The results of this year’s Economic Performance Survey (EPS) show that, once again, companies belonging to The ESOP Association have experienced positive corporate performance.
Just as importantly, the EPS once again shows that when companies perform well, employee owners share in the rewards. This year, new data reveal a new facet of how ESOP (employee stock ownership plan) companies distribute those rewards.
Employee Owners Share the Rewards
For the first time ever, this year’s survey included questions on pay increases. The results show that 75 percent of responding companies increased wages at or above the national average of 2.7 percent, and 29 percent increased wages by 4 percent of more.
In addition, 55 percent of responding companies contributed to their ESOPs an amount equivalent to 11 percent or more of their employee owners’ pay—far surpassing the typical 401(k) match.
Sharing the wealth with employee owners is fundamental to ESOPs and helps align the efforts of all employee owners with the performance of the company.
Profits Rose More than Revenue
The engagement of employee owners may help to explain a noteworthy trend: Companies responding to the survey realize profits that rose more than their revenue.
Since the EPS started asking for greater detail on revenue and profits in 2016, ESOP companies have reported profit margins that exceed the highest increases in revenue. The only apparent explanation is that these companies excel at managing costs, which is consistent with businesses that engage their employees and seek better, more efficient ways to operate.
A History of Strong Performance
Since 2000, the majority of responding companies have reported increases in profits for every year but two (2002 and 2010), and increases in revenue for every year but one (2010).
The exceptions noted above reflect the nationwide economic downturns of the prior years (2001 and 2009). Even in those challenging economic times, 29 percent or more of ESOP companies responding to our survey reported that profits and/or revenue increased.
These results align with recent academic research that found employee-owned businesses surpass conventionally-owned companies at riding out tough economic times.