CSPAN - Hearing on Employee Stock Ownership Plans

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July 25, 2025 01:02-02:36 - CSPAN

01:33:57

Hearing on Employee Stock Ownership Plans

Participants

Main

bernie sanders

sen/d 07:08

bill cassidy

sen/r 09:34

tim kaine

sen/d 06:31

Appearances

jim banks

sen/r 02:05

maggie hassan

02:30

roger marshall

sen/r 03:18

tommy tuberville

sen/r 02:51

Clips

jimmy carter

d 00:03

ronald reagan

r 00:01

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Speaker	Time	Text
unidentified		Of Independence to the voices shaping our nation's future.
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		America 250.
		Over a year of historic moments, only on the C-SPAN networks.
		And now a hearing on employee stock ownership plans, where a company's employees collectively hold stock in a company.
		This hearing held by the Senate Health, Education, Labor, and Pensions Committee.
		The Senate Committee on Health, Education, Labor, and Pensions will please come to order.
bill cassidy ▲ ● ▼		Strengthening America's retirement system is a bipartisan priority on the committee, and we all agree, Republicans, Democrats, every worker deserves the ability to retire with dignity and security.
		Congress has made great progress improving Americans' retirement through Secure 2.0, but there's more.
		A recent study showed that 86% of Americans think that Congress needs to focus more upon retirement.
		And one way to enhance our retirement system is, I like to say, give the worker the power, making sure that they have financial security after finishing his or her career.
		A place we can start expanding opportunity for employee ownership is through supporting employee stock ownership plans, or ESOPs, retirement plans in which a company's employee employees collectively hold stock in the company.
		Today, about 11 million Americans participate in an ESOP, including about 39,000 people in Louisiana, and I have somebody representing an ESOP here on the panel.
		Louisiana workers who retired from ESOPS received a total sum of over $575 million in payouts in 2023.
		An ESOP model is pro-worker, pro-family, and pro-business.
		And studies show that ESOPs result in higher employee satisfaction, lower turnover, and greater financial success that puts more money directly into a worker's pocket.
		By the way, I'm proud of this.
		Louisiana Senators Russell Long and John Brough, our representatives at that time, John Brow, led the effort to create ESOPS when Congress passed ERISA in 1974.
		And I understand one of our witnesses, Dr. Blaise, is actually Blasey, is actually the guy that was hustling when he was 22 years old to get co-sponsors on both sides of the hill.
		So we've got that history here today.
		Today we'll hear from Acadian companies from Lafayette, Louisiana, giving first-hand testimony on how ESOPs empower Louisiana workers, creating economic growth.
		And while ESOPs are proven to help workers succeed, outdated federal law makes it difficult for companies to implement the model without being in legal jeopardy.
		In ERISA, Congress required the Employees Benefit Security Administration, or EBSA, to develop clear regulations making it easier for ESOPs to sell stock to their employees.
		Now, this sounds like a joke.
		This sounds like a joke.
		But 51 years later, EPSA has failed to put in place any rules on this issue, despite repeated bipartisan requests from the committee.
		And 51 years later, they still haven't done it.
		Additionally, the ERISA Advisory Council, which advises the Department of Labor on regulating employee benefit plans, does not have ESOP representation.
		Workers who are also owners should have a seat at the table in shaping policies that affect the combination of a worker and an owner.
		As chair of the Help Committee, I'm committed to enacting a pro-worker, pro-family agenda that helps Americans succeed in their career and afterwards.
		That's why this committee is leading multiple efforts to strengthen ESOPS so workers can have a stake in their company, building wealth for themselves and their families.
		Senators Marshall and Kane, they're leading legislation to clarify federal law, ensuring that ESOPs can sell shares of their company without fears of frivolous lawsuits.
		I introduced two pieces of pro-worker legislation to better support ESOPS.
		The Employee Ownership Fairness Act authorizes ESOPS to provide generous and diversified benefits by permitting ESOPS to contribute into 401k plans without exceeding contribution limits.
		As a result, employees will save more money for retirement and can invest more in their employers' stock.
		The Employee Ownership Representation Act would add two new ESOP board members to the ERISA Advisory Council, giving ESOP owners and workers representation to advocate for policies to improve their lives.
		I look forward to discussing this bills.
		Thank you all for being here to highlight the power of ESOPS in creating a better life for workers and their families.
		With that, I recognize Senator Sanders.
bernie sanders ▲ ● ▼		Thank you, Mr. Chairman, and thank you for holding this important hearing.
		One of the beautiful things about representing the state of Vermont is that we have some of the best employee-owned companies in the country, and I am very proud of that fact.
		Over the years, I've met with employee-owned companies in Vermont, and never in my life have I seen employees who take more pride in the work that they do, from senior executives and managers all the way down to the cashier and the store clerk.
		In a few moments, I'm delighted that we will be hearing from one of those companies, the King Arthur Baking Company, headquartered in Norwich, Vermont.
		King Arthur is not only an enormously successful baking company, what makes this company so special is that it is directly owned by its employees, not some multi-billionaire on Wall Street.
		Brock Barton, the chief financial officer of that company, is one of our witnesses.
		And Brock, thanks so much for being here today.
		Mr. Chairman, at a time when the gap between the very rich and everyone else in our country is growing wider, when millions of Americans are falling further and further behind, when corporate America has outsourced millions of decent paying jobs overseas, and when the economy continues to struggle to create jobs that pay a livable wage with good benefits, we need to expand economic models that broadly benefit the middle class, not just the 1%.
		And I strongly believe that employee ownership is one of those models which has enormous economic potential and the potential to improve the lives of millions of workers.
		Mr. Chairman, when employees own their own companies, when they work for themselves, when they're involved in the decision-making process, rather than just being a cog in a machine, they are no longer just punching a time clock.
		Unlike large corporations that have been shipping jobs overseas, employee-owned businesses are not shutting down, and they're not moving their businesses to China, Mexico, Bangladesh, or other low-wage countries.
		Workers who have a direct ownership stake in the companies they work for become more motivated.
		Absenteeism goes down, worker productivity goes up, and people stay on the jobs for a longer period of time.
		They're happy at their work.
		They're proud of what they're doing.
		Further, employee-owned businesses boost morale because workers share in future profits and have greater control over their work life.
		Study after study has shown that employee ownership has been proven to increase employment, increase productivity, increase sales, and increase wages in the U.S.
		And I'm proud that the author of many of those studies is also here with us this morning, Dr. Joseph Blasey, the Director Emeritus of the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers University.
		Dr. Blasey, thanks so much for being with us.
		Mr. Chairman, for far too long, many corporations in this country believe that the bottom line is only the bottom line.
		The only thing that matters are short-term profits, strong dividends, and increasingly generous compensation packages for their CEOs.
		That type of greed, in my view, is not an economic model that we should be embracing.
		In my view, we can and must do better.
		And that is what I hope this hearing will begin to accomplish.
		Despite the important role that worker ownership can play in revitalizing our economy, the federal government has failed to commit the resources needed to allow this business model to realize its true potential.
		And I hope we can make some significant improvements in that area.
		And that is why I have introduced legislation today to provide the financial assistance workers need to own their own businesses through employee ownership stock ownership plans or worker-owned cooperatives.
		A lot of workers around this country would like to own their own companies, and employers, people who started the business, would prefer everything being equal to give their businesses over to their workers.
		But right now, there are a lot of impediments in doing that.
		Let me conclude, Mr. Chairman, by doing something that I don't do very often, and that is quoting Ronald Reagan.
		All right, you ready for Ronald Reagan, guys?
bill cassidy ▲ ● ▼		In 1987.
bill cassidy ▲ ● ▼		There's hope for us, Bernie.
bernie sanders ▲ ● ▼		In 1987, Ronald Reagan said, and I quote, I can't help but believe that in the future, we will see in the United States and throughout the Western world an increasing trend toward the next logical step, employee ownership.
		It's a path that benefits a free people, end of quote.
		Reagan was right 38 years ago.
		Let's do it.
		Thank you.
bill cassidy ▲ ● ▼		And Senator Tupperville will recognize and introduce Mr. Roark.
tommy tuberville ▲ ● ▼		Thank you, Mr. Chairman.
		I'm proud to introduce an Auburn man and constituent, Mr. Bill Rohark.
		Mr. Rohark is the co-founder of Torch Technologies Inc., founder and executive chairman of the board of Starfish Holdings Inc., and founder and chair of the board of chair of Freedom Real Estate and Capital LLC.
		So he stays pretty busy.
		He's a champion for employee ownership, and he has led multiple companies to national recognition through his core values.
		As CEO of Torch Technologies, Mr. Roark implemented an employee-owned ownership program from the company's inception with the goal of becoming a 100% S-Corp employee stock ownership plan.
		His company achieved that goal in just under 10 years.
		Torch and Mr. Roark gained national attention for being named on the inaugural list of best of America's best small companies by Forbes.
