The boom economy of the 90's that has generated enormous new wealth for the already affluent has also deepened the economic imbalance that has divided American society and has left millions of middle-class Americans struggling to survive with lower pay, uncertain jobs, temporary work, and the competing demands of balancing family and two careers.

Last year, the Federal Reserve reported that 60% of American families own no stock at all -- no 401 (k) plan, no mutual fund, no company stock, no pension plan invested in stock. Furthermore, among the 40% who do own stock, ownership is heavily concentrated at the top. The top 1% of the wealthy own nearly 50% of all stock in America.

Many financial analysts agree that there is no way society can sustain this much accumulated wealth distributed to so few people in the long-run. Continuing to manage the firm in the short-term with "shareholder value" as the primary goal will become counterproductive. Our future calls for workers to be viewed in a new paradigm - as partners, not as subordinates.

Ultimately, greater economic growth can only be achieved by a broadening of corporate ownership through employee ownership.

Modern ESOP Expansion in the United States
The mushrooming of employee ownership over the last decade is due in large part to the legal recognition of ESOPs in the Employee Retirement Income Security Act of 1974 (ERISA). This act gave statutory definition to a concept introduced by Louis Kelso and Patricia Hetter in How to Turn Eighty Million Workers Into Capitalists On Borrowed Money (1967). Kelso and Hetter believed greater economic growth could be achieved by a broadening of corporate ownership.

Since capital is the primary source of an affluent society, "universal capitalism" is a prerequisite for real economic expansion. A vehicle was needed to encourage a broader population to accumulate shares of corporate ownership so individuals could gain a viable share of corporate wealth which they in turn could use to develop their personal wealth. Kelso and Hetter believed that as the number of people with multiplying net worth grows, so would the economy grow at a substantially increased rate. They proposed to motivate corporations via tax incentives and finance the leveraged acquisition of new capital through the discount window of the Federal Reserve. Less than a decade later the first part of their proposal was made part of U.S. economic policy as Congress awarded ESOPs tax-favored status in the Employee Retirement Income Security Act (ERISA) of 1974.

The Corporate Performance Advantage
Sharing ownership with employees offers the opportunity to involve the workforce in the business with the same sense of responsibility that an owner experiences. An employee-owner or "worker-owner" is more than a wage earner; he or she is also an owner of the means of production.

Consider the difference between renting and owning a home. Unlike a person who rents, the home owner has equity in his or her investment and therefore will have an incentive to increase the value of that investment. After all, how many renters do you know that paint the outside of their residence? Just like a homeowner, an employee-owner has a greater incentive to drive the value of stock in his or her company. This can result in reducing scrap, generating creative ideas on how to improve a process, and producing better quality products.

When employees have an ownership interest in their company and are valued for their input, their jobs become more meaningful. Satisfied employees as well as satisfied customers stay with the company longer!

The Ohio Employee Ownership Center (OEOC) at Kent State University surveyed 167 Ohio ESOP companies and found that employee-ownership coupled with participation, education and information leads to higher financial performance. Equally important, a study in the State of Washington showed that companies which reward employee participation with stock ownership outperform those which only reward participation with profit sharing.

The transformation of workers into owners requires a commitment to cultivating a genuine sense of ownership where the employees take the responsibility of ownership seriously and their actions contribute to the company's success.

This is not a radical new concept. In the 1919 Program of Social Reconstruction, Catholic leaders observed "the full possibilities of increased production will not be realized so long as the majority of workers remain mere wage earners. The majority must somehow become owners, at least in part, of the instruments of production." This judgement stills remains valid in today's economy. Today, there are over 11,000 established employee-owned companies and 9.5 million employee owners in the U.S. That's about 8% of the our private sector.