Center for American Progress

RELEASE: New CAP Report Outlines Policies to Promote Broad-Based Profit Sharing and Inclusive Capitalism
Press Advisory

RELEASE: New CAP Report Outlines Policies to Promote Broad-Based Profit Sharing and Inclusive Capitalism

Washington, D.C. — A new report from the Center for American Progress explores in-depth ways to encourage more companies to adopt employee ownership programs and other types of broad-based profit sharing policies to help ensure that workers are rewarded for the wealth they generate.

“The economy has bounced back—but those at the very top are doing much better than everyone else. Stagnant wages and declining household incomes have plagued many middle- and working-class households over the past decade. Even before the Great Recession, productivity was growing, but working Americans have seen little benefit in their paychecks,” said Carmel Martin, Executive Vice President for Policy at the Center for American Progress. “We need a new approach to ensure that workers can share in the economic success they have helped create. And broad-based profit sharing programs aren’t just good for workers—they are good for business too.”

CAP’s profit sharing proposals offer new ideas and expand on recommendations included in a number of CAP policy papers, most recently its January 2015 report from the Commission on Inclusive Prosperity, or IPC. The IPC—a transatlantic board convened by CAP—is composed of high-level American and international policymakers, economists, business leaders, and labor representatives. The report focused on finding ways to expand the middle class through inclusive economic growth, and a key part of the report explored policies—including profit sharing and other strategies to raise wages and incomes—to increase workers’ share of the economic pie.

Broad-based profit sharing programs benefit workers by allowing employees to share in economic growth to which they have contributed, but as CAP’s report notes, strong evidence shows that firms and investors also receive tangible benefits from sharing with their workers. For example, research shows that both public and private companies with broad-based sharing plans are less likely than their counterparts without employee ownership to go bankrupt or disappear for another reason. CAP’s report also notes that companies and investors that adopt partnership approaches make profits over and above the cost of sharing ownership with employees, according to a review of more than 70 empirical studies.

In its report, CAP outlines three primary policies to ensure that more companies and workers are able to participate in inclusive capitalism programs. They are:

  • The elimination of perverse incentives that encourage companies not to share with their employees: Reforming the tax code so that it no longer subsidizes narrow incentive programs that benefit only top executives is at the heart of this policy. Policymakers should also ensure that employee-owned companies are not barred from participating in contract set-aside programs.
  • The adoption of policies to incentivize more companies to implement broad-based sharing plans: This approach includes allowing more companies that share with their workers to benefit from loan guarantees through the Small Business Administration. Doing so would help ensure that these small businesses have access to the capital they need to sell to their employees—a good investment as these companies have lower rates of default than comparable companies without sharing programs. Policymakers should also encourage estates to sell to workers by providing partial estate tax relief.
  • Action from the federal government to bridge information gaps and thereby encourage more companies to adopt broad-based sharing programs for workers by creating an Office of Inclusive Capitalism: This office would promote outreach and provide technical assistance to private sector businesses, unions, and workers and improve government knowledge and support for inclusive capitalism.

Click here to read “Capitalism for Everyone: Encouraging Companies to Adopt Employee Ownership Programs and Broad-Based Profit Sharing,” by Karla Walter, David Madland, and Danielle Corley.

For more information or to speak with an expert, contact Allison Preiss at [email protected] or 202.478.6331.