		During his tenure, Torch received multiple business awards and was named the number one fastest growing privately held defense contractor in the Southeast region.
		Torx Technologies provides superior research, development, and engineering services to the Department of Defense.
		Mr. Rourke recently led Torch to become a certified evergreen company, achieving its long-term commitment to 100 percent employee ownership and its pledge to remain privately held to ensure enduring stability and opportunity for its workforce.
		This milestone came as Torch celebrated its 20th anniversary.
		A true believer in company culture and employee well-being, Mr. Rourick has prioritized top-tier benefits and working conditions throughout his career.
		Mr. Rourick also founded Starfish Holdings, Incorporated, a holding company that provides beneficial ownerships to employees across all its portfolios through an ESOP structure.
		Starfish Holdings companies now include Torch Technologies, Inc., Freedom Real Estate, and Capital LLC in Samvana.
		Mr. Rourick has a proven track record with a common denominator of building companies where employees can thrive, retire with dignity, and find lasting purpose in their work.
		Thank you for being here today.
bill cassidy ▲ ● ▼		Mr. Rourke, so we'll introduce each speaker as they give their testimony.
bill cassidy ▲ ● ▼		So, Mr. Rourke, will you give your testimony now?
unidentified		Sure.
		Chairman Cassidy, Ranking Member Sanders, and distinguished members of this committee, thank you for the invitation to share my experience as a co-founder of Torch Technologies and the profound impact that employee ownership has had on our company.
		I appreciate your efforts to spotlight ESOPs and legislation that can help sustain and grow existing employee-owned companies while encouraging more companies to adopt this model.
		My name is Bill Rourke, and I live in Huntsville, Alabama.
		My journey began over 40 years ago as a young engineer and eventually an executive for the defense contractor.
		In 2002, I co-founded Torch Technologies with Don Holder just after I was laid off following an acquisition.
		To prevent this from happening to our employees, we established Torch as an employee-owned company, implementing an ESOP that would allow us to exit without selling the company.
		From day one, every employee had the opportunity to be an owner.
		Our ESOP was formally established in 2004 and we became 100% ESOP in 2011.
		This fulfilled a commitment we made to our employees on a cocktail napkin in a local diner when we were starting the company.
		This ownership model has been a driving force behind our rapid growth.
		Today, we are ranked number 57 on the Washington Technology Top 100 Government Contractors List.
		Torch is a mid-tier defense contractor headquartered in Huntsville, strategically located to support Redstone Arsenal.
		Our annual revenue currently exceeds $800 million.
		We have received numerous local and national best places to work awards, as well as business awards, including 15 consecutive years on Inc. 5000 for outstanding business growth.
		Over 1,100 of our employees are in Huntsville, contributing to numerous military programs.
		We also have significant presences in members of the committee's locations in Shalamar, Florida, Colorado Springs, Dayton, Ohio, Waltham, Massachusetts, Montgomery, Alabama.
		Overall, we support multiple military bases and commands in more than 20 states and overseas.
		Our employees play crucial roles in advancing state-of-the-art capabilities for our warfighters by delivering superior RD engineering services and solutions.
		We provide rapid prototyping and advanced capabilities from concept development to fielding and sustainment.
		The success of Torch is directly tied to employee ownership, which gives every employee a stake in the outcome.
		We recently certified as an evergreen company that commits us to remain in business for the next 100 years.
		Additionally, we became a public benefit corporation, dedicating ourselves to the financial success of our employees, outstanding service to our nation's defense, and support for the communities where we operate.
		We are also committed to helping other companies become ESOPs.
		My book, Built with Purpose, details this journey and my commitment to building companies where employees can thrive, retire with dignity, and find lasting purpose in their work.
		This passion led me to serve on the board of the Employee S Corporations of America, ESCA.
		Through ESCA, TORCH's leadership has connected with numerous companies that share similar stories.
		Research from ESCA shows that Congress created S ESOPS 30 years ago, and there's been significant increases among those companies in worker savings, wealth, wage quality, job stability, and national economic benefits.
		We applaud Chairman Cassidy's legislation aimed at reducing tax code barriers to retirement savings and providing ESOPS with a voice on the ERISA Council Advisory Council.
		We also thank Senator Sanders for his efforts to grow the community of ESOPS through financing assistance and encouraging the DOL to support rather than discourage ESOPS.
		Torch supports bipartisan legislation sponsored by Senators Daines and Hassan, which would encourage more employee ownership by providing incentives for S Corporation business owners to sell to an ESOP or be acquired by an SESOP company.
		This initiative, long supported by ESCA, would allow more American workers to enjoy the benefits and meaningful retirement savings that we at Torch have experienced through employee ownership.
		We also would appreciate the opportunity to collaborate with committee leaders to communicate to the White House the vital importance of employee ownership.
		Creating platforms such as last year's White House convening on worker ownership can further promote this initiative.
		Mr. Chairman and committee members, thank you for allowing me to share this story.
		I urge your consideration and support for bipartisan legislation that enables more hardworking Americans to share in the American dream at work.
		Let's keep that dream alive.
bill cassidy ▲ ● ▼		Thank you, sir.
unidentified		Thank you.
bill cassidy ▲ ● ▼		At first, I thought Coach only picked you because you're an Arbyn person, but now I realize that you actually have a story to tell.
unidentified		Thank you.
bill cassidy ▲ ● ▼		It's my privilege to represent to introduce somebody from Louisiana, Eddie Dupree, Chief Executive Officer of Acadian Companies.
		Mr. Dupree joined Acadian in 2009, a ground and air ambulance service based in Lafayette, Louisiana.
		And of course, his position, Chief Executive Officer, gives him insight into Acadian's ESOP and his financial and through his financial and oversight roles in the company.
		Eddie graduated from the University of Southwest Louisiana, now the University of Louisiana, with a Bachelor of Science in Business Administration.
		Thank you, Mr. Dupree.
		Look forward to hearing from you.
unidentified		Chairman Cassidy, Ranking Member Sanders, and members of the committee, thank you for inviting me to share my experience as the CEO of Acadian Ambulance Service and the impact that employee ownership has had on Acadian's growth and culture of compassion in our home state of Louisiana.
		My name is Eddie Dupuy, and I joined Acadian in 2007.
		I became the company's CEO last year after serving five years as its CFO.
		I welcome this opportunity to highlight the ESOP model and promote legislation that can help sustain and grow existing ESOP companies and encourage more businesses to become employee-owned.
		Acadian's story begins in 1971 in response to a medical transport crisis.
		New federal regulations caused funeral homes to discontinue providing ambulance services, leaving a gap in emergency services in smaller communities across the country.
		Acadian started with just two ambulances and eight medics.
		We have steadily grown to over 750 ambulances and 5,000 employees, serving parishes and counties in Louisiana, Mississippi, Tennessee, and Texas.
		Our safety, security, and mobile health divisions operate nationwide.
		It is our vision for the name Acadian to be synonymous with the best health, safety, and security services anywhere in the world.
		We work side by side with other first responders, area hospitals, EMS associations, accreditation agencies, and civic leaders to become integral partners in our communities.
		We support local charities and provide community services such as standing by at high school football games.
		When hurricanes or other disasters strike, Acadian evacuates the vulnerable ahead of the storm and provides emergency response afterward.
		By 1993, Acadian had achieved the level of success that led our founders, who understood our workforce was our biggest asset, to transition ownership of the company to an ESOP.
		This fostered a culture where Acadian employee owners see every day as an opportunity to make a difference, to invest in their future, and to build the company together.
		In fact, during a rigorous accreditation process, an ambulance crew member was asked if he ever had the opportunity to speak to the owner.
		His reply embodies the goal of ESOPS.
		Every day, he said, I am an owner.
		This new ownership structure was a natural complement to what our employees were already achieving, and now they had a financial stake in their actions.
		The employee-owned S-Corporations of America, or ESCA, has conducted research that shows in the 30 years since Congress created S-ESOPS, there is more worker savings, increased wealth and wage equality, improved job stability, and significant economic benefits generated.
		Our own results bear this out.
		Since the 27 years of becoming an S-Corp ESOP, Acadian has grown at a much faster pace than its previous 27 years.
		Additionally, as employees began to retire and receive meaningful distributions from the ESOP, the ownership culture solidified.
		Acadian also benefits in the area of recruitment and retention of staff.
		The ESOP, coupled with our 401k plan, allows us to differentiate from the rest of the market for talent.
		Retention speaks for itself.
		At our recent company meeting, we recognized 28 employees celebrating 20 years of service, 12 with 25 years, 12 with 30 years, and 16 with over 35 years.
		The institutional knowledge and experience of these employees is invaluable to our operations.
		Given the success and prosperity that the ESOP has brought to our company and employees, Acadian resoundingly supports ESCA's work on the promotion and expansion of Private Employee Ownership Act, bipartisan legislation sponsored by Senators Daines and Hassan.
