SACRAMENTO – Senator Josh Becker announced legislation today to expand employee ownership of businesses in California by providing education, technical assistance and other supportive resources for enterprises making the transition.
Senate Bill 1407, the Expanding Employee Ownership Act, reduces the barriers for businesses seeking to transition to employee ownership and worker-led models, such as employee stock ownership plans, known as ESOPs, and worker cooperatives, or co-ops.
“ESOPs and worker co-ops are beneficial to owners and employees alike, but transitions seldom occur,” said Senator Josh Becker, D-Peninsula, a member of the Senate Business, Professions and Economic Development Committee.
“We need to foster better understanding of employee-owned businesses and the benefits they can bring to workers, society and the enterprises themselves,” added Senator Becker, a Silicon Valley entrepreneur before being elected to the Senate. “These include wealth-building opportunities for employees, heightened worker engagement, job creation by stakeholders with firsthand job experience, stronger business performance, and stronger local economies.”
The bipartisan legislation is coauthored by Senator Andreas Borgeas, R-Fresno, Senator Rosilicie Ochoa Bogh, R-Yucaipa, Senator Anthony Portantino, D-La Cañada Flintridge, and Assemblymember Phil Ting, D-San Francisco.
How Employee Ownership Can Help Small Businesses
SB 1407 creates a hub within the Governor’s Office of Business and Economic Development, better known as GO-Biz, that will focus on helping workers, business owners and other stakeholders learn about employee ownership, provide funding for technical assistance to study feasibility of transition, and assist business owners and workers in navigating resources to smooth the path for transition.
California’s small businesses face a dual crisis. Hammered by the strictures necessitated by the COVID-19 pandemic, small businesses continue to work toward their economic recovery. At the same time, the sector must contend with Silver Tsunami of business owners who are at or near retirement age. Baby boomers own approximately 359,000 California businesses, employing 3.9 million people. With 85% of business owners lacking succession plans, many of these companies will close or sell to non-local buyers who are likely to relocate or cut jobs.
“Broad-based employee ownership, primarily in ESOPs and worker co-ops, is an effective strategy to help create a more inclusive and resilient economy,” Senator Becker said.
Research shows employee-owned companies tend to be more durable, more likely to outperform their competition, and generate more jobs. Majority ESOPs created 25% more jobs over a 10-year period, and during the pandemic were less likely to cut jobs, hours or pay. Studies also show that workers at ESOPs have more than twice the amount of retirement assets when compared with Americans nationally, and ESOP retirement benefits prove far more equitable in terms of race, gender, and economic status than other retirement plans.
“The WORC Coalition is proud to co-sponsor this legislation. Small businesses face many challenges, which have been compounded by the economic impacts of the pandemic. This bill is not only timely, it provides California a proven set of tools to both support businesses and lift up workers,” said Zen Trenholm, director of Employee Ownership Cities and Policy at the Democracy at Work Institute, a founding member of the WORC Coalition.
In addition to WORC, Ownership America and Project Equity are SB 1407 cosponsors. Burlingame Vice Mayor Michael Brownrigg, a co-founding partner of a firm dedicated to helping workforces of color acquire their companies from retiring owners, brought ideas about employee-owned businesses to Senator Becker and inspired the bill, the senator said.
“There is no better path to long-term wealth creation than owning a share of a successful business, and that’s what this legislation will help promote,” said Vice Mayor Brownrigg. “We salute Senator Becker’s commitment to helping close the racial wealth and opportunity gaps in our state. “
“I’m grateful to my coauthors and colleagues – Senators Borgeas, Ochoa Bogh and Portantino and Assemblymember Ting – and to have support from organizations with strong track records in advocating for employee ownership and equity,” said Senator Becker.
In addition to WORC, Ownership America and Project Equity are SB 1407 cosponsors. Burlingame Vice-Mayor Michael Brownrigg also provided valuable input on the bill, the senator said.
SB 1407, which was amended in its entirety to introduce the Expanding Employee Ownership Act, will have its first review by a Senate policy committee in the coming weeks.
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Media Contact: Leslie Guevarra, leslie.guevarra@sen.ca.gov, 415-298-3404
Updated 3/24/2022 to add a link. Updated 3/25/2022 to add a comment from Burlingame Vice Mayor Michael Brownrigg.