Freeman, Steven F
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PublicationS Corp ESOP Legislation Benefits and Costs: Public Policy and Tax Analysis(2008-07-29) Freeman, Steven F; Knoll, Michael; Freeman, Steven F; Knoll, MichaelSamuel Zell’s acquisition of the Tribune Company in December 2007 using an S corporation employee stock ownership plan (S ESOP) brought S ESOPs to national attention. An S ESOP is a trust that holds shares of an S corporation (a closely held corporation whose shareholders are taxed on a pass-through basis similarly to partners in a partnership) for the benefit of the corporation’s employees. S ESOPs, which have only existed since 1998 are not as well known as C ESOPs, an ESOP that holds shares of a C corporation (a separately taxed corporation). Enron, Polaroid and United Airlines, all of which had ESOPs when they went bankrupt, were C corporations. Perhaps because they have only existed for ten years, little academic attention has focused on S ESOPs. In this paper we draw on the extensive existing employee ownership literature to describe the benefits and costs to employees, to firms and to society at large from the legislation that authorizes S ESOPs, and, where possible, we quantify these costs and benefits. We estimate that annual contributions to S ESOPs on behalf of employees total $14 billion, which represent additional compensation that would not have been paid without an ESOP. Annual gains attributable to increased job stability also save employees approximately $3 billion annually. Accumulated stakes, which are essentially forced savings and usually do not displace other savings, lead to additional annual accruals of $34 billion. Employers pay for ESOP contributions out of firm-level productivity and sales gains of $33 billion annually attributable to employee ownership. We estimate that one quarter of the annual gain, $8 billion ultimately goes to the federal treasury, which thereby also benefits from the adoption of S ESOPs. PublicationEffects of ESOP Adoption and Employee Ownership: Thirty years of Research and Experience(2007-01-04) Freeman, Steven F; Freeman, Steven FAn important, but little reported development in US business has been increasing numbers of employees with ownership rights in the corporation with an increasingly large economic value. Most comes through Employee Stock Ownership Plans (ESOPs), which were established in 1974 partly as a response to anticipated shortfalls in Social Security, but also with the hope of invigorating the economy and distributing the benefits of capitalism more widely through broad-based business ownership. Experience and research indicate that ESOPs and employee ownership more generally do accomplish these aims, but large knowledge gaps remain. Research does confirm that individual employee-owners benefit from ESOPs. Equity comes on top of, not in place of, other compensation. Employee ownership is also associated with considerably greater employment stability and, in firms that simultaneously increase worker participation in decision making, the result is increased job satisfaction, organizational commitment, identification, motivation, and workplace participation. High profile cases accentuate potential risks through lack of diversification, but most employee-owners are less vulnerable than counterparts. Research confirms also that employee ownership, on average, leads to increased firm productivity, profitability, and longevity. Evidence suggests that combining employee ownership with increased employee participation may generate astounding returns on investment. Little is known, however, about management of employee owned firms and few projects even attempt to justify societal claims. Economists, managers, and financiers remain skeptical of employee ownership, and few studies directly counter their concerns. Problems associated with employee ownership go unstudied. For all the extent and appeal of employee ownership, it is on the fringe of both social consciousness and the academic literature. Employee ownership is one of the few issues on which the political left and right can agree, and is thereby capable of attracting strong support across the US political spectrum. Recent concerns about social security solvency suggest further inducements to widening ESOPs. Given this opportunity, increased knowledge can help promote employee ownership, help ensure its wise adoption and successful implementation, and intelligently influence public policy. PublicationCorporate Practices that Inhibit and Drive Innovation for Sustainability(2012-04-03) Barstow, Alan M; Freeman, Steven F.; Finn, Steven M; Nuessle, Frank; Barstow, Alan M; Freeman, Steven F.; Finn, Steven M; Nuessle, FrankProposal to the Eastern Academy of Management to conduct a discussion symposium regarding a systematic review of the body of research on innovation for sustainable business.