		This bill would encourage more employee ownership by providing incentives to S Corporation owners to sell to an ESOP or become acquired by an ESOP company when they are looking to transition out of the business.
		Acadian would also like to join ESCA in applauding Chairman Cassidy's pair of ESOP bills that would reduce tax code barriers to retirement savings as well as give ESOPS a voice on the ERISA Advisory Council.
		Acadian also thanks Senator Sanders for his long-term efforts to grow the community of ESOP companies and encourage the Department of Labor to support ESOPS with the Employee Ownership Initiative program.
		In concluding, Mr. Chairman and members of the committee, thank you again for the opportunity to address you today.
		I look forward to a continued conversation on the impact of ESOPs on American workers' success and for your support of legislation to sustain and enhance the employee ownership model.
bill cassidy ▲ ● ▼		Thank you, sir.
bill cassidy ▲ ● ▼		And now Senator Sanders to introduce the Democratic witnesses.
bernie sanders ▲ ● ▼		Thank you.
		Mr. Chairman, I'd like to introduce Brock Barton, CFO of King Arthur Baking Company and a King Arthur employee owner since 2013.
		He oversees the company's financial strategy and also sits on King Arthur's ESOP Board of Trustees.
		Mr. Barton, thanks very much for being with us.
unidentified		Thank you.
		Good morning, Chairman Cassidy, Ranking Member Sanders, and members of this committee.
		I sincerely appreciate the opportunity to speak to you today in support of employee-owned businesses.
		My name is Brock Barton.
		I'm Chief Financial Officer at King Arthur Baking Company, an employee-owned business in Vermont.
		I've been with King Arthur for over 12 years.
		In addition to being a proud employee owner, I'm a trustee of our employee stock ownership plan, or ESOP.
		I also sit on the board of directors at Johnny Selected Seeds, another employee-owned company which is located in central Maine.
		I pride myself on specializing in the management and administration of ESOPs, but most importantly, I believe in the philosophy that employee ownership improves corporate performance and employee engagement.
		King Arthur Baking has a long history, stretching back over 230 years.
		We've been providing bakers with superior ingredients and baking guidance since 1790.
		Our flour, once sold out of wooden barrels in Boston, can now be found in nearly every grocery store across the country.
		Over the past decade, the company has grown from a regional flour company into a nationally recognized baking brand.
		Despite the company's storied history, I believe that it made one of its most important transitions in 1996 when Frank and Bryna Sands sold the company to its employees.
		However, they simply didn't hand over a business.
		The Sands entrusted the employees with a legacy rooted in respect, trust, and the belief that shared ownership drives performance and purpose.
		Employee ownership has been the foundation of our success ever since.
		It fosters accountability, pride, and a commitment to our customers, our partners, and our communities.
		Each employee owner, whether with us for a few years or several decades, plays an important role in shaping our workplace and driving high performance.
		As many of you know, there are many financial benefits of employee ownership, and those are usually defined.
		However, it's also important to highlight the importance of employee ownership culture.
		To support and sustain this culture, King Arthur establishes an internal committee, the Employee Ownership Culture Committee, or EOCC.
		The EOCC is a group that promotes a culture of ownership and empowerment through education, communication, and celebration.
		With almost 30 years of operating as an ESOP, King Arthur Baking is proof that employee-owned businesses offer a sustainable and successful alternative to a traditional business structure.
		It has been more resilient and stable during economic downturns.
		It has fostered a culture of engagement and empowerment.
		And it has built while generating wealth for its employee owners.
		I want to end my time with two quick stories today.
		I'm honored to be invited to many retirement parties, but one event always sticks out.
		It was in our manufacturing building.
		The woman retiring had been working on our manufacturing floor for over 25 years.
		At the end of the event, she approached me with watery eyes.
		She said that someone like me doesn't have a retirement account like this.
		The comment was sincere, authentic, and one I'll never forget.
		King Arthur Baking and other ESOPs have facilitated a structure that resets those expectations and allows any employee, regardless of their role in the company, to thrive professionally and reap the rewards of their hard work once they reach retirement.
		The second, as part of our employee-owned core values, King Arthur shares financial performance with our employees at all of our town, at all of our monthly town meetings.
		In my tenure, the financials have been largely favorable, but we're not immune to sluggish performance.
		I remember one month in early 2022, commodity prices were high.
		Post-pandemic baking had slowed slightly.
		As a result, financial results weren't meeting expectations.
		But we talked about it.
		I got up in front of the employee owners and I told the truth.
		There were some initial looks of concern, but within seconds, the conversation shifted from what does this mean to what can we do?
		There was no shortage of ideas.
		Would these ideas overcome a gap driven by spike in wheat prices?
		Probably not, but that wasn't the point.
		Here were hundreds of employees who didn't resign themselves to external pressures, but instead decided to step into the challenge.
		It was a moment that made me proud to be part of an engaged employee-owned workforce.
		For the past 12 years, I've witnessed the power of employee ownership, specifically in its ability to drive workplace engagement and by providing opportunities to build meaningful retirement accounts.
		By investing in this model, I truly believe that we can build a stronger economy that works for everyone.
		Thank you so much for this opportunity to testify today, and I welcome any questions.
bernie sanders ▲ ● ▼		Thanks very much, Brooke.
		I'd like to introduce now Dr. Joseph Blasey, Director Emeritus of the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers University, who recently spent time as an advisor at the U.S. Department of Treasury on employee ownership.
		Dr. Blasey has spent decades researching employee ownership and has authored numerous books on the topic.
		Dr. Blasey, thanks so much for being with us.
unidentified		Thank you very much, Chairman Senator Cassidy and Ranking Member Senator Sanders and members of the committee.
		At almost 76 years old, I have been researching ESOPS on a bipartisan basis for 50 years across many administrations.
		The Rutgers Institute for the Study of Employee Ownership and Profit Sharing is the foremost university institute studying these issues.
		First, let's understand the scale of ESOPS in America.
		The most recent 2022 DOL data finds about 15 million participants in ESOPs, 11 million active employees in about 6,300 ESOP corporations with 1.8 trillion in total assets.
		Of these, for our specific purposes today, about 5,800 ESOPs are in closely held corporations, not traded on public stock markets, with about 2.4 million active employee participants, about 1 million retirees still receiving benefits.
		Closely held ESOPs have about $477 billion in total plan assets, $232 billion in company stock, and an average wealth per worker of $164,000, often 51% to 100% employee-owned.
		Average wealth after 10 years of service based on the U.S. General Social Survey is estimated at $320,000 per ESOP worker.
		Our research also shows that smaller ESOPs and larger corporations can produce significant wealth.
		The nonprofit National Center for Employee Ownership separately analyzed DOL data, broadly tracks our conclusions.
		We have seen over 50 years of research on ESOPs that ESOPs provide better retirement benefits, lower turnover, are safer workplaces, and are more likely to deeply involve workers in participation in solving company problems.
		Second, our analysis of the U.S. government's Health and Retirement Survey of workers over 50 years of age from 2008 to 2018 indicates ESOP participants have about double the retirement wealth in old age compared to non-ESOP participants.
		The National Center for Employee Ownership also found mediated ESOP account balances significantly outpace non-ESOP worker account balances in every income group and every age group.
		Third, ESOPs are safer workplaces.
		Using data from the Occupational Health and Safety Administration injury tracking population data from 2016 to 2019, ESOPs have 9 to 13 percent decrease in workplace safety incidents compared to non-ESOPs.
		Fourth, initial results from a recent Institute study found a 20 percent increase in labor productivity when thousands of ESOP manufacturing establishments are compared to tens of thousands of non-ESOP manufacturing establishments.
		Fifth, ESOPs appear to not replace diversified 401k plans and defined benefit pension plans based on our analysis of the general social survey and 10 years of DOAL data on 401k date on 401k plans.
		Sixth, our analysis of the U.S. General Social Survey indicates that 0% of ESOP workers report being laid off in the last year compared to 7% of non-ESOP workers.
		70% of ESOP workers have company-based training compared to 44% of non-ESOP workers.
		38% of ESOP workers participate in highly involved employee involvement teams to solve company problems compared to 26% of non-ESOP workers.
		And 71% of ESOP workers have annual cash profit sharing compared to 34% of non-ESOP workers.
		Seventh, ESOP growth among the closely held ESOP corporations has been pretty flat with an average of 221 new ASOPs, 30,000 new employees every year.
		Dr. Corey Rosen of the National Center for Employee Ownership found that ESOPs are acquiring other ESOPs, so the number of ESOPs may go down, but total assets and plans may be going up.
		Using census data, the Rutgers Institute study found that 52 percent of business owners are close to retirement and 137,000 businesses with 33 million employees and about 15 trillion in sales and 2 trillion in payroll are potentially ESOPable, a huge potential thing for American workers.
		Why this huge gap between ESOP potential and ESOP adoption?
		We concluded that a lack of awareness of the ESOP possibility, lack of clarity about DOL enforcement regarding valuations, inability of retiring business owners to borrow sufficient funds to effectuate 100% employee buyout, these are all part of the situation.
