loses, not just those at the bottom. As the result, the efficiency and the resiliency of the company (especially in hard economic times) is maximized, while turnover is predictably reduced.
Although there are approximately 8,000 employee-owned companies with 11 million employee-owners in the US today, the problem is that they’re still the rare exception, not the rule. So, employees of conventionally owned companies (even those with stock options) lack the opportunity to use future earnings to pay off loans when purchasing capital shares in the company. Even if they were allowed to buy into their company, they’d need access to the discretionary funds required to do so. And today most workers lack that access.
Moreover, public-sector employees like teachers, police and fire department members, and the armed forces are all left out of the ownership loop. So are women who work hard raising kids or overseeing elderly parents. That is to say, most Americans lack a systematic opportunity to participate in the (usually predictable and profitable) ownership side of the economy because so many are living paycheck to paycheck, needing to feed the kids and pay the rent/mortgage. This eliminates any opportunity for so many to benefit from ownership in our economy. In turn it also increases the wealth gap that threatens to kill what little remains of American democracy.
A $4 Trillion Dollar Idea Whose Time Has Come
In that light let’s recognize that on average, the American economy grows at the rate of $4 trillion dollars annually. That translates into about $12,000 annually for every man, woman, and child in America. But generally speaking who benefits from this annual growth? Obviously it’s those who can afford to buy stocks, bonds real estate, technology, etc. who benefit the most.
The question I want to raise here is, how can we give the average American citizen systematic access to the ownership side of the economy? How can the average Joe gain access to that $4 trillion dollars-worth of predictable growth in order to generate a second stream of investment income, while eliminating the fear and instability that so many Americans suffer from in today’s incredibly imbalanced economy?
Paying Americans to Pull Together…
Consider this. What if the Federal Reserve, through local banks issued $12,000 of INSURED CAPITAL CREDIT to every American citizen annually, along with a stipulation that these funds could only be used to purchase shares of new and transferred capital assets that were predicted to generate enough future profits to pay for these assets? It would cost American taxpayers NOTHING. It creates no government or consumer debt! And, rather than creating government debt-backed currency, our money would be backed by real, productive, private-sector assets
And it won’t be inflationary. All money created would be backed by the full value of private sector assets that citizens would receive insured loans to purchase. Citizens would actually be purchasing newly issued, full dividend payout, voting shares of companies that need new capital assets in order to grow. What this would do however, is give every American citizen equal access to the ownership side of the American economy. It will help democratize the free market. In this moment of political division and strife it literally pays Americans to pull together, at the same time, in the same direction, towards the same goals!
It Systematically Counteracts Concentrated Wealth!
Over time, each American citizen will accumulate more and more equity (instead of debt) and benefit from his or her investment income in a way that only the wealthy can do today. As the result, the need for federally backed social safety net programs (i.e. social security, Medicare, Medicaid, food stamps) will gradually fade away. More people will be able to pay taxes, which in turn decreases the load on those among us who actually still pay taxes. It systematically counteracts/impedes concentrated wealth and it democratizes America’s economy!
Today’s Crisis Wouldn’t Be a Crisis
If the Obama administration had implemented Capital Homesteading in the wake of the 2008 meltdown today’s COVID 19/Unemployment crisis would not be a crisis. People could afford stay at home and still have sufficient income to weather a much less severe storm. Trump has the same opportunity today. Let’s see if he really wants to make America great again.
Capital Homesteading In Detail
I confess, this commentary has been a generalized portrait in dire need of more detail. So, for a full and detailed explanation of how this strategy could be laid out, go to CESJ.ORG and check out the concept that Dr. Norman Kurland calls Capital Homesteading. It’s an ingenious idea whose time is long overdue. And it’s one very good thing that could actually come to fruition as the result of this horrific COVID 19 crisis.