May 16, 2023

Van Hollen, Rubio, Phillips, Moore Introduce New Bipartisan, Bicameral Bill to Boost Employee Ownership of Businesses

Bill would help return American profits to American workers, instead of foreign investors

Today, U.S. Senators Chris Van Hollen (D-Md) and Marco Rubio (R-Fla.) and U.S. Representatives Dean Phillips (D-Minn.) and Blake Moore (R-Utah) introduced bipartisan, bicameral legislation to make it easier for private companies to transfer ownership of the business to their employees. Right now, over 40 percent of U.S. corporate stock is owned by foreign investors, and foreign corporate ownership is set to increase as a wave of business owners in the baby boom generation retire and sell their companies. The lawmakers’ Employee Equity Investment Act would return a greater share of American profits to American workers, by supporting the sale of businesses to their employees. Van Hollen and Rubio were joined in introducing this legislation by Senators Tammy Baldwin (D-Wis.), Todd Young (R-Ind.), Jeanne Shaheen (D-N.H.), and Mike Braun (R-Ind.), as well as Representatives Chrissy Houlahan (D-Pa.), Dusty Johnson (R-S.D.), Jill Tokuda (D-Hawaii), Brian Fitzpatrick (R-Pa.), Mark Pocan (D-Wis.), and Dan Meuser (R-Pa.).

“American workers are the true power behind our economy. By investing in employee ownership, we’re investing in our workers and putting more of their hard-earned dollars back in their pockets, instead of sending U.S. profits overseas. This bipartisan bill will offer up-for-sale businesses the tools to transition to employee ownership – empowering workers and keeping jobs and opportunity here at home,” said Senator Van Hollen.

“Employee ownership empowers workers and improves productivity. The Employee Equity Investment Act would help facilitate and promote the sale of companies to their employees. By encouraging a system that allows employees to invest in themselves and the companies they work for, we can strengthen our economy and keep American companies in America,” said Senator Rubio.

“My family taught me that business is a means to an end; and that end is ensuring success is shared with the people and communities who help create it,” said Rep. Phillips. “Over the coming years, millions of small business owners will reach retirement age and sell to competitors or other buyers in the mergers and acquisitions market - which often results in jobs leaving the communities that rely on them. Expanding opportunities for employee ownership will help keep businesses and jobs in local communities, allow American workers to build wealth for their families, and result in more sustainable and resilient communities. Employee ownership is both good business and good for business.”

“Utah boasts a flourishing ecosystem of employee-owned businesses that create value for both their customers and employees. We must ensure that our federal programs do not inadvertently hinder opportunities for companies to transition to an employee-ownership model, and the Employee Equity Investment Act (EEIA) is designed to accomplish this goal without imposing any additional burden on taxpayers,” said Rep. Moore

“American workers deserve to enjoy all the fruits of their labor in the work place, yet still far too many foreign entities are reaping the benefits of our very own workforce in corporate stock ownership. I’m proud to join this bill that will put a greater share of American profits back in the pockets of those who earned them and strengthen American industries as whole,” said Senator Braun.

Text of the legislation is here.

Studies have shown that employee-owned companies are more productive, prove more resilient during challenging economic conditions, and enable workers to build more wealth compared to those at traditional firms, while keeping local businesses rooted in their communities.

Nearly half of all private businesses are owned by individuals who are at or near retirement age – totaling 2.9 million companies that employ over 32 million workers. Many of these owners will sell their businesses to buyers in the mergers and acquisitions (M&A) market or close their doors, ultimately resulting in the loss of jobs and businesses in local communities. Employee ownership can be a solution to preserving those jobs and local economic activity, but the current process of transitioning to this model is burdensome. The status quo typically places the onus on the business owner to initiate the transaction, ensure compliance with complex regulations, and provide the financing themselves – a difficult ordeal that, provided it is successful, ends with owners waiting several years to receive their full payout from the transaction.

The lawmakers’ bill works through the longstanding Small Business Investment Company (SBIC) program at the Small Business Administration (SBA), which provides loan guarantees to investment funds that invest in small businesses. In order to make employee ownership more viable, the Employee Equity Investment Act uses the SBIC program to support a new generation of investment funds that are devoted to expanding employee ownership at small and mid-size businesses. These investment funds would finance and facilitate the process of selling a company to its employees, and sustain and expand existing employee-owned firms. As under the current SBIC program, loan guarantees would be provided on a zero-subsidy basis with fees paid by the investment funds, in order to expand access to financing without cost to the taxpayer.

Stakeholders endorsing the Employee Equity Investment Act include The ESOP Association, Ownership America, National Cooperative Business Association, Employee-Owned Contractors Roundtable, Economic Innovation Group, Small Business Majority, and U.S. Impact Investing Alliance. A full list of endorsing organizations is here.

A one-page fact sheet on the legislation is here.

“The ESOP Association fully supports and endorses the bipartisan Employee Equity Investment Act. This important bill addresses a critical factor currently preventing ESOP growth – access to capital. When the Employee Equity Investment Act becomes law, the known benefits of employee ownership could be extended more broadly nationwide to benefit workers, families, businesses, and the communities in which they live and operate. We appreciate the sponsors’ work with the employee ownership community to develop this bill and are grateful to the bipartisan congressional ESOP champions who have found common ground,” said James Bonham, President and CEO of the ESOP Association.

“Access to capital is a key missing piece needed to spur a new wave of ESOPs, and so the Employee Equity Investment Act is a bold, substantive step towards improving the finance landscape for ESOPs. The ESOP Association’s Public Policy Council has closely studied access to capital issues, and addressing this matter is a cornerstone of TEA’s public policy agenda. Members of Congress, both House and Senate, who developed this bill should be applauded for their leadership,” said Peter A. Ney, Executive Vice President, Treasurer and Director at EA Engineering, Science, and Technology, Inc., PBC located in Hunt Valley, Maryland, and Chair of the ESOP Association’s Public Policy Council.

“Lifting up the middle class requires more Americans having the opportunity to build wealth through equity ownership. The EEIA is a transformational piece of legislation that will enable a new generation of Americans to become employee owners and retire with dignity. By making employee ownership a more viable option for business succession, this bipartisan legislation will contribute to a more dynamic, inclusive, and resilient American capitalism,” said Jack Moriarty, Founder and Executive Director of Ownership America.

“American workers are the driving force behind the U.S. economy’s strength, dynamism and resilience. And with the right tools, investors can help empower them further. The U.S. Impact Investing Alliance is proud to endorse the Employee Equity Investment Act, a worker-focused piece of legislation that will leverage private capital to bolster employee ownership models and generate long-lasting economic opportunities for entrepreneurs, small businesses and local communities,” said Fran Seegull, President of the U.S. Impact Investing Alliance.

“The Economic Innovation Group (EIG) applauds the introduction of the bipartisan Employee Equity Investment Act. This legislation would help a wider array of small and medium-sized businesses whose owners are nearing retirement age make the transition to employee ownership, thereby supporting local economies and building wealth and retirement security for American workers,” said John Lettieri, President and CEO of EIG.

“The Employee Equity Investment Act (EEIA) is essential to unlocking opportunity and wealth creation for women business owners. The EEIA will provide a financing mechanism by which retiring women owners of successful businesses can ‘cash out’ and sell it to their workers, sustaining their legacy and growing the economy. We thank Senators Van Hollen, Rubio, Baldwin, Young, Shaheen, and Braun and Representatives Phillips, Moore, Houlahan, and Johnson for their bicameral, bipartisan leadership to introduce the EEIA,” said Lisa Coppola, National Advocacy Committee Chair of the National Association of Women Business Owners.