		My personal policy analysis suggests that legislation that makes it easier to finance ESOPs across the federal government, such as the proposed Employee Ownership Financing Act and also the American Ownership Resilience Act, aspects of the Work Act and other proposals that remove ESOP barriers to share price evaluations, all efforts to increase ESOP awareness and the expanding ESOP initiative,
		specific measures to de-link 401k contribution limits and ESOP contribution limits, and your proposals to expand the ESOP Advisory Council will all address this really huge gap.
		Thank you, and this is the high honor of my career to testify before you.
bill cassidy ▲ ● ▼		I will thank you all.
bill cassidy ▲ ● ▼		I'll defer to Senator Tuberville to ask questions.
tommy tuberville ▲ ● ▼		Thank you, Mr. Chairman.
		Gentlemen, thanks for being here.
		Important topic.
		Mr. Rohr, it's got to be pretty mind coming to know if you work in an ESOP and you have some of the owners exit the company, that everybody's not going to lose their job.
		So what kind of security does an ESOP structure have for all employees that you've seen?
		Some examples.
unidentified		Well, you know, we work real hard to build a succession plan in that prepares our employees as people retire to step forward.
		You know, that is a challenge.
		One of the biggest challenges we've had is the success of the ESOP has led to people retiring early, so we have to work that problem a little harder and be training people ready to step into the role.
		The departure of employees that are retiring actually creates lots of opportunities for the other employees to accelerate in their career quicker.
		So a successful ESOP actually creates a lot of successful careers.
		It also creates the ability for employees to retire with dignity.
		In fact, the announcement of this hearing went out on our social media last night.
		One of the posts this morning, I'll quote for you, it says, Jim Deal, one of our retiring employees seven or eight years ago, he says, tell them how much you helped us retire with dignity.
		That is, to me, the essence of why I wanted to do this.
		You know, some 25 years ago, a company bought the company I work for, and a few months after it was bought, I'd had a successful career.
		I went from being an entry-level person to an executive.
		I was president of an operating segment.
		In that time, I'd had one of the most successful careers of anyone at that company.
		As that acquisition evolved and I was there, I was shortly thereafter walked to the door and asked, told, as I was handed my severance check, that we'll pack your office and send your stuff home.
		When I started this company, at the core of what I wanted is I wanted people to retire with dignity.
		When I walked out and stood on that corner, I didn't feel very dignified.
		When I meet an employee in the grocery store, I want them to come hug me, not run from me.
		With the ESOP, I get lots of hugs.
		Every year when the ESOP statements come out, I get lots of hugs.
		This is a different way of doing business.
		I never want to see an employee walk to the door in such an undignified manner.
		I put my whole life into that company.
		Several times I worked 24 hours straight to get a delivery out on time.
		Was that respected?
		No.
		My stuff showed up in boxes with a bunch of crap that I didn't really want.
		It was not dignified at all.
		I hope that answers your question, Coach.
tommy tuberville ▲ ● ▼		So how can we help on the federal level to make ESOP structure more viable for the?
unidentified		Well, I think there's lots of ideas being proposed here in several of these bills.
		You know, making this easier, making it clearer in what we're supposed to do, there is a lot of murkiness in the bills.
		You know, one of the things for us in the last few years, we've been in a position where we could contribute more than the maximum allowable to our employees.
		And that creates an issue with the ESOP itself.
		If the limit's at 25%, I can only give 25%.
		If it were higher, we, in some cases, would have given higher, including this year.
		So there are some pieces there where we could just fine-tune some things.
		The ESOP is a wonderful tool, and it provides it provides stability for the employees and provides a retirement path for them as well.
		I think the more that we can refine the regulations around it to encourage people to be able to do this, clear up the rules on how the valuations are done so that it's clear what needs to be done.
		I think those would be great helps.
tommy tuberville ▲ ● ▼		Thank you.
tommy tuberville ▲ ● ▼		Thank you, Mr. Chairman.
bill cassidy ▲ ● ▼		Senator Sanders.
bernie sanders ▲ ● ▼		Thank you.
		I'm going to pick up on Senator Tuberville's question.
		Maybe we'll start from the other side.
		But before we do that, I think, Mr. Rock, you really hit the nail on the head.
		You used the word dignity many times.
		You put your life into a company, change of ownership, you're out the door in a very disrespectful way.
		And I think what employee ownership, what ESOPS is about, is empowering workers to say you're just not a cog in the machine.
		You're not going to be thrown out the door.
		You have a say about how the company runs.
		You're a decision maker.
		You're not just the worker.
		That's a big deal.
		All right, let me go to Dr. Blasey, and we'll head from this side to that side.
		You know, Senator Cassidy and I and others on this committee have legislation, but forget the legislation for a moment.
		If you had your troubles, if you had your wish, what should the federal government be doing to expand the concept of employee ownership in ESOPS?
		Be brief.
		I'd like to hear from everybody.
unidentified		Given this huge microphone, given this huge potential of trillions of dollars of companies that could be potentially owned by ESOPS, we do need significant loan and loan guarantee programs to make this possible.
unidentified		Secondly, we need, and this is my personal opinion, that the unclarity about valuation and adequate consideration is really something that needs to be resolved.
bernie sanders ▲ ● ▼		Okay, good.
bernie sanders ▲ ● ▼		Mr. Martin?
unidentified		Thank you.
		I would second on the clarity, on the clarity point.
		I think that's, you know, just understanding the guidelines would be a huge benefit.
		I think for me, education and awareness, anything, I mean, I think there's already, obviously there's barriers to entry to all areas of business, but I feel like with ESOPS, there's just a little bit of a business.
bernie sanders ▲ ● ▼		You think that there are a lot of workers and in fact owners, people who started a business, who everything being equal, would like to leave their business to the employees if they could.
bernie sanders ▲ ● ▼		Do you think there is the kind of awareness about that that there should be in the country?
unidentified		Not enough.
		No, I don't think there's enough.
		I think if someone truly, truly wants to invest time, resources into determining, I think the resources are out there.
		But I think there are enough, like I said, enough barriers to maybe distract owners from going down that path.
		Okay.
bernie sanders ▲ ● ▼		Mr. Duplay?
unidentified		I'll echo that.
		I think that awareness certainly would help out there in the community.
		I think that simplicity would certainly help.
		These are complex transactions, and the easier we make it through legislation and otherwise to help companies form ESOPS would certainly be helpful.
		And then obviously we need some of this legislation to get passed.
		So some bipartisan approval and attempt to move some of this forward.
		All of the legislation that the speakers have mentioned and myself today are all positive and leading in the right direction.
		We just would like to see them come to fruition.
bernie sanders ▲ ● ▼		Mr. Rook.
unidentified		I think we've got lots of good suggestions here.
		I would add one more.
		We have the ability as a C Corp to defer taxes when a C Corp converts.
		There are many other types of businesses out there that have the potential to become employee-owned that maybe aren't C Corps.
		It would be nice to have that.
		That is an incentive to encourage people to go.
		The clarification around the valuation is vital.
		I know of businesses that have been afraid to go because of concerns about that long term.
		Okay.
bernie sanders ▲ ● ▼		Are there anything else that we didn't discuss that you would like to throw out here?
		Anything of okay.
		Thank you, Mr. Chairman.
bill cassidy ▲ ● ▼		Senator Houstead.
unidentified		Thank you, Mr. Chairman.
		I would like to thank you and the ranking member for making this a priority.
		I think that ESOPs are one of the most virtuous forms of capitalism in America.
		If you look at the information, you can see that it's good for the employees.
		The companies tend to do better than those who have been exited with, say, a private equity investment, which I would like for you, if any of you have thoughts about the difference in the marketplace between an exit that involves a private equity exit versus an ESOP exit and what that means.
		I hope that we will get this accomplished because I do believe that there is a lack of awareness about the ESOP option and that there is friction.
		The company owners I encounter most are usually family owners, that they have this family business, there's not someone to take it over, they would like to exit, they have a private equity option, they have an ESOP option, and if it's more difficult for them to do an ESOP, then they're less likely to do it, and if it's easier for them, they can.
		And then we also would also like you to address the diversity, because capitalism is hard.
		Running a business is hard.
		Sometimes they fail, even because of markets and other factors.
		How did you protect for the diversification for some of the employees as you're looking at not having all of their eggs in one basket?
		If anyone has a thought on that, please share.
		Yeah, sure.
		Thank you very much for your question, Senator.
		I'll take the diversification issue first.
		It's really important with ESOPs, the research that we have that I've placed into the record that shows that ESOPs, 70% of ESOPs tend to have separate 401k plans.
		When ESOP companies contribute to 401k plans, they have significantly higher balances than non-ESOP companies.
		More ESOPs, in fact, have ESOP workers have defined benefit plans than non-ESOP workers.
		And ESOPs are not to the disadvantage of other retirement plans.
		Also, I think it's important to recognize that the workers are not buying the stock with their savings and with their wages with virtually all ESOPs.
