Employee-owned companies have existed in the United States in one form or another since the mid-1800’s. In those early days, companies like Sears & Roebuck and Railway Express Agency were visionary in their actions and compassionate in their intent to give their employees an avenue for retirement income.
Since those initial businesses blazed the trail, many others have followed their important first steps. Today, companies like Publix Super Markets, King Arthur Flour, and Swales Aerospace are numbered among the 6,669 ESOPs in the USA. (2015 – most recent statistics available from DOL)
While the answer to how many ESOP companies are in the United States is relatively simple, there are significant observations that one can make when a deep dive is made into the numbers behind the aggregate number of 6,669.
Stand-alone ESOPs make up the bulk of that number (5,505) with KSOPs topping up the remaining 1,164 spots.
As we take a closer look at the 5,505 stand-alone ESOP companies in the United States, more details emerge.
- The vast majority of those ESOPs are private companies. – Only 129 are publicly traded.
- Large ESOP companies (ESOPs with more than 100 participants) make up the smaller share of ESOPs at 2,031 companies but have the most participants (1,190,685).
- There are far more smaller companies (with fewer than 100 ESOP participants) utilizing the ESOP model (3,344), but because of company size, the number of participants is much smaller (139,655).
Another way to measure ESOPs is the assets of the ESOP plan. If one totals the ESOP plan assets of the privately held ESOP companies in the United States, he or she will come up with a number around $107,481,000,000.
Again, the size of the company drives the ESOP plan assets inside of our statistics. The large ESOP private companies had an accumulated total ESOP plan asset worth of $95,356,000,000 while the small private ESOP company’s total combined ESOP plan assets were $12,124,000,000 in 2015.
Where does the ESOP model thrive?
By surveying the entirety of ESOPs across the United States, we can begin to make some educated observations about what kind of companies historically and currently operate well within the ESOP framework.
Our latest data suggests the following.
The services industry and manufacturing overwhelmingly lead the way in the adoption of the ESOP model. The services industry makes up 28% of all ESOPs and manufacturing comes in a close second at 22%.
Why is this?
Historically, these are two industry sectors where workers have seen lower wages and fewer benefits. As a result, the ESOP model was attractive for employee-friendly employers as well as employees hungry for change. Once the ball was rolling in these sectors, the ESOP model was more readily adopted by others within the same industry.
Following Services and manufacturing, the industries with the next highest percentage of ESOP companies are:
- Finance/Insurance/Real Estate at 17% of the total of ESOP companies.
- Construction at 11% of the total of ESOP companies.
- Wholesale trade at 9% of the total of ESOP companies.
- Retail at 6% of the total of ESOP companies.
From there, the numbers drop off dramatically and are taken up by industries such as transportation, communications/information, utilities, agriculture, and mining.
C Corporations and S Corporations
What Area Of The Country Has The Most ESOPs – And Why?
The mid-west wins the ESOP national race with 32% of the total ESOPs in the United States. This is closely followed by the South with 30% of the total ESOPs.
The numbers of ESOPs begin to fall when we look at the western states (only 23%), and the northeast pulls up at the back of the pack with only 16% of ESOPs.
Why? The answer is again found in history. As we mentioned earlier, the ESOP model found fertile ground in the industries of services and manufacturing. The mid-west and the south simply had more of these types of companies earlier on, and so the acceptance of the ESOP model was stronger through the south and midwest where employees were hungry for change and employers were looking to give it to them.
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