Happy birthday, America! Celebrations galore will mark our country’s 250th anniversary. Among the commemorations, companies and industries are creating timeline walls and founders’ story corners that connect their history with United States’.
Amidst these festivities, let’s take a moment to observe a similar remembrance that honors the rich history of employee ownership since colonial days. Yes, 2026 also marks the semiquincentennial of employee ownership.
Credit Benjamin Franklin and his commercial franchise system, the first in the Americas, with encouraging promising employees to become business partners and eventually (usually after six years) independent owners. These employee-to-owner pipelines and apprenticeship-to-owner transitions marked informal forms of employee ownership. For example, Lewis Timothee was a journeyman, appointed to run Franklin’s first franchise granted in 1731 in South Carolina.
In subsequent decades, other advances took place to promote employee ownership as well as Employee Stock Ownership Plans, or ESOPs, in the U.S.:
1849: The first federal recognition of employee ownership occurs when Treasury Secretary William Meredith, noting workers already own shares in many enterprises, argues that shared ownership can usefully align labor and capital.
Late 1800s: Worker cooperatives founded by the Knights of Labor – among the first mass labor movements – create worker‑owned businesses as an alternative to industrial capitalism. Hundreds are founded, but most fail because they lack capital, skilled management, competitive market strategies and other factors.
1920s: The “New Capitalism” movement develops, in which Industrialists encourage employees to buy company stock. More than one million workers participate, but enthusiasm fades during the Great Depression, signaling that such ownership is fragile without worker protections.
1921: The Internal Revenue Act creates the legal category of stock bonus plans, the earliest statutory structure enabling employers to contribute company stock to workers. Over time, this structure evolves in today’s ESOPs.
1956: Political economist and lawyer Louis Kelso creates the first true ESOP, a leveraged stock‑purchase plan for a California newspaper which allows employees to gain ownership without contributing capital upfront.
1974: ESOPs become federal law under the Employee Retirement Income Security Act, or ERISA, marking the single most important legal milestone in employee‑ownership history.
1984: The Tax Reform Act sparks ESOP growth by permitting capital-gains deferral for selling owners and corporate deductions for ESOP loan repayment, making ESOPs the country’s most tax-advantaged succession tool.
1990s: ESOPs are extended to S‑Corporations, markedly expanding adoption. By the 2000s, over 75% of ESOPs are S‑Corp ESOPs.
2014: The first U.S. Employee Ownership Trust (EOT) is established, a new ownership model inspired by the UK that enables perpetual employee ownership.
2010s–2020s: Worker cooperatives and ESOP participation grows rapidly, with ESOP participation rising 8% during the decade and worker cooperatives more than doubling.
2022: The SECURE 2.0 Act strengthens employee‑ownership readiness as federal policy now explicitly supports worker‑ownership transitions and education.
2023: The Labor Department creates the Division of Employee Ownership, dedicated to expanding employee ownership nationwide.
Today, about 18% of U.S. employees, or roughly 25 million workers, enjoy some form of ownership in the companies where they work. About 11 million active employees participate in ESOPs; 14 million in equity compensation plans, and about 10,000 are employed in 900-to-1,000 worker-owned cooperatives, estimate Joseph Blasi and Douglas Kruse of Rutger’s School of Management and Labor Relations.
This brief timeline underscores that even before the birth of our nation, employee ownership has played a part, evolving from informal practices to a federally supported, tax-advantaged, and bipartisan-supported economic strategy, one that is today implanted in retirement law, tax policy, and small‑business succession planning.
Let’s celebrate this history of employee ownership during what I have long called the Decade of the ESOP. Three cheers for employee ownership and for the U.S.A.!