		That's very important.
		That does reduce some of the risk.
		Lastly, we've seen that ESOP companies to diversify acquire other companies whose businesses are countercyclical to their own.
		And that's something that requires a lot of thought and future planning.
		Every ESOP company should have a committee to plan for when the market changes, because capitalism changes.
		New things happen.
		If you plan for it, you can do a better job.
		Go ahead.
		Yeah.
		No, I'm okay.
		I was just going to add one note on the diversification piece.
		I can speak to a sample size of one at King Arthur.
		So, in addition to everything that was mentioned, there is kind of a plan design, but there are required options that you have to offer where if someone is 55 years of age and has 10 years of experience, they can diversify.
		King Arthur, we've taken that one step further and amended our plan to bring that age down to 40 years.
		So, it's technically not a diversification, it's an in-service distribution, but that allows if you have 10 years of experience at 40 years.
		So, it allows the younger workforce to diversify sooner.
		I'll just comment to your private equity versus an ESOP.
		So, you know, an ESOP is a longer-term transition.
		You're going to have a different goal in moving your company to an ESOP, meaning you probably want to continue the culture and the work ethic and maybe even some of your own leadership as an employee or as an owner into the life of the ESOP.
		And so, that to me is a longer term, whereas a private equity transaction will also have completely different objectives because that typically is a shorter-term hold.
		And so, there is the difference there, and it just boils down to what does the owner want to accomplish for his company.
		Yeah.
		And do you know anyone who maybe wanted to do an ESOP but felt that the rules for doing it were so difficult that they chose otherwise?
		Have you encountered that?
		Strong?
		Yes, I have seen that at least a couple of times.
		It's tied around the valuation issues that I mentioned earlier.
		I will add that we have multiple additional opportunities to diversify, starting, I think, at the age 45.
		And then, beyond the 55, we have once you're 55, you can diversify every year till the end.
		We also bring in investment advisors to help counsel our employees about the need to diversify.
		However, we've outperformed the market so much that we have very little success in getting people to diversify.
		Okay.
		Thank you very much.
		Thank you, Mr. Chairman.
bill cassidy ▲ ● ▼		Next will be Senator Hesson.
maggie hassan ▲ ● ▼		Well, good morning and welcome.
		And thank you, Mr. Chair and Ranking Member Sanders, for this hearing.
		My first question was going to be one that you've already answered about barriers to more companies becoming ESOPs.
		But I just did want to really note for all of you, but also my colleagues, that Senator Daines and I have a bipartisan bill that would incentivize business owners to provide stock ownership plans because it would deal with some of that difference between an S corporation and a C corporation that you talked about, Mr. Rourke.
		So allowing S corporations to get that same tax treatment when people sell the stock back to the company so it can be used for the ESOP is something we are working on.
		And I look forward to working on it with my colleagues here.
		Mr. Barton, King Arthur Baking Company was founded in 1790 and has employed many granite staters.
		You met one this morning who's now on my staff over the years contributing to New Hampshire's economic success as well as Vermont's in the regions.
		The company transitioned to an ESOP in the mid-1990s.
		You have nearly 30 years of insight into the benefits of being an employee-owned company.
		And I came in at the end of your testimony.
		You talked about a little bit of them, and in response to Senator Houston, you did as well.
		But how has being an ESOP helped your company weather economic uncertainty and strengthen your workforce?
unidentified		Thank you so much for the question.
		In my second story, I think that was kind of the core of the answer of how our teams kind of step in, step in to challenges.
		I think it's more, I mean, yeah, like in the example I gave, there were wild swings in wheat futures and the costs were going to be impossible to overcome.
		But it was more kind of the mindset and the ability to kind of chip away at deficits and to create an environment where everyone is comfortable stepping in.
		And it may not be that all of our 400 employees have every single say in every single decision, but there's forums within departments, within teams, within the company so that our employee owners feel welcome to step in, step into those challenges, feel empowered, be educated on how we can move forward.
		So I think that's core to.
maggie hassan ▲ ● ▼		Thank you.
maggie hassan ▲ ● ▼		So it provides some stability here that you might not see in other kinds of companies.
unidentified		Absolutely.
maggie hassan ▲ ● ▼		Thank you.
		Mr. Blasey, ESOPs help build wealth for workers regardless of their position in the company, and you outlined some of that in your testimony.
		Making sure that entry-level workers can jointly benefit from profit gains and company growth is a strength of the ESOP model.
		You articulated this somebody.
		If somebody were asking you in a simple couple of sentences to answer this question, how would you do it?
		The question is, how does an ESOP help workers at all levels share in a company's success?
unidentified		Because they get greater retirement security by sharing in the increased value of the company.
		And also because, as I said, 70% of ESOP companies offer cash profit sharing to their employees.
		And more ESOP companies, we've done a survey together with the ESOP Association, offer more than 10% of salary cash profit sharing per year.
		So ESOP companies are employee-owned companies, but they are also share companies.
maggie hassan ▲ ● ▼		Thank you very much.
		You've all been asked this several times, just as you've been listening to each other's testimony, any barriers to ESOP formation that we haven't talked about that you just want to get out on the table?
		You've covered a lot, so I just wanted to make sure you had the opportunity.
		Okay, Mr. Blasey.
unidentified		I will say that if you look across the cabinet departments of the federal government that touch businesses, most of them do a really bad job of sharing information on ESOPs.
maggie hassan ▲ ● ▼		Thank you.
		That's very helpful.
		Thank you, Mr. Chair.
bill cassidy ▲ ● ▼		Senator Marshall.
roger marshall ▲ ● ▼		Thank you, Mr. Chairman.
		And another red letter day that Senator Sanders and I agree on something.
		So we always got to mark these days down.
		So I appreciate both of y'all's leadership on this.
		Of all the business models out there, ESOP is one of my favorite.
		I think it's one of my favorite when I go visit them, the employees have a hop in their step.
		It's more than just getting a paycheck.
		They're working for the future.
		I bet you have incredible employee satisfaction and customer satisfaction because of those ESOPs.
		It's an area that I dove into before I got here as I was looking towards economic development in small communities.
		What could be done to keep these companies from being sold to the East Coast or West Coast companies?
		And even more concern is countries or ownership out of the country.
		And what I found was President Reagan, that was a big reason he wanted to expand these, was to prevent foreign ownership of local companies and keep those jobs there.
		So congratulations to all the ESOPs, 6,000 employees, employee owners in Kansas, Burns and Mac, Eagle Radio, J.E. Dunn, Buyer Bear Construction, Inland Trucking, and I can go on and on and on.
		And again, you can just tell an ESOP company the second you walk through the door how you're greeted.
		They provide job stability, employment, boost wages, and of course, just this incredible retirement plan.
		Now, I want to address our bill, Retirement Through Ownership Act, and thank you, Senator Kaine, for your leadership on this bill as well.
		This is something that should become law.
		As I understand it, if you're not a publicly traded ESOP and you have to do a valuation of this company, it's a challenge.
		And Mr. Rourke, maybe could you help address why this is important that we address this valuation issue?
unidentified		Yes, it's very important.
		One of the challenges as you go through this is the uncertainty.
		I think to see if we can.
		Yes, maybe I need to lean in.
roger marshall ▲ ● ▼		There you go, lean in.
unidentified		One of the challenges is the uncertainty leads to a diminished valuation, sometimes because of the nervousness of the evaluator or the rules and just the fear of being sued.
		One of the concerns I have as a person who wants to remain as an ESOP long-term is that if that valuation comes in too low, someone coming in from the outside may offer such a substantial offer that I would get forced into looking at a sale.
		It would be nice if those things were well defined and that we could get valuation more consistent with the public markets.
		Maybe it doesn't need to be quite as high as the public markets, but it certainly needs to be reasonable.
		And there is often uncertainty in those valuations.
roger marshall ▲ ● ▼		But certainly we want to get the right valuation.
		We want to get the right valuations.
		Mr. DuPois, do you have anything you would add to the importance of this issue?
unidentified		No, Senator, I don't.
		But that is an issue that I have come across.
		And the question came up earlier is, you know, do we experience companies that are hesitant to do this?
		And I will tell you that in my 20-ish years with Acadian, I've probably spoken to about eight or ten companies that, once I went through the explanation of how it all works, kind of shied away from it.
		And I don't think any of them ever went.
roger marshall ▲ ● ▼		What it does is creates uncertainty.
		It creates uncertainty, I think, is the word that I would use.
		And we've been waiting over 50 years for a little bit of clarification on the rules.
		Exactly.
		Mr. Barton, you have King Arthur Baking Company.
		I wonder if you could just speak to how good Kansas wheat is, that it's got a high protein content.
		It's the best for baking.
		And just anything you want to add about how good Kansas wheat is for baking?
unidentified		No objections whatsoever.
unidentified		We have many, many partners in Kansas.
roger marshall ▲ ● ▼		You know, I always brag that Kansas has high protein in it.
roger marshall ▲ ● ▼		And it's one more reason why Kansas wheat is better than French wheat, because it truly is better for baking.
