EMPLOYEE OWNERSHIP PROGRAMS
"To Own or Not to Own,
That is the Question"

Summary

Timeline

EO Today

Summary

18th and 19th Century There is a long history of EO in the United States.  Worker cooperatives date back over two hundred years to the 1790s.  Cooperatives began to gain popularity in the 1830s as workers began to respond to strikes, lockouts and recessions.  During this time period, cooperatives also became linked to the counter-culture, or Socialists movement.  ESOPs and profit sharing were first introduced in the 1870s as potential solutions for the evils caused by the industrial revolution.  Despite the initial alliance between the labor movement and EO programs, the American Federation of Labor pushed aside cooperatives in favor of collective bargaining.  According to the AFL leaders, cooperatives were considered too difficult to deal with due to the additional time and energy required to train the workers as managers.

20th Century

After World War I, ESOPs began to flourish and the EO momentum continued throughout the Depression Era.  During the 1930s, the EO movement was fueled by the popularity of the self-help cooperative movement.  The foundation for the modern day ESOP movement has it roots in the 1950s.  Louis Kelso, an investment banker, wrote two books, The Capitalist Manifesto and The Two Factor Theory.  In his two books, Kelso outlined how ESOPs can be used as a corporate financial tool:

Prevention of hostile takeovers

Redistribution of wealth

Increased productivity

The next major evolvement in the ESOP movement after Kelso's contribution was the tax reforms during the 1970s.  These tax reforms designated ESOPs as "qualified and defined contributions".  In other words, employers were allowed to deduct the contributions which they made to the ESOP trust fund.

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Employee Ownership Today

Today, three forces are driving EO opportunities:

• Ideological,
• Economic, and
• Legislative.

From an ideological perspective, EO draws heavily from concepts of powersharing and increased worker participation.  Several movements from the 1970s, including decentralization, accountability, and self determinism, provided the necessary foundation for discussions concerning powersharing and increased worker participation.  The Reagen-era was marked by the self-help and entrepreneur culture.  Again, EO fits in well with these ideological movements as well.

EO also draws from economic arguments.  As the economy experiences structural changes, such as a plant closing, mergers and consolidations, and/or a decline in productivity or competitiveness, EO is often considered a strategic option.

Recent legislative changes have been designed to help places adjust to the economic structural changes described above.  For example, legislation was adopted which requires a certain pre notification period if a plant was going to close.  Second, there has been increased funding for EO programs at both the federal and state level.  Finally, legislation is facilitating the development of support networks and agencies to promote EO programs.  For example at the national level, the National Consumer Cooperative Bank was founded in 1979; at the state level, Pennsylvannia spent $15 million in 1984 to establish the Employee Ownership Assistance Program.

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Definition	Theoretical Justifications
History: US Context	Role of Economic Developer
Key Success Factors	Framework for Evaluation
State Agencies	Resources and Other Links