The Encouraging Employee Ownership Act Isn’t Really About Encouraging Employee Ownership. So What is it About?

Yesterday, the House passed the Encouraging Employee Ownership