unidentified		It absolutely.
		One of our claims to fame and one of the reasons why bakers can continue to come back is our consistency in protein, where we don't necessarily have swings that other flowers do.
		And we have your farmers to thank for that.
roger marshall ▲ ● ▼		Yeah, if you have a wedding cake and this is your big event, you need consistent protein in that flour, right?
unidentified		100%.
roger marshall ▲ ● ▼		Yeah, thanks for agreeing with me on that as well.
		Mr. Belassey, what are your biggest challenges right now as an ESOP?
		And beyond just the law right now, what other challenges are you seeing in your organization?
unidentified		ESOP companies also have to figure out how to have a supportive corporate culture, how to have employee participation in solving real company problems at the job level and the department level where employees can make an important difference.
		ESOP companies need to look towards expanding profit sharing and gain sharing for short-term results.
		So it's combining the corporate culture with the greater financial advantage to employees.
		That's the real thing.
roger marshall ▲ ● ▼		And I guess at one time I apologize.
		I was hoping you would say the cost of health care and that we need more transparency in health care.
		But I thank you, everyone, for joining us here, and we're rooting you on.
		Thank you, Chairman.
unidentified		Thank you.
bill cassidy ▲ ● ▼		Senator Kane.
tim kaine ▲ ● ▼		Mr. Chair, and thanks for holding this hearing.
		It's really important.
		This hearing, for me, sort of crystallizes why I've never been comfortable with the label capitalist or capitalism to describe what our system should be, because I don't think capital should be at the top of the pyramid.
		Capital is really important, but talent, labor, creativity, innovation is really important.
		I'll just call it humanity.
		And I think capital should serve humanity rather than humanity serve capital.
		So capitalism, to say that's the top value, I don't really think is accurate.
		And I think this testimony today and your own experiences is really showing kind of a different model that puts humanity at the top of the pyramid and capital serves humanity rather than vice versa.
		We've got about 250 ESOPs that are really active in Virginia with more than half a million participants.
		I'll just tell you two stories.
		Wiley Wilson, 125 years next year, it's an architecture firm, Alexandria, Richmond, and Lynchburg.
		They've done a lot of federal contracting work, including right here at the Capitol complex in the War College.
		Back in 2000, the majority owner was thinking about selling and considered a lot of options.
		And one of the prime contending options was a large foreign firm.
		But in the end, they decided to go the ESOP route.
		Now, there's nothing wrong with foreign direct investment.
		I love it.
		We got a lot of it in Virginia.
		But would that owner have been as committed to maintaining a strong Virginia presence?
		Would they have been as committed to growing their employees' wealth?
		Maybe, but probably in all likelihood, not as much as the ESOP model.
		Here's another one.
		Mid-South is a building supply company, helps a lot of homebuilders in Virginia with siding, windows, cabinets, other supplies.
		They became 100% ESOP in 1985.
		Again, they were looking at a lot of exit options, the founding owner back then.
		And one of the employees went to the owner and said, hey, let's explore and go ESOP.
		They took a 20-year loan, the employees to buy the company.
		They paid it back in 12 years.
		And since they've converted to ESOP, they've distributed another $42 million to employees from the ESOP plan.
		They've paid back the initial debt six times over in what they have contributed both to pay back the debt and to employees.
		Right now they have more than 20 employees at the company that have more than a million dollar balance in ownership in the company.
		And the average of these half a million Virginians who participate in ESOPs is they have a balance in excess of $100,000 in ownership.
		I have applaud my colleague, Senator Marshall, trying to deal with this valuation question.
		When the ESOP model was created by the DOL 50 years ago, they were charged by Congress with developing a regulation on valuation.
		And guess what?
		50 years later, they haven't.
		They've started it a couple of times and then pulled it back as recently as a couple of years ago.
		And the valuation question is really important.
		We have a lot of experts in the room, but we have some who like the concept, aren't experts.
		You have an owner.
		That owner is entitled to fair market value for this business.
		So you could put it out for sale to a whole lot of people and get offers.
		And so the owner shouldn't be forced to sell it at a big discount to employees.
		So the owner should get adequate consideration, much as the owner would if the owner was exploring other exit options.
		But because the purchase involves employees taking on a lot of debt, you also don't want the owner to charge really more than the company is worth with individuals who are the employees then taking on more debt than they should.
		And so you're trying to hit this sweet spot of not requiring the owner to sell at a discount, but also not putting too much debt on the backs of the employees who have to pay it back.
		So it's really important to have valuation standards.
		The bill that Senator Marshall and I have introduced would basically take a whole lot of existing IRS law about how you value shares in closely held corporations and set up guidelines for how to do a valuation for an owner to sell to the employees.
		We would not forestall the ability of the DOL to do additional guidance should they choose to, but we would use well-accepted IRS principles for valuing companies.
		And what we would do is give a seller a safe harbor.
		If you follow the provisions in our legislation, well-accepted IRS provisions for valuing companies, then somebody can't come back against you years later and say, you charged us too much and you put too much debt on the shoulders of employees and then people try to undo a transaction.
		Mr. Dupuy and Mr. Rourke, you said you've known folks that have decided not to go the ESOP route because of valuation questions.
		And it's the uncertainty of having somebody come back against you later and claim that the valuation that you did was inaccurate that we're trying to solve with this bill that we're putting in.
		And again, we're using well-established IRS principles for valuation, but also allowing the DOL to do future tightening up or additional regulations should they need it.
		So I hope my colleagues might support it.
		But thank you all for sharing your stories because I think these are really, really powerful stories and then they show that at the top of the pyramid in our economy, it should be humanity and capital should serve humanity rather than vice versa.
		Thanks a lot.
bill cassidy ▲ ● ▼		Thank you.
		I'll take my turn now.
		Mr. Dupuy, just for those people watching, we've talked about kind of a corporate governance, as in not as in as a corporation with somebody at the top, but it's kind of a Mr. Barton spoke of kind of almost a committee of the whole when they face tough times.
		I'm sure it varies, but at times a company feels as if it may exit a line of business.
		I don't know if you've done that.
		You've all been expanding.
		But you may exit a geographic location which formerly you were in, now you're not.
		How do you manage that?
		Because you've got employees there who are invested, but you're going to pull out of a geographic area and you leave them stranded.
		Tell us that.
unidentified		In our case, we've been fortunate in that we don't operate plants or facilities where you have large numbers of employees that could be displaced.
		But we do operate in a variety of communities, and occasionally we are, our contract may not be renewed.
		Again, fortunate in our case in that we are expanding and we actually are under a shortage of medics and paramedics.
		And so we have been able to then take employees who are sort of displaced, if you will, and allocate them and use them elsewhere in the organization.
		So, Senator, we have not come across that specific issue.
bill cassidy ▲ ● ▼		Mr. Barton, you suggested that there may have been price of wheat in Kansas, apparently went too high, too much protein in it.
		Everybody wanted it.
		You should have bought the French stuff.
		But that said, did you all have to do layoffs?
		How do you manage that?
		Do people voluntarily cut my pay?
unidentified		In that case, no, there were no layoffs.
		I think it really, and I think there was a reference earlier about kind of specifically with public companies, kind of the requirement for quarterly reporting and quarterly performance and quarterly targets.
		Obviously, we have those targets.
		We have those reporting.
		We have those targets.
		But our financial model is built on sustainability.
		It's not built on meeting quarterly, quarterly targets.
		So I think that's what certainly helped us through.
		I mean, I think back of 2022 and fiscal 22 wasn't a great year, but we kind of strengthened our foundation and set us up for future success, basically allowing financial performance to dip slightly so that we could be stronger on the other end.
bill cassidy ▲ ● ▼		Dr. Bozzi, you had mentioned the need to have access to capital markets in order to finance these.
		Presumably, one, Small Business Association is there.
		Secondly, obviously banks are there.
		I think you are proposing something different than those two.
		Tell us the shortcomings of using an SBA loan or of a traditional bank or bonding or whatever to do the financing.
unidentified		Thank you for that question, Senator.
		It's really a core question.
		First of all, the Small Business Administration has generally not been friendly to ESOP financing.
		And I know this isn't the SBA committee, but we'll just leave it at that.
		There's a lot to be said about that.
		So that's not a really good route.
		Secondly, most ESOPs, if they're, say, manufacturing ESOPs or service ESOPs, don't have the hard assets to get more than 40 to 60 percent, sometimes even less than that, of the capital needed to do an ESOP leverage buyout from a senior lender, from a bank.
		So that's where you need another.
bill cassidy ▲ ● ▼		So let me ask, though, there's a certain amount of discipline there.
		The U.S. government has a bad history of investing in dogs.
		So Lindra is always the example that people use.
		Politically motivated, turned out not so well.
