Employee-owners had 92 percent higher median household net worth than non-owners in the same age group.
In 1956, attorney and investment banker Louis O. Kelso structured the first Employee Stock Ownership Plan for Peninsula Newspapers, Inc. in Palo Alto, California.1 The company's employees acquired ownership through a trust that borrowed money to buy shares, then repaid the loan from future earnings. Workers became owners without putting up their own capital.
Kelso had spent years developing what he called the "two-factor theory" of economics, arguing that both labor and capital were productive factors and that concentrating capital ownership in fewer hands was the central economic problem of industrial societies.2
The concept gained legal standing in 1974 when Senator Russell Long of Louisiana championed ESOP provisions in the Employee Retirement Income Security Act. Long, the son of populist governor Huey Long, saw ESOPs as a way to broaden capital ownership without redistribution.3
By 2023, more than 6,600 ESOPs existed in the United States, covering roughly fifteen million employee-participants and holding total assets exceeding two trillion dollars.4
Research from Rutgers University and the National Center for Employee Ownership has found that ESOP companies grow faster, are less likely to lay off workers during downturns, and provide higher retirement savings. A 2017 study found that employee-owners had ninety-two percent higher median household net worth than non-employee-owners in the same age group.5
The German codetermination model and the John Lewis Partnership in Britain represent parallel approaches to the same question of how workers participate in the ownership and governance of the firms that employ them.