Young, Colleagues Introduce Bill to Boost Employee Ownership of Small Businesses

Sen. Todd Young | Official U.S. Senate headshot

By Hoosier State Today Report

Jun 6, 2023

WASHINGTON – U.S. Senators Todd Young (R-Ind.), Chris Van Hollen (D-Md.) and Marco Rubio (R-Fla.), along with U.S. Representatives Dean Phillips (D-MN-03) and Blake Moore (R-UT-01), introduced bipartisan, bicameral legislation that would make it easier for private companies and small businesses to transfer ownership of the business to their employees.

Right now, over 40 percent of U.S. corporate stock is owned by foreign investors, and foreign corporate ownership is set to increase as a wave of business owners in the baby boom generation retire and sell their companies. The Employee Equity Investment Act would return a greater share of American profits to American workers by supporting the sale of businesses to their employees.

“Helping employees invest in the companies they work for is good for America’s economy and workers,” said Senator Young. “Our bipartisan bill will reduce existing barriers that hinder companies from transitioning to an employee-ownership model, grow our economy, and keep jobs in local communities.”

“American workers are the true power behind our economy. By investing in employee ownership, we’re investing in our workers and putting more of their hard-earned dollars back in their pockets, instead of sending U.S. profits overseas. This bipartisan bill will offer up-for-sale businesses the tools to transition to employee ownership – empowering workers and keeping jobs and opportunity here at home,” said Senator Van Hollen.

“Employee ownership empowers workers and improves productivity. The Employee Equity Investment Act would help facilitate and promote the sale of companies to their employees. By encouraging a system that allows employees to invest in themselves and the companies they work for, we can strengthen our economy and keep American companies in America,” said Senator Rubio.

In addition to Senators Young, Van Hollen, and Rubio, Senators Tammy Baldwin (D-Wis.), Jeanne Shaheen (D-N.H.), and Mike Braun (R-Ind.) also cosponsored the Senate legislation. Representatives Chrissy Houlahan (D-PA-06), Dusty Johnson (R-SD), Jill Tokuda (D-HI-02), Brian Fitzpatrick (R-PA-01), Mark Pocan (D-WI-02), and Dan Meuser (R-PA-09) also cosponsored the House legislation.

Stakeholders endorsing the Employee Equity Investment Act include The Employee Stock Ownership Association, Ownership America, National Cooperative Business Association, Employee-Owned Contractors Roundtable, Economic Innovation Group, Small Business Majority, and U.S. Impact Investing Alliance.

Full legislative text can be found here. A summary of the bill can be found here.

Background:

Studies have shown that employee-owned companies are more productive, prove more resilient during challenging economic conditions, and enable workers to build more wealth compared to those at traditional firms, while keeping local businesses rooted in their communities.

Nearly half of all private businesses are owned by individuals who are at or near retirement age – totaling 2.9 million companies that employ over 32 million workers. Many of these owners will sell their businesses to buyers in the mergers and acquisitions (M&A) market or close their doors, ultimately resulting in the loss of jobs and businesses in local communities. Employee ownership can be a solution to preserving those jobs and local economic activity, but the current process of transitioning to this model is burdensome. The status quo typically places the onus on the business owner to initiate the transaction, ensure compliance with complex regulations, and provide the financing themselves – a difficult ordeal that, provided it is successful, ends with owners waiting several years to receive their full payout from the transaction.

The Employee Equity Investment Act works through the longstanding Small Business Investment Company (SBIC) program at the Small Business Administration (SBA), which provides loan guarantees to investment funds that invest in small businesses. In order to make employee ownership more viable, the legislation also uses the SBIC program to support a new generation of investment funds that are devoted to expanding employee ownership at small and mid-size businesses. These investment funds would finance and facilitate the process of selling a company to its employees, and sustain and expand existing employee-owned firms. As under the current SBIC program, loan guarantees would be provided on a zero-subsidy basis with fees paid by the investment funds, in order to expand access to financing without cost to the taxpayer.