		And then that burns everybody, and we start passing on things that maybe we should do.
		So how do we, if we correct the valuation, because that really seems to be the issue, you could go to a senior lender if we have the Kane-Marshall bill and therefore maybe get the correct valuation and the correct purchase price, as opposed to inject the, because my side is kind of nervous about this, as opposed to inject the Federal Government into what ultimately could be a political decision.
		You see where I'm going with that?
unidentified		Yes, I see where you are going.
		Well, I'm not an investment banker, so I don't want to give a definitive response on that, but I will say I have studied these kinds of transactions and done interviews with professionals who have done them.
		And even with the correct valuation, it is hard for a potential ESOP transaction to get the amount of capital it needs to get to effectuate a majority or 100 percent ESOP buyout from a retiring business owner.
bill cassidy ▲ ● ▼		And in that answer, you imply that the buyout does not have to be 100 percent.
		I could sell 60 percent of my business.
		Mr. Rohr could sell 60 percent, retain 40 percent, with maybe a game plan to sell in the future or maybe to pass to his heirs, correct?
unidentified		That's absolutely true.
		And there are some wonderful examples around the country of 30 and 40 percent ESOPs where the families want to keep the other 60 percent.
		And they work together with the employees.
		Family businesses, our research shows, like profit sharing, they like employee ownership, they like their employees.
bill cassidy ▲ ● ▼		So the federal loan program would allow the luxury of 100 percent, but the absence of that program does not necessarily eliminate the ability to create an ESOP, even if it's only partial employee ownership.
unidentified		Probably in some cases, yes, sir.
bill cassidy ▲ ● ▼		Okay.
unidentified		Yes, sir.
		Senator Hickenlooper.
		Thank you, Mr. Chair.
		And I could not be more enthusiastic for your willingness to come here and talk about this as one of the few true small business entrepreneurs left in the Senate who started a business from scratch and put everything I owned on the line and created that bond with my employees.
		And we had all different manners of we got pretty far down going in ESOP.
		I was back in the day when I was reading Jack Stack's book, A Great Game of Business about Springfield Remanufacturing.
		I actually drove out to Springfield, Missouri in pursuit of how to do that open page management in a company, which we did copy.
		And I respect and hold in high regard the relationship between management and employees and the people that own the stock.
		Often they're in different spheres of life, and yet they do have an alignment of interest, as you guys have all proved.
		And I think it's unbelievably important.
		I know that Senator Hassan was talking a little bit about subchapter S corporations and that relationship and how we need to solve for that.
		That was what got in the way in the end with our businesses, because we had a number of different restaurants that were each subchapter S companies.
		So I wanted to point out in Colorado, I don't know how Mr. Barton and Mr. Dupuy and Mr. Work, I'm not sure how well you know Colorado's state's laws, but we have a number of different incentives that the state provides, education, training, consulting, but not capital, but everything short of that.
		I thought I'd ask what other state initiatives have you heard of that actually could be helpful to yours and similar companies across the country?
		In other words, what should we be looking at in addition?
		I'm going to start with Mr. Rourke and just be quick.
		Don't be too long because if you don't have a lot of answers, that's all right.
		We'll move to the next question.
		Well, we do have a fairly sizable presence in Colorado in the Colorado Springs area.
		I know it.
		We love it out there.
		I don't know that I have much to add to that.
		So I'll just let these other gentlemen see what they have to say.
		Well, it'll be a short response.
		Louisiana has incentives for training workers and those sort of things, but nothing directed towards ESOP specifically.
		Got it.
		So fun fact.
		So King Arthur will be actually opening up two pop-up stores in Colorado coming soon this holiday season, one in Denver, one in Boulder, so we're very excited for that.
		It's our first presentation.
		King Arthur opening pop-ups in Colorado.
		I want to make sure we get that out there.
		Yes.
		We try to support our companies as best we can.
		100%.
		I don't have much to add.
		I think for me, I mentioned it earlier.
		For me, it comes back to education and awareness, and that's kind of a broad umbrella from business owners that are looking for succession planning, but also for employee owners as well.
		So, I mean, it's just kind of broadening and promoting the ESOP vision.
		And I can't speak to any specific, any specific initiatives that are out there, but I think that's anything that would support that.
		Sure, but I'm hearing from all three of you that we need to get the awareness raised, and whether we do that through the Internal Revenue Service within little inclusions when they're sending it out to small businesses doing their taxes.
		There are a lot of different forms that could take, but I appreciate that.
		Dr. Blasey, the Aspen Institute has done a bunch of studies, significant research on ESOP and employee ownership.
		You published data on the impact of employee ownership on different demographic groups, the particular benefits in terms of how workers experience their workplace.
		Could you talk a little bit about the research and the impact you've seen ESOPs have on the workers who do participate?
		Yes.
		We did one interesting study funded by the W.K. Kellogg Foundation, Cornflake People, interviewing black workers around the country and found that ESOPs allowed them to be more involved in investing in their families and children, dealing with special family situations.
		So ESOP wealth has a specific impact on families and children.
		Perfect.
		That's important.
		I love that.
		Thank you.
		Last question, we'll probably get cut off because the chairman can be a little authoritarian here.
		But again, Dr. Blasey, in Colorado, we've seen breweries, Odell Brewing Company.
		We talked about New Belgian Brewing Company.
		We've had a lot of ESOPs within brewing industries.
		Are there other industries in other parts of the country that are especially receptive to ESOP?
		ESOPs are highly concentrated in U.S. manufacturing, and our new study showed a huge increase in productivity analyzing that.
		ESOPs are highly concentrated in professional service corporations.
		Engineering, consulting and architecture is really big for ESOPs, and that's really important.
		Most people don't understand that.
		Once you get a group of ESOP companies, they start developing a whole focus on an industry.
		We heard about Kansas, where there's a lot of really significant construction companies.
		So there's a lot of potential here.
		I love that.
	Thank you.
bill cassidy ▲ ● ▼		Thank you all.
unidentified		Appreciate it.
		Yield back to the chair.
		I also ask unanimous consent to enter the record a statement from the employee-owned S-Corporations of America, ESCA, in support of the ranking members' legislation.
bill cassidy ▲ ● ▼		Without objection.
unidentified		Thank you.
bill cassidy ▲ ● ▼		Senator Markey.
unidentified		Thank you, Mr. Chairman, very much, and thank you for taking a serious look at how to support employee ownership.
		In Massachusetts, we have over 100 companies that fall into this category with nearly 24,000 employees who are owners.
		It's an excellent way to empower workers to set their own.
bill cassidy ▲ ● ▼		Senator Markey, I'm sorry.
		Senator Banks was here before you.
		We should be going back and forth.
		Can I ask, would you mind if we go to Banks and then you?
unidentified		If everyone would remember where I was in my remarks, I would appreciate it.
unidentified		Yes, no problem.
bill cassidy ▲ ● ▼		That is my bad.
		I was looking over here, not over there.
		I'm sorry, Jim.
jim banks ▲ ● ▼		Thank you, Mr. Chairman.
		I'm happy to get to it.
		My colleague, but I'll be quick.
		Mr. Chairman, I appreciate this hearing very much because my mom for over 30 years worked in nursing homes.
		And as a cook, she was a cook in a nursing home.
		And the nursing home that over time became an employee-owned business became an ESOP.
		So my family saw firsthand the value of ESOPS.
		And I'm glad to see the bipartisan support coming out of this committee to do more to support employee-owned businesses because I've seen firsthand what that can do for families like mine and families in my district.
		And Mr. Belase, there are about 6,400 employee-owned companies in the state of Indiana that represent over 15 million workers and retirees like my mom.
		Urshel Laboratories in Chesterton, Von Tobel and Lafayette, Michigan City and Valparaiso, Corellis Roofing in Hammond, and BSA Life Structures in Indianapolis, just to name a few of the ESOPs that have a great reputation and do great work in our state.
		15 million people is a lot of people, but it covers just a very small percentage of the entire workforce of the state of Indiana.
		I wonder if you could explain how would the economy overall be different if there were more workers who worked for ESOPs?
unidentified		Our research suggests that one would see fewer layoffs, more employment stability, so fewer unemployment compensation costs in the economy.
		When a community, and we're talking about mostly, forget about really huge cities, 33,000 counties in the United States, many small towns and some very small cities, a few companies that can be sold to an ESOP from a retiree business owner ensure a lot of social stability in those communities.
		When families lose their jobs, there's increases in alcoholism, there's increases in divorce, there's all kinds of effects on children and families.
		We have to look to the human impact.
		When a small city of 10,000 people loses a supermarket or its anchor manufacturing because it's sold to some country outside the United States, that's really not a good thing.
		So ESOPs really go directly at this issue in a very significant way.
jim banks ▲ ● ▼		Indiana is also the top manufacturing state per capita in the country.
		You've already talked about manufacturing, the manufacturing industries being ripe for employee-owned businesses.
		But how can we motivate that?
		How can we speed that up to restore the manufacturing base in this country that makes America grow?
unidentified		We can speed that up because many retiring business owners who have manufacturing companies, they could get 100 percent check from a private equity firm or a strategic buyer.
unidentified		But ESOPs need more loans and loan guarantees to be able to finance 100 percent, although I defer to Mr. Chairman saying that it doesn't always have to be 100 percent ESOP.
jim banks ▲ ● ▼		Good.
		Well, like I said, this is such an important topic and conversation.
		I hope to work with you, Mr. Chairman, and others on the other side of the aisle to support employee-owned businesses like the ones that I mentioned.
		It makes a difference in Indiana.
		Thank you.
		I yield back.
bill cassidy ▲ ● ▼		And Senator Markey, thank you.
bill cassidy ▲ ● ▼		And take an extra bit of time if you need to.
unidentified		Thank you, Mr. Chairman, very much.
		And I'm the ranking member of the Small Business Committee, and I know how crucial it is at this point to expand employee stock ownership plans.
		In Massachusetts, much like elsewhere in the country, over 50 percent of businesses have an owner that is 55 years old or older, and many are struggling to find a succession plan that honors their life's work.
		Too many have to close their doors or turn to a corporate buyer that has no loyalty to the business owner, the workers, or the community.
		And I look forward to making progress on this crucial issue.
		Mr. Dupree, you have stated that Arcadian was founded in a medical transport crisis.
		I would imagine that having ambulance crews as owners means they know how important emergency medical services are.
		When a loved one has a heart attack or a stroke, you're the ones who will get them to the hospital in time.
		They're also understanding of the financial difficulty for the business and patients when people don't have insurance or how difficult it can be to provide emergency care in rural areas when the care that people need is just too far away.
		What is the impact of having frontline emergency providers also serve as owners of the company?
		Thank you, Senator.
		Yes, our employees are very aware of, obviously, the personal situation of patients as they are going through a crisis.
		And from a managed perspective, we are aware of the reimbursement reality of what a patient may or may not have.
		Ultimately, though, our mission is to provide the best medical services we can.
		And we are out there.
		I think it is sort of a blind issue, if you will, in that we allow them to worry about providing the care and we manage the financial aspects of it.
		Yeah.
		And again, we are not any longer in a business-as-usual environment.
		We just had the biggest cuts to medical care passed to Congress and signed by the President in the history of our country.
		I wish that we had this hearing before, before we had votes on that bill, especially for someone like you in terms of what the resources are that you need.
		The trillion dollars in cuts will push 15 million people off their insurance and make it more likely that rural hospitals will close their doors or cut services like labor and delivery, mental health, pediatrics or emergency care.
		And those cuts are absolutely going to impact businesses all across the country.
		So would you like to expand further, Mr. Leby, in terms of what the ESO is?
		Yes, I can.
		I think that certainly we are a health care provider, so the Medicaid cuts will affect us.
		We understand what Congress was trying to accomplish.
		We respect that.
		We hope to have additional conversations.
		However, I think the thing for our business is that when people come off the Medicaid rolls, that doesn't stop us from having to provide a service.
		So we have to answer the call regardless of a patient's ability to pay.
		And so it simply means that we will still have the same level of cost and operating expense, et cetera, but our reimbursement may either be zero or reduced as a result for a portion of our patients, obviously.
		So, yes, it is a concern.
		And similar, if you don't mind, I would like to supplement, because it goes hand in hand with what Senator Cassidy asked earlier about how do you address a downturn in your business or other issues.
		I think that being an ESOP instills a certain level of discipline in the management of the company.
		We are dealing ultimately with our employees' retirement accounts, and we see them every day out in the field.
		And we have to make very prudent and real, sometimes difficult decisions to be able to protect those retirement accounts.
		We know that.
		And we absolutely know that, but we just can't cross our fingers and hope.
		A vision without funding is an hallucination.
		You have to have the funding in order to accomplish the goals that you are talking about.
		And we know people are going to be hurt unless those cuts are reversed.
		And employee ownership gives workers dignity.
		It gives them security.
		It evens the scale between workers and big corporations.
		But I just think that we just can't see a reduction in people's lives, in their dignity, in their security, because that is going to absolutely require us to reverse the balance that has now been struck for the future, which is that billionaires get bigger tax breaks and individual workers' programs that are central to their well-being, keeping their companies going and the services they provide, receiving the funding which they need.
		So that would be my perspective on this.
		And again, I think it's central to making sure ESOPs get the resources they need to be successful.
		Thank you, Mr. Chairman.
bill cassidy ▲ ● ▼		Senator Kaine has a follow-up question.
tim kaine ▲ ● ▼		Mr. Ruck, I wanted to ask you just one question, because this, again, we have got a lot of experts in the room, but also people who are watching are kind of learning this.
		You dropped a line that you didn't explain, which was that your company recently decided to become a public benefit corporation.
		Tell folks what that means.
unidentified		Public Benefit Corporation.
		Thank you for that question, by the way.
		One of the challenges we have as an ESOP wanting to become a company for be in business for 100 years, as we said, is our goal, and that goal changes every day to be 100 more years.
		One of the challenges is sort of, we've sneaked up to this in some of the discussion earlier, is that if someone comes in and makes a substantial offer, we have to consider that.
		Even though we may be able to sit and agree that the best thing for our employees is to stay in business as we are, not to sell and have a bunch of them walk to the door and the benefits change and all those things that go forward.
		Some of the state laws provide some protection for you if you define what you are in business to do.
		The federal law does not do that as of now.
		So we have the fiduciary responsibility with the federal law to look at those.
		That's one area that I would like to see changed.
		I don't know if it falls under this committee or where it falls.
		But as a public benefit corporation, we define in our Articles of Corporation things that are just as important as making a profit for our employees.
		For us, we've defined that financial growing the financial capability of our employees and putting them in a good position for retirement as our number one aspect.
		Number two, our customers and the nation in terms of what we do in terms of service.
		We think if we take care of their employees, they'll take care of our soldiers in the field.
		And number three, at the key of our culture, even from the very beginning, is to give back to our local communities.
		And so we give back to all, in every community we participate, we participate in the charities in those communities.
		In fact, in the last couple of years, we've been honored by three philanthropy awards for the company given back to the community.
		Three different organizations have honored us.
		And last but not least, our number four item in our public benefit statements that we've indoctrinated into our Articles of Corporation is we will make it our mission to help other companies become employee-owned.
		And so a large portion of my time that I spend now, I've retired as an employee.
		I'm no longer a member of the ESOP, but I'm still chairman of the board and I still work a couple of days a week.
		Most of the time that I spend now, and I'll come in on days that I don't work, is helping other companies.
		I work on two issues, and one is the repurchase liability, which has not come up here, which is a big issue for ESOP companies.
		And the other is helping other companies with either sustaining their current ESOP or becoming an ESOP.
		And as a public benefit corporation, those four items count just like profit in making a decision whether you have to sell or not.
tim kaine ▲ ● ▼		That's really important.
		So just to summarize, about 36 states allow public benefit corporations.
		The federal government doesn't have that.
		So if you're in a state that doesn't allow it or if you're just following the federal law, the fiduciary duty is to shareholder value.
		But the public benefit corporation model allows you to define for each corporation, could define it differently, here's how we measure our performance.
		Here's what you can hold us accountable to.
		And it's not just shareholder value.
		And I think that's an important thing.
		And I'm glad that you were able to kind of explain that to folks.
unidentified		Clearly, you understand this issue.
		90% of our employees voted to be a public benefit corporation.
		We did the vote two ways, one by shares.
		So the share counts, 89.6%, I think.
		And we did it by noses because we wanted the employees to have an equal share in saying we would not have gone forward if we didn't get a positive on both those 90%, roughly on both those.
tim kaine ▲ ● ▼		Thank you very much.
tim kaine ▲ ● ▼		I yield back.
bill cassidy ▲ ● ▼		Really good second set of questions.
		Hey, thank you all.
		In closing, I want to thank the ESOP Association for the leadership and feedback on this issue.
		They've all been fantastic.
		I think it's illuminated the issue, and thank you very much.
		I asked for unanimous consent to enter several levels, several letters of support from the ESOP Association into the record, and the two of us agree.
		With that, I close the hearing.
		If anybody has for any senator wishing to ask additional questions, questions for the records will be due 5 p.m. Thursday, August the 7th.
		I thank the witnesses for being here.
		The committee stands adjourned.
		Eddie, can we get a picture?
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jimmy carter ▲ ● ▼		Democracy is always an unfinished creation.
ronald reagan ▲ ● ▼		Democracy is worth dying for.

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