January 27, 2016 2 min read

Employee ownership — A proposal to encourage ESOPs

In the mid-1980s, Burns & McDonnell found itself at a major turning point.

At the time, the Kansas City engineering firm was owned by Armco Steel. However, Armco was interested in selling Burns & McDonnell to a foreign investor.

Fearing that the sale could lead to a downturn for the company, Burns & McDonnell leaders rallied to put together a bid to purchase the company through an employee stock ownership plan, often called an ESOP.

The move was successful. Since then, Burns & McDonnell has flourished as an employee-owned company. The company is currently constructing a massive headquarters expansion.

A bill being considered in the Missouri House would help other Missouri companies follow Burns & McDonnell’s lead and become employee-owned.

House Bill 2030 would create a new 50 percent income tax deduction on the proceeds business owners receive when the sell their companies to their employees. The bill is intended to encourage businesses to go the ESOP route versus selling to a competitor or passing the business to out-of-state ownership.

The tax deduction would kick in if an owner has sold at least 30 percent of the business to the employees.

“What this would do is it allows many businesses to remain local and be owned by the employees,” said Rep. Denny Hoskins, a Republican from Warrensburg.

The Missouri Chamber of Commerce and Industry supports this bill. Tracy King, the Missouri Chamber’s vice president of governmental affairs, cited research showing the how ESOPs create a more engaged workforce and lead to better performing businesses.

“When you sell it to your employees you see more growth than a regular business,” said King.

The bill would allow owners of both S and C corporations to benefit from the tax deduction when they move to ESOP ownership. Some other states, including Nebraska and Iowa, already have similar incentives that encourage ESOPs.

During a hearing on the bill, Burns & McDonnell lobbyist Fred Dreiling recounted the history of the company’s bid to become employee-owned and encouraged lawmakers to pass the bill so that more Missouri businesses would take this route.

“As you know, the employee-owners of Burns & McDonnell are doing very well,” Dreiling said. “Those that are following in Burns & McDonnell’s footsteps toward becoming an ESOP could benefit from this legislation.”

The Missouri Chamber is working to establish a coalition of business leaders who want to encourage ESOP ownership and support passage of HB 2030. For more information, please contact Tracy King at tking@mochamber.com or by phone at 573.634.3511.


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