Employee ownership is being sold in Washington, on Wall Street and across the business press as a practical answer to one of capitalism’s hardest problems: how workers can share more directly in the value they create. Supporters say employee stock ownership plans, or ESOPs, can give employees a stake in the businesses they help build. Critics argue the model can work very differently in practice, shifting risk to workers while giving owners, investors and private equity firms another route to liquidity.
The debate is not theoretical. In December 2021, employees at SHoP, the New York architecture firm known for projects including Barclays Center, the Brooklyn Tower and 111 West 57th, announced an effort to form Architectural Workers United, described in the source material as the first professional architecture union in more than 70 years. Organizers said they were responding to mismanagement, inconsistent overtime rules, unsustainable workloads and 60- to 70-hour weeks. One former employee was hospitalized for pneumonia after a 110-hour week, according to the account provided.
That union effort collapsed. Former employees cited in the source material said the firm ran a powerful anti-union campaign while promoting an advisory committee and an ESOP as an alternative. They also said workers were incorrectly told that unionizing would make them ineligible for the stock plan. Instead of bargaining rights, employees would collectively buy into the firm’s stock, a model management reportedly framed as a “third way” between the status quo and unionization.
ESOPs are now a substantial part of the American retirement and ownership system. The National Center for Employee Ownership figures cited in the material show 6,609 ESOPs in the United States as of 2023, with about $2 trillion in assets and more than 15 million participants. Publix operates the country’s largest ESOP, though most firms using the structure are not household names.
Political support has grown across party lines. The Republican Party’s 2016 platform praised ESOPs as a way to let workers become capitalists and expand private property. Democrats that year did not name ESOPs directly but supported incentives for companies to share profits with employees. Senator Bernie Sanders later proposed a broader employee ownership model that would have required large corporations to offer workers stock and allow workers to elect 45 percent of boards. In 2024, the Harris-Walz campaign also backed mechanisms such as employee stock ownership and profit-sharing plans.
The model’s appeal is clear when profits rise. But the source material’s history points to a recurring problem: workers may receive stock at the same moment they are asked to accept wage cuts, benefit reductions or greater exposure to a company’s failure. Early employee ownership experiments were promoted by industrialists seeking to soften conflict between labor and capital. After the 1929 stock market crash, workers who had invested in employer stock lost heavily, strengthening labor’s skepticism.
Modern ESOPs emerged after the Employee Retirement Income Security Act of 1974 created a retirement structure allowing workers to own shares in their companies. The design also gave sellers powerful tax advantages. Owners selling to an ESOP could reinvest proceeds in other securities and defer capital gains taxes, making the structure attractive not only to founders but also to investors seeking exits.
The source material points to TWA and United Airlines as warnings. In 1985, Carl Icahn promised TWA workers an ESOP if they supported his bid. The machinists and pilots accepted about $145 million in annual wage concessions in exchange for profit-sharing and 20 percent of the company’s stock. When TWA filed for bankruptcy in early 1992, the ESOP became worthless, while Icahn left with hundreds of millions of dollars in profit. United Airlines later became the country’s largest ESOP in 1994 after staff unions agreed to convert nearly $5 billion in promised wages and benefits into stock that became worthless after bankruptcy less than a decade later.
Private equity’s current embrace of employee ownership has revived those concerns. Pete Stavros, now global co-head of private equity at KKR, wrote as a Harvard Business School student in 2002 that ESOPs could help private equity firms defer taxes and achieve liquidity. Two decades later, he helped lead KKR’s effort to raise a $19 billion fund used to acquire companies where employee stock-ownership programs were installed. Blackstone has also announced a broad-based employee ownership program for most employees of large U.S. companies it buys in the future.
Employee ownership can benefit workers when plans are transparent, diversified and paired with real governance power. The question raised by the source material is whether the current ESOP boom gives workers that power, or whether it mainly gives owners and investors a more attractive way to sell.