The New Jersey Economic Development Authority has reached an agreement with the Rutgers University School of Management and Labor Relations to create educational and informational programming to increase the number of New Jersey businesses utilizing an Employee Stock Ownership Plan.
The NJEDA board approved the agreement, which will be funded at $2 million, this week. The agreement will support the creation of a technical assistance program in which Rutgers will develop a tool to help interested businesses determine if transitioning to an ESOP may be a viable option. The agreement also includes a series of outreach initiatives and more. Programming will be led by Rutgers’ Institute for the Study of Employee Ownership and Profit Sharing, and the New Jersey/New York Center for Employee Ownership.
An ESOP is an employee ownership model in which workers retain interest in shares of a company through holding stock in a trust, providing a successional plan for business owners while building wealth for workers, the EDA said in a news release.
The Memorandum of Understanding will be funded with a portion of an allocation of $6 million for Wealth Disparities Initiatives that was part of the Fiscal Year 2024 Appropriations Act. That was part of Gov. Phil Murphy’s efforts to find the causes of, and create remedies for, the longstanding wealth disparities that affect Black and Hispanic communities within the state. Those efforts included the creation of the Wealth Disparity Task Force, whose work formed the basis of the initiatives.
“The ESOP model has been deployed successfully by thousands of companies nationally, and presents a fantastic alternative for New Jersey businesses looking to solidify their succession plans and offer a family-sustaining benefit to their employees,” Murphy said in a prepared statement. “The team at Rutgers has amassed significant expertise on the deployment of ESOPs, and will be a crucial partner in raising awareness of this tremendous financial opportunity for New Jerseyans.”
New Jersey has one of the lowest rates of employee-owned companies across the U.S., the EDA noted, with 88 ESOPs holding $64.9 billion in plan assets covering more than 423,000 employees and retirees. The average stock account for eligible employees has more than $188,000.
“ESOPs offer a powerful mechanism for creating a stable transition plan for companies, while also helping employee-owners accumulate wealth to pass on to future generations, particularly within communities of color,” EDA CEO Tim Sullivan said in a statement. “Under Gov. Phil Murphy’s leadership, the Wealth Disparity Task Force identified an opportunity to mitigate barriers for entry into ESOPs, releasing their potential to secure the future of businesses and their employee-owners that outpaces more widely-employed forms of savings and investment.”
