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Pennsylvania State Senate
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=S&SPick=20130&cosponId=14834
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Senate of Pennsylvania
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted: June 5, 2014 01:05 PM
From: Senator Stewart J. Greenleaf
To: All Senate members
Subject: Employee Ownership Program
 
I recently had the opportunity to meet with employees of a company in my district to discuss employee ownership. The entire staff shares ownership in the company. Since adopting an Employee Stock Ownership Plan (ESOP), the company has seen an increase in productivity, improved consumer relations and increased sales.

In the Employee Retirement Income Security Act of 1974, Congress codified a technique of corporate finance which utilizes employee stock ownership, officially named an Employee Stock Ownership Plan (ESOP). ESOPs serve the dual purpose of providing retirement savings and stock ownership for employees as well as being a financing method for businesses. According to the National Center for Employee Ownership (NCEO), there are about 12,000 ESOP-owned companies or similar trust-based plans that cover 11 million participants. It is estimated that Pennsylvania has 500 companies with ESOPs or similar trust-based plans covering about 900,000 participants.

Research shows that employee ownership increases employment, productivity, wages and sales. Employee ownership keeps businesses and jobs in state. According to NCEO, ESOP-owned companies are 25% more likely to stay in business and employee-owners were 4 times less likely to be laid off during the recent recession. In addition, ESOPs have 25% higher job growth than comparable companies without such a plan over a 10 year period. Further, ESOPs have a number of tax benefits including making company contributions and dividend payments tax-deductible.

That being said, however, business owners may be unaware of ESOPs or lack clear understanding about such plans, how they operate and the advantages associated with them. ESOPs could provide an effective tool for companies going through ownership transition by preserving their companies and jobs through employee ownership rather than closing or selling them to out of state, or out of country buyers. Increased use of employee ownership plans can substantially increase the income and financial security of the citizens of Pennsylvania. Employee ownership helps to keep jobs in the United States, increases quality, and provides employees with sufficient retirement plans, reducing reliance on Social Security.

Recognizing the above, I plan to introduce two measures. Please respond by the close of business on Wednesday, June 11th.



Document #1

Introduced as SB1421

Description:

A bill providing that the Department of Community and Economic Development (DCED) may establish and administer a program to encourage employee stock ownership plans and other forms of employee ownership in existing and start-up businesses.  DCED may enter into memoranda of understanding with one or more organizations to implement and administer such program. Any such memorandum shall provide that any such organization shall not charge the state for any costs incurred in the implementation or administration of such programs. Such organizations shall include, but not be limited to, economic development corporations, regional economic development corporations and other nonprofit organizations with expertise in employee ownership plans.

 
Such a program shall: (1) Provide education and outreach to inform employees, employers and entrepreneurs about the possibility and benefit of employee ownership, business ownership succession planning and employee participation in business decision-making, including providing information about financial education, employee teams, open-book management principles that provide employees with financial information regarding business performance and other tools that enable employees to share ideas and information about how their businesses can succeed; (2) Provide technical assistance to assist efforts to form and transition to employee-owned businesses, to enable employers and employees to explore and assess the feasibility of transferring full or partial ownership to employees and to encourage employees and employers to start new employee-owned businesses; (3) Train employees and employers with respect to methods of employee participation in such open-book management, work teams, committees and other approaches for seeking greater employee input; and (4) Develop partnerships with the State System of Higher Education, State-related universities and a business and industry trade association in order to host educational events to promote awareness and understanding of employee ownership of businesses.  
 
Within one year of such a program being established, and annually thereafter, the department shall provide a report to the Senate Community, Economic and Recreational Development Committee and the House Commerce Committee regarding the program.
 
 

Document #2

Introduced as SR408

Description:

A resolution that would urge the Department of Community and Economic Development to establish an employee ownership program to promote business retention and growth in the Commonwealth.