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Study Finds Employee Ownership Provides Best Worker Outcomes in Business Transitions

A new study by the Brookings Institution and Washington University’s Olin Business School finds that employees are significantly more likely to remain working for their employer and to be satisfied with their jobs in companies that transition ownership through ESOPs and other employee ownership models compared to other business transition models. The study also recommends that Congress pass the Promotion and Expansion of Private Employee Ownership Act of 2023 and support efforts of private equity firms, such as those involved with Ownership Works, to include employee ownership in business transitions.

The report, The Tidal Wave of Transitions on Main Street (PDF; discussed in Olin Brookings Commission recommends policies to manage ‘silver tsunami’ impact), included data from the platform Prolific that surveyed employees who had been through transitions. In addition to asking about whether they stayed with their employer, the survey looked at a measure of overall job quality based on a Department of Labor construct. The study focused on three items in particular:

  • “I had a competitive wage and benefits”
  • “All workers were valued and respected by leadership”
  • “There were transparent promotion/advancement opportunities”

When compared to baseline numbers, when there is a transition to employee ownership, job quality numbers show a slight dip in the early years after the sale but end up more positive than the baseline five years later. No other transition approach does as well, with family transitions coming in second-best and sales to competitors or private equity doing significantly worse (down about .75 points on a 7-point scale).

Employees were also much more likely to stay with the employer after an employee ownership transition compared to other transitions. Some 81.8% of surveyed employees were still at the same employer when the transition was through employee ownership, compared to 70.3% in a family transition, 65.9% in a private equity sale, and 61.2% in a competitor sale. The study did not break out how much of this decline was voluntary. The findings are consistent with other research showing that employee ownership is strongly correlated with lower turnover.