Research · Employee Ownership
LSI research examines the federal and state policy levers, business succession pathways, and capital structures most likely to scale employee ownership, and to route more retiring American businesses into the hands of the workers who built them.
Our view
Employee ownership is a proven strategy to retain domestic ownership and investment while building generational wealth for American workers. For most of American history, a durable route from worker to wealth-builder was to start a business. For working-class families without inherited capital, that route has narrowed. Employee ownership offers another: a share of the company you already work for, paid for out of the company's own earnings, and built over decades of service.
The policy rationale first entered federal law in 1974, through the Employee Retirement Income Security Act, whose ESOP provisions were championed by Senator Russell Long of Louisiana.1 It has drawn co-sponsorship from both parties in every subsequent decade. Most recently, Senators Chris Van Hollen and Marco Rubio introduced the Employee Equity Investment Act in 2023, alongside Representatives Blake Moore and Dean Phillips, to begin to close the capital gap that limits how quickly employee ownership can expand.2
The outcomes are well-documented. Employee-owned companies generate roughly 2.5 times more retirement wealth for workers than conventionally-owned peers,3 lay off fewer workers in downturns, grow faster, retain more local jobs through ownership transitions, and account for a disproportionate share of the American manufacturing base. The benefits are most pronounced for low- and moderate-income workers, who are otherwise least likely to hold capital assets of any kind.
What has not kept pace is scale. Roughly three million American workers currently hold meaningful ownership stakes in approximately six thousand privately held employee-owned companies.4 Tax incentives for selling owners exist but are unevenly applied. State statutes vary widely. And the capital stack required to finance an employee-ownership transition remains narrow, relying on bank leverage and long-term seller financing that many retiring owners are unwilling to accept.
LSI's employee ownership portfolio works on three fronts. Federal and state policy research identifies the tax, regulatory, and statutory reforms most likely to scale ownership. Proprietary technology makes business succession opportunities legible to lawmakers, retiring owners, and investors at the district and state scale. And the State Employee Ownership Caucus, a bipartisan network of state legislators, carries the agenda into statehouses across the country. LSI translates the findings into options that lawmakers of either party, community organizations, investors, and other mission-driven actors can act on.
Where we focus
Approximately 2.9 million American businesses are expected to change hands over the next decade.5 Research on the policy, financing, and awareness levers that can route more of them into employee ownership rather than out-of-market sales, closures, or rollups.
See publicationsThe federal and state statutes, tax code provisions, and Department of Labor regulations that govern how and whether employee ownership can scale. Research on the reforms most likely to unlock the next generation of employee owners without new federal spending.
See publicationsThe capital structures that make employee-ownership transitions possible. Research on the bank leverage, seller financing, and institutional capital vehicles most likely to close the financing gap that currently limits how quickly employee ownership can expand, including the bipartisan Employee Equity Investment Act.
See publicationsEmpirical research on what a share of ownership does for a working-class family over the course of a career: wages, retirement assets, job stability, and participation in company decisions.
See publicationsFlagship report
Employee ownership works. Yet every year, thousands of retiring owners sell to strategic buyers or private equity because the financing pathway for an ESOP transition is longer, more expensive, and less well understood than the alternatives. This paper proposes the federal and state financing tools needed to make employee ownership the default option for succession in the American middle market.
Across pillars
LSI pairs employee ownership research with a data product that investors, lawmakers, and retiring business owners can query, and a coalition that carries the findings into state policy conversations.
District-by-district data on the business ownership landscape that employee ownership policy is trying to move: small-business density, owner-age distribution, retirement-wave timing, and working-class employment share. Query by state, district, or representative.
Open the data tool → Coalition companionA bipartisan network of state legislators advancing employee ownership legislation in statehouses across the country. Members introduce, co-sponsor, and defend state ESOP incentives. LSI provides the research and technical assistance.
Learn more →Employee ownership research updates
Occasional updates from LSI employee ownership researchers, including new publications, State Employee Ownership Caucus briefings, and data releases on business transitions and ownership policy.
