Employee Owned Companies – What Do You Think This Means?

Since becoming connected with progressive groups, I have noticed that use of the sentence “It’s an employee owned company” is usually uttered in tones used by a therapist, counselor or a funeral director selling a “pre-need” policy.

So I decided (skeptical soul that I am) to check into what “employee-owned company” means, if anything.  I ran across a document that included the following definitions: 

The term ‘employee owned’ is reserved for a corporation that is more than 50% owned by its employees. Firms with less than 51% employee ownership are commonly called ‘employee ownership companies,’ ‘companies with significant employee ownership,’ ‘companies with minority employee ownership,’ or ‘employee-held companies.’

Source: http://www.benefitcapital.com/ESOPInfoList/Employee_Ownership_and_Employee_Buyout_Definition_Fed_1-14-04.pdf  

In the Madison area, the following companies are identified (in one way or another) as “employee-owned”: Costco; Woodman’s; and Hy-Vee. In addition, King Arthur Flour (which may or may not be sold in this area) is also considered to be an “employee-owned company.”

Costco is the easiest of the above companies to find information on, because it is also a publicly held company. This means that its stock is traded on a public stock exchange (NASDAQ – symbol COST) and it is required to file specific reports with the federal government regarding ownership of its stock.

Costco’s website provided the following information regarding the extent of “employee” ownership:

Breakdown of Costco Major Shareholders

% of Shares Held by All Insider and 5% Owners:

1%

% of Shares Held by Institutional & Mutual Fund Owners:

78%

Source: http://finance.yahoo.com/q/mh?s=COST+Major+Holders

Looking at this table, one would have to say that at most 22% of Costco shares are held by employees. Generally “Insiders” are assumed to be managers and members of the board of directors whose stock trades are regulated because they have access to information which could give them an unfair advantage over the average shareholder.

On the plus side for the company, Costco’s benefit plans include a 401K plan which may offer the option of investing in company stock and an employee stock purchase plan via payroll deductions which allows employees from their first day with the company to buy company stock and avoid brokerage fees.

Does this change your view of Costco as an “employee owned” company? Why or why not?


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  • commented 2012-12-10 14:35:58 -0600
    Yes, I agree with you. I was just commenting on use of the “employee-owned” term as sort of a halo.
    Karen
  • commented 2012-12-10 14:05:01 -0600
    Yeah, sounds like a stretch to call it employee-owned. But it’s still a much better company to it’s workers, and therefore a much better alternative to Walmart, right?