Rutgers and NJEDA Partner to Promote Employee Ownership
Strategic Collaboration Announced
The State of New Jersey and Rutgers, The State University of New Jersey, have embarked on a significant initiative aimed at promoting Employee Stock Ownership Plans (ESOPs) through a comprehensive public education and outreach program. This strategic collaboration was formalized on July 17 when the New Jersey Economic Development Authority (NJEDA) signed a Memorandum of Understanding (MOU) with the Rutgers University School of Management and Labor Relations (SMLR).
Advancing ESOP Adoption
The primary objective of this partnership is to develop educational and informational programming to encourage more businesses in New Jersey to adopt ESOPs. Under an ESOP, employees hold an interest in company shares through corporate stock held in trust, offering a viable succession plan for business owners while simultaneously building wealth for employees.
Addressing Wealth Disparities
This $2 million initiative is a direct response to recommendations made by the Wealth Disparity Task Force, which was established by Governor Phil Murphy in 2021. The task force was charged with examining the root causes of wealth disparities affecting Black and Hispanic or Latino residents of New Jersey and proposing effective remedies.
Identifying Barriers and Opportunities
Earlier this year, the NJEDA issued a Request for Information (RFI) to develop a statewide employee ownership program. The RFI findings revealed that while there are technical and financial barriers to transitioning to employee ownership, companies that overcome these hurdles often experience significant success.
A Groundbreaking Framework
NJEDA Chief Diversity Officer Michelle Bodden highlighted the transformative potential of ESOPs: “The Wealth Disparity Task Force’s recommendation of ESOPs as a means to support businesses and help people of color build generational wealth is groundbreaking. ESOPs offer a proven framework for achieving financial stability.”
Program Implementation
Several key features define this collaborative effort:
The Institute for the Study of Employee Ownership and Profit Sharing and the New Jersey/New York Center for Employee Ownership at Rutgers SMLR will lead the program's implementation.
Rutgers SMLR will develop a technical assistance program to help New Jersey businesses evaluate the feasibility of transitioning to an ESOP.
A series of outreach initiatives will be launched by Rutgers to increase awareness and provide crucial information to both employees and business owners.
Current Landscape of Employee Ownership
Despite the advantages of ESOPs, New Jersey has one of the lowest rates of employee-owned companies in the nation. Currently, the state is home to 88 ESOPs, which hold $64.9 billion in plan assets and cover 423,429 employees and retirees. The average stock account for eligible employees stands at $188,868.
Governor Murphy's Vision
Governor Murphy emphasized the potential of ESOPs to provide a robust succession plan for businesses and a significant financial benefit for employees. “The ESOP model has been successfully implemented by thousands of companies nationwide and offers a compelling alternative for New Jersey businesses looking to solidify their succession plans and provide a family-sustaining benefit to their employees,” he said.
Supporting Business Succession and Wealth Accumulation
Tim Sullivan, CEO of NJEDA, noted the importance of reducing barriers to ESOP adoption to secure the future of businesses and their employee owners. “ESOPs offer a powerful mechanism for creating a stable transition plan for companies, while also helping employee owners accumulate wealth to pass on to future generations, particularly within communities of color,” said Sullivan.
Retaining Jobs and Sustaining Local Economies
Professor Bill Castellano, executive director of the New Jersey/New York Center for Employee Ownership, stressed that employee ownership not only saves jobs but also supports local economies. “Our research shows that when low-income workers own some or all of the companies where they work, they can build significant wealth over time,” said Castellano. “This program aims to correct the under-communication of this important option for succession and wealth preservation to underrepresented business owners.”
Conclusion
Through this initiative, the NJEDA and Rutgers are poised to make a substantial impact on the economic landscape of New Jersey, promoting employee ownership as a means to secure business futures, build wealth, and reduce long-standing wealth disparities.