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Employee ownership gives power to the people, not corporations

Economic inequality is worse today than during the “Gilded Age” at the turn of the last century. With most U.S. lawmakers caring more about wealthy 21st-century robber barons than average Americans, there is not a hint of embarrassment concerning a budget that takes from the poor and gives to the rich. This reverse Robin Hood ploy in government spending, justified with the faulty notion of “trickle down” economics, is the latest example of regressive policy designed to further tilt the economic playing field away from benefiting the majority of Americans and their children.

Capitol Hill and White House leadership strive ceaselessly to reward their wealthy campaign contributors, rather than incentivize a healthy local economic multiplier effect for everyone. Nevertheless, there is a faint whisper of bipartisan support in Washington for helping the majority of Americans through legislation focusing on employee-ownership: employees owning stock in the companies where they work.

Four separate bills were introduced during this Congress’ first session to empower employees to share in the responsibility and wealth of their local businesses. Sponsors are Republicans and Democrats, and, oh yes, independent (Bernie Sanders of Vermont). Both Maryland’s U.S. Sens. Ben Cardin and Chris Van Hollen like employee ownership, yet these bills are all but ignored by congressional leadership and the White House, even though they represent a real way to actually “make America great again.” In a nutshell, the 2010 Citizens United Supreme Court Decision gave corporations the rights of individuals. Employee ownership is a way to return the rights held by corporations back to individuals, their communities and all of our children.

In Annapolis, we have a related idea about how to fairly share wealth by grounding economic opportunities in our communities through passage of a Maryland Employee Ownership Act, which would ease the transition to employee ownership for conventional businesses.

Broad-based employee-ownership is a proven strategy to build assets for workers, retain jobs in our neighborhoods and provide a meaningful and financially rewarding exit for retiring business owners. Employee-owned enterprises perform better in terms of productivity and sales growth, and they also tend to be greener and more socially just than traditional businesses. But perhaps their most important attribute for Maryland is that they maintain employment during downturns.

Maryland lost approximately 35,000 jobs due to the permanent closure of businesses with more than 20 employees between 2001 and 2010, according to the Small Business Association. This is due in part to the fact that 82 percent of business owners have no exit plan. Also, less than half of closely held businesses find a buyer when they’re ready to sell. With 60 percent of businesses owned by baby boomers, job losses associated with the generational transition are expected to increase. Employee-ownership is the natural solution to this “Silver Tsunami” of retiring boomers.

The transfer of healthy businesses to employee-ownership is a reliable transactional process –– Maryland’s existing 130-plus employee-owned companies can attest to this fact. Yet, a lack of public awareness and accessible incentives remain major obstacles to scaling employee-ownership.

A Maryland Employee Ownership Act can remove these burdens through:

  • A 100 percent state capital gains tax exemption to owners who transfer their business to their employees;
  • A state center to build awareness of worker-ownership as a preferred exit strategy for business owners;
  • Loan guarantees to banks and loans to business for the purpose of financing a transfer to employee-ownership;
  • And support for employee-owned businesses in government contracting.

Passage of these four policies will continue the strong history of employee-ownership in Maryland while leading to more quality jobs for Maryland’s workers, reducing fiscal burdens on the state and making us more competitive — all while supporting economic growth for Maryland businesses.

In Wisconsin, where all four provisions were recently introduced, the policies were found by the state to be revenue-neutral to slightly positive. In New Jersey, a 100 percent capital gains tax exemption on transfers to employee-ownership is under consideration and expected to pass. Moreover, New York just passed legislation in support of employee-ownership. If other states can recognize the value of supporting and growing their local economies, so can Maryland.

As we can see from the long list of successful employee-owned businesses (Publix Supermarkets, W.L Gore and Associates, and the New Belgium Brewing Company, among others), employee-ownership is possible. It promotes localism, self-reliance and pride, and it works for everyone. As David Brodwin of the American Sustainable Business Council has pointed out, a fair and viable economy requires more employee-owned enterprises because they stabilize consumer incomes and spending power, along with employment and corporate cash flows, while holding in check the inevitable extremes of business cycles.

With the budget-busting tax law coming out of Washington, passage of an Employee-Ownership Act is more critical than ever. Ask your state and federal senators and representatives to help the bipartisan effort by co-sponsoring employee-ownership bills in the upcoming session — both nationally and in Maryland.

Christopher K. Croft (ckcroft@mdceo.org) is executive director of the Maryland Center for Employee Ownership, chair of the Sierra Club's Greater Baltimore Group Labor and Economic Justice Campaign, and an adjunct professor of sustainable communities and a research fellow at the University of Baltimore.

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