Asset ownership like a home, stocks, bonds, or even stock in the company where you work is a critical part of taxable wealth generation because well managed assets enjoy compound appreciation and allow the owner to hopefully generate more wealth through ongoing work. Employee stock ownership is a fantastic way to make all workers think, plan, and act like shareholders to generate maximum output and profitability that increases share value. Enlightened capital and management realize the near and long-term benefits of enfranchising workers with an equity stake in their labor. Win for capital and labor cooperation! I briefly highlight two market-leading 100% employee owned companies:
1. Landscape Structures: Minnesota-based manufacturer of playground structures. @$100 million annual revenues and 300 US employees. All structure design, manufacturing, and distribution is executed by American employees who own a stake in their business. They are beating US and foreign competitors with off-shore manufacturing because, in part, all employees are executing as business owners.
2. Recology Green Waste Management: San Jose, CA-based waste management company. Recology processes recycled, garden, and regular trash in processing centers in the Bay Area. What’s interesting here is line workers are members of a trade union, but are also owners in the employee stock ownership program along with management. The trade union manages the workers’ pension assets and the workers have full transparency on the company financial performance from management as shareholders. In the recent down economy, workers decided to freeze compensation for a few years in order to help the company price aggressively and win local multi-year contracts with several Bay Area city governments over traditional waste management competitors. Employee stock ownership is both a competitive advantage and a critical wealth generation vehicle for regular line workers.
The chart below shows the upward parabola power of compound capital appreciation. You can see the account value of $10,000 invested today grow over 30 years assuming a 5.3% real annual return after a 2.2% annual inflation rate. 5.3% real return is a close approximation of the Dow Jones and S&P 500 annual total returns since inception.
Case studies like Recology and Landscape Structures demonstrate that government should tilt the tables to 1) induce current business owners to sell stock tax-free into ESOP programs and 2) allow worker shareholders maximize their productivity and taxable wealth generation which keeps good paying jobs, helps build local communities, and generates stable US-based tax revenues for governments at all levels.