Press Release – The opportunity to keep smaller, private New Jersey-based companies operating in the state was enhanced today when the Assembly Commerce and Economic Development Committee approved legislation allowing businesses with less than 500 employees to offer workers a chance to own part of the company through an employee stock ownership plan (ESOP). Assembly Republicans Holly Schepisi and Anthony M. Bucco sponsor the bill, A-4021, which allows workers to own stock they receive from a trust set up by the company. Employees must be 100 percent vested in the program within three to six years.

An ESOP is a type of employee benefit plan, similar to a profit sharing program. Shares in the trust are allocated to individual employee accounts. Employees are not required to invest their own money and shares are distributed either by their level of salary or some other equal formula.

 “ESOPs give employees a stake in an organization and a vested interest in the company’s success,” said Schepisi, R-Bergen and Passaic. “Workers who benefit financially when the company performs well enjoy additional compensation because they play an important role in its accomplishments. This proposal incentivizes employees to increase productivity which improves the company’s image and success. When that happens, the value of the business increases and so do employees’ financial rewards.”

“Under an ESOP, if the owners want to sell their interest in the company, the employees who contributed to its success have the ability to purchase it and save New Jersey jobs,” said Bucco, R-Morris and Somerset. “An ESOP gives employees an opportunity to have a say in the company’s future. At a time when other states are trying to lure companies away from New Jersey, this program allows workers the opportunity to keep the company in New Jersey. The effort made by workers to help the company succeed counts for something. This bill gives them a chance to have input and express who they work for and where.”

A 1986 National Center for Employee Ownership study found that employee ownership firms that practice participative management that includes employees grew 8 to 10 percent per year faster under this structure than without it. Employees pay no tax on the stock contributions they receive until they leave or retire.

A private business will not receive pre-certification for an ESOP from the Economic Development Authority until the gross income tax the state anticipates losing under the plan is offset by the retention of full-time jobs in New Jersey.