Employee-Owned Companies and Foreign Aid
The extensive coverage of President Trump’s executive order to halt payments for foreign aid has missed one of the order’s unintended consequences: the impact it will have on the thousands of people who work at U.S.-based employee-owned companies that implement many USAID projects. Companies that have employee stock ownership plans (ESOPs) are heavily represented among the contractors affected by the executive order.
Employee Ownership
Employee ownership is extensive in the U.S. More than 6,000 private companies have ESOPs, spanning various company sizes and all states and territories. ESOP companies have an especially heavy presence in manufacturing, but they are in all sectors of the economy.
The ESOP companies that support foreign policy are U.S.-owned, and their ESOPs are governed by U.S. federal law. Being employee-owned has helped them successfully avoid being acquired by foreign and domestic competitors, giving the U.S. a strong base of companies to support U.S. foreign policy across administrations.
The National Center for Employee Ownership (NCEO) is a nonprofit organization that has supported the employee ownership community since 1981. Our mission is to help employee ownership thrive. Employee ownership and ESOPs drive better business outcomes and more secure retirement for employees, which has resulted in strong bipartisan support for ESOPs for decades.
Executive Order on USAID
The Trump administration’s January 20, 2025, executive order Reevaluating and Realigning United States Foreign Aid and the ensuring stop-work orders directly affect all companies, including employee-owned businesses. Since the executive order, three of the ESOP-owned companies implementing USAID programs have reported that they have not been paid by USAID for work performed before January 20, and they have more than $200 million in outstanding receivables to the U.S. government.
All of the executives we spoke to for this update believed that the executive order and stop-work orders will drive some contractors into bankruptcy. All of the firms in the industry have already laid off or furloughed thousands of staff in an attempt to avoid bankruptcy during the review period.
An officer at one company said, “the sudden and shifting implementation of the executive order threatens our company’s health and financial stability.” Another noted that, like other companies, they are legally required to continue paying office expenses, equipment leases, staff costs that cannot be diverted onto other contracts, and other costs. That executive noted that “we cannot be reimbursed until we can present claims for equitable adjustment when the stop-work order is lifted at the end of the State Department’s 90-day review of foreign aid programs.”
The Effect on Employee-Owners
While the impact of bankruptcy is profound for any firm, company shares in an ESOP are owned in trust to benefit employees’ retirement accounts. If the firm goes bankrupt, all of the current and former employees who are beneficial shareholders in the ESOP lose their ESOP retirement savings, in addition to losing their jobs and health insurance. Although ESOP companies typically have other retirement plans, the executive order risks a significant portion of the retirement savings of more than 10,000 employee-owners and retirees at the affected companies.
The NCEO is not qualified to have an opinion on the merits of a review of current programming or President Trump’s foreign policy objectives, but we believe that these adjustments can be made in a way that preserves the goal Congress set over 50 years ago when it adopted the Employee Retirement Income Security Act: to enhance and preserve the retirement savings of the American workforce.