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tommy tuberville
Employee Ownership: A Surprisingly Bipartisan Solution to Inequality
Broad-based employee ownership is one approach to economic opportunity that has wide political support, a demonstrated record of success, and great untapped potential.
Jan 28, 2024
A recent Oxfam report found that “the combined fortunes of the world’s five richest men have more than doubled to $869 billion since 2020, while 5 billion people have been made poorer.” The report makes a number of recommendations to help address the problem of wealth insecurity, one of which is supporting employee ownership.
That may seem like a stretch in today’s polarized political climate, but, in fact, employee ownership has the support in Congress of Sens. Bernie Sanders (I-Vt.), Tommy Tuberville (R-Ala.), Elizabeth Warren (D-Mass.), Ron Johnson (R-Wis.), and just about everyone in between. In fact, over the last 46 years, employee ownership has consistently been supported by virtually all members of both parties through a variety of tax and financial incentives.
There are 14 million employees in the most common form of employee ownership in the U.S., the Employee Stock Ownership Plan (ESOP). The average account value for these plans is $136,000 per employee, and much more for longer-tenured workers. ESOP-owned companies grow faster than their competition, lay people off at one-third to one-fifth the rate, and have far lower voluntary turnover.
By contrast, 50% of the private sector workforce is in no retirement plan at all, and half the households cannot put their hands on $1,000 in an emergency. While most ESOPs are in companies with 20-100 employees, the 100 largest ESOP-owned companies employ close to 700,000 people and include some of the largest companies in their fields.
It is not difficult to persuade legislators that this is a good idea, but there needs to be a real push to make people see it as an important idea.
There is a lot of conversation about income inequality, but this is only half the story. While real wages have been largely stagnant since the 1970s, returns on capital have been impressive. The Dow had only three digits in the 1970s and has five today. If more workers were owners, more families could afford to retire, to buy a home, to send their kids to college, and do all the other things only wealth can provide.
Broad-based employee ownership is one approach to economic opportunity that has wide political support, a demonstrated record of success, and great untapped potential. Employee-owned companies perform better, and their employees are much more economically secure. You would think pundits and politicians would be shouting from the rooftops about an idea that both works to improve people’s lives in meaningful ways and is politically feasible. But almost no one does.
Employee ownership can involve employees buying stock, but most broad-based employee ownership in the U.S. allows working people to become owners without their having to cough up scarce dollars to do so. ESOPs, the major form of employee ownership, are funded by the company, almost always as an additional employee benefit. Over 90% of these plans are in closely held companies, where they are usually used as a means to provide for business transition, creating an ideal scenario for the wave of retiring baby boomer business owners who want to manage a transition in a way that preserves their business legacy. Congress has granted these plans and owners selling them significant tax benefits.
It is far past time for people to start talking about this. While Congress has provided generous tax support for ESOPs, there is more that needs to be done, especially in helping make more financing available and supporting outreach efforts to educate business owners about why ESOPs can be a good idea for their companies. The Worker Ownership Readiness and Knowledge Act (the “WORK Act”), for instance, passed in 2022 and would fund state employee ownership outreach programs, but it will need funding in the next congressional budget to become effective. The Employee Equity Investment Act would provide government-backed financing for companies to use ESOPs to buy out existing owners of closely held businesses. It has bipartisan support. State programs have been enacted in a number of states, but more are needed.
It is not difficult to persuade legislators that this is a good idea, but there needs to be a real push to make people see it as an important idea. That can happen if more voices are raised to support it.
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Ban Congressional Stock Trading to Help Control Pentagon Budget
Support for higher budgets can lift share values of members invested in weapons industry stocks. These votes for Pentagon increases may be based on other considerations, but trading creates the opportunity for self-dealing and profiteering.
Jul 30, 2023
A new bill being introduced by Sens. Kirsten Gillibrand (D-N.Y.) and Josh Hawley (R-Mo.) would bar executive branch officials, members of Congress, and their families from owning or trading stocks in individual companies.
Efforts to curb or ban stock trading by members of Congress have gained momentum in the past few years, with a slew of bills on the topic, as well as major investigations by The New York Times and Wall Street Journal.
Letting members play the stock market creates conflicts of interest that are an invitation to corruption. This is particularly troubling when these deals involve members who have decision making power over spending on the Pentagon, intelligence, and homeland security. America’s security should not be for sale.
Investigations by major news outlets and non-governmental organizations have identified at least 25 members of key national security committees with investments in arms industry stocks.
Support for higher Pentagon budgets can lift share values of members invested in weapons industry stocks. These votes for Pentagon increases may be based on other considerations, but the key point is that stock trading creates the opportunity for self-dealing and profiteering on the part of key members of Congress. The temptation for corrupt decision making is itself a serious problem. Even the appearance of conflicts of interest undercuts public trust in the budget decision making process.
Investigations by major news outlets and non-governmental organizations have identified at least 25 members of key national security committees with investments in arms industry stocks, in firms ranging from top-ranked contractors like Lockheed Martin and Raytheon to lesser known companies like Huntington Ingalls Industries and L3 Harris.
Examples include Sen. Tommy Tuberville (R-Ala.), a member of the Senate Armed Services Committee, and a prolific stock trader. Tuberville is best known for putting a hold on top military nominations to protest the Pentagon policy that covers abortion-related travel expenses for service members based in states with restrictive reproductive healthcare laws. The Pentagon estimates that Tuberville’s actions could impact 650 positions by the end of this year.
Meanwhile, Tuberville reported owning hundreds of thousands of shares in Honeywell, Lockheed Martin, General Electric, Raytheon, and General Dynamics since 2020. Additionally, he sold his shares of Microsoft about two weeks before it became public that the company’s $10 billion contract with the Pentagon was canceled. He also bet against a Taiwanese company whose stock is often affected by U.S.-China relations, as RS’s Connor Echols reported earlier this year.
Another SASC member, Sen. Jacky Rosen (D-Nev.) reported co-owning $110,000 worth of shares in General Electric with her husband. Rep. John Rutherford (R-Fla.) bought shares in Raytheon on February 24, 2022—the day Russia invaded Ukraine. Rutherford sits on the House Appropriations homeland security subcommittee. Rep. Josh Gottheimer (D-N.J.), who sits on the House Permanent Select Committee on Intelligence (and is the ranking member of the National Security Agency and Cyber subcommittee) has traded millions in Microsoft shares—the latest example being his purchase of three $1-5 million blocs of shares on May 15 and 16 this year.
There are a number of cases in which members have failed to comply even with the weak rules that are now on the books, which involve periodic reporting on stock deals.
As the Project on Government Oversight has pointed out, the best way to eliminate the potential conflicts of interest inherent in congressional stock ownership is to institute a comprehensive ban on trading in stocks by all members of Congress as well as immediate family members and senior staff—with no loopholes, and no complex work-arounds. POGO elaborated on the features of a strong stock trading ban in congressional testimony last year. Many recent legislative proposals fall short of this standard.
Stock trading is just one potential financial incentive for members of armed services, defense appropriations, intelligence, and homeland security committees to jack up military spending. Campaign contributions, arms-related jobs in a member’s state or district, and lobbying by former colleagues also exert pressure to up the Pentagon’s already enormous budget.
For example, Rep. Mike Rogers (R-Ala.), chairman of the House Armed Services Committee, was the top recipient of defense industry campaign contributions during the 2022 midterm election cycle, getting over $511,000 in donations from weapons makers. The aforementioned Sen. Tuberville has received over $244,000 in arms industry contributions since 2017.
Meanwhile, in the past two years—prior to this year’s debt ceiling deal—Congress added $25 billion and $45 billion to the Pentagon budget, respectively, beyond what the department even asked for. Much of this funding was for projects in the districts or states of key members. And in many cases the member in question even issued a press release bragging about the items they added to the budget. These statements are almost always accompanied by a perfunctory argument that the additional spending is necessary for national security, but in many cases these protestations are just a smoke screen to hide the fact that these decisions serve special interests, not the national interest.
Adding unnecessary weapons to the budget for economic and political reasons is a form of legalized corruption that wastes scarce taxpayer dollars and undermines the possibility of aligning arms spending with a more sound defense posture.
Stock trading is just one piece of a larger problem of undue pressures on Congress to “go big” on Pentagon spending. But eliminating it would be a step in the right direction that might encourage initiatives to reform other practices that stand in the way of crafting a more realistic Pentagon budget in service of a more coherent defense strategy.
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