V. The Ohio State Employee Ownership Program and Model State Program
Ohio Employee Ownership Program
The 1998 annual report, to the Ohio Legislature, provides the most recent information
regarding the functioning and operation of a successful employee ownership program. To follow is a brief summary of the report. Since its inception in 1988, the Ohio Employee Ownership Assistance Program has assisted more than over 10,500 employees in buying all or part of 47companies. The majority of these employees would otherwise have become unemployed due to plant shutdown or corporate downsizing. The cost per job saved through the Ohio Employee Ownership program was $129 per job.
In 1997, the Ohio Employee Ownership Center (OEOC) received requests for information or assistance from over 45 firms employing approximately 9000 workers. Thirty-nine of these firms were contemplating employee ownership to avoid shutdown, plan for business succession, or to deal with divestiture of a parent corporation. About half of these 39 firms received repeated, in-depth consultations. Eight firms, employing 925, implemented Employee Stock Ownership Plans. Fifteen firms were still consideration employee ownership and are working with the program.
The program also encourages cooperative workplace practices in employee-owned firms. This development of cooperative workplace practices is facilitated through Ohio’s Employee-Owned Network. In 1998, the Network ran fifteen programs/seminars providing useful information for employee-owned firms. Topics were aimed at employees from the shop floor to the CEOs, with topics ranging from accounting and financing to safety. Over 60 employee-owned firms participate in this program annually. In 1998, 450 employee owners partook in these programs.
A similar program was run to provide useful information about succession planning for retiring owners and other potential employee owners.This program is run in conjunction with the Greater Cleveland Growth Association’s Council of Smaller Enterprises (COSE).
The OEOC has also put on a yearly conference on employee ownership. It is the largest regional conference of its kind. Over 300 people have attended each of the last two conferences. The OEOC is also involved in research as means to increase the available knowledge of employee ownership and disseminated this information to the public and potential employee owners. This research has also provided a venue for improving the manner in which the OEOC assists potential employee owners.
The OEOC also administers the JTPA Title III preliminary feasibility studies for the state of Ohio. The function of these assessments is to ascertain the feasibility of an employee buyout for plants that will be shutdown. In 1997, four studies were done. As a result of four studies, three plants (employing 105), were consequently bought by their employees allowing the plant to stay open. In 1998, one plant, which had closed in 1997, was bought by employees and reopened in 1998 as a result of the feasibility study. The plant now employs twenty.
A Model State Program
What should a model program look like? First, employee ownership programs should disseminate information about employee ownership and provide assistance with succession planning. This can be particularly useful for retiring owners. Providing information on succession planning can prevent job loss when a firm closes because such a plan was not in place. New York’s succession planning strategy could be a model for future programs. Their succession-planning program is tied to their small business succession program. When succession planning is coupled with a small business program it can provide small business owners with various succession planning options, such as employee ownership. It can also provide future small business owners with an alternative (employee ownership) as a means of establishing a new business. Ohio’s program is a good example of information dissemination. It produces a biannual newsletter about employee ownership. The various seminars on succession planning and other aspects of employee ownership, especially financial training can be of great value to employee owners.
Second, employee ownership programs can be a valuable resource to employee-owned firms and potential employee owners. Ohio’s Employee-Owned Network is an excellent example of such a resource. The Network provides training that meets the particular needs of the employee-owned firm. Although there is debate about the importance of worker participation, such a resource though not necessarily a guarantee for success can create an employee ownership culture (within a firm) that, according to the available research, can make the firm more effective and productive.
Third, employee ownership programs should provide financial and technical assistance. State programs should provide either actual assistance or assist potential employee owners in finding available financial resources. States can pass legislation providing, for example, loan guarantees for the purpose of employee buyouts. Given the complexity of ESOP law, technical assistance must also be made available either directly through the state program or in the private sector.
Forth, employee ownership can provide an alternative to plant shutdown. Given that the Workforce Investment Act does not contain specific language providing for preliminary feasibility studies, states may have to take up the slack. The preliminary feasibility program has proven to be a cost-effective program where it has been utilized. Without such studies, viable plants may be shutdown that otherwise could have been kept open. Coupled with an early warning system, like in New York and Pennsylvania, preliminary feasibility studies can save jobs at viable firms, either through an employee buyout or buyout by some outside party.
In conclusion, employee ownership can be a useful economic development tool. With an employee ownership program, best coupled with a small business program and staffed with well-skilled personnel, it can be an effective economic development strategy. It helps to anchor capital in the community reducing the uncertainty of economic development officials concerning capital flight. Furthermore, employee-owned firms tend to more productive than conventional firms that can generate more tax income for the community and tend to lead to increased job creation. Employee ownership can also provide an alternative to plant shutdown for viable firms. Thus, an effective employee ownership program can save, and in many cases, create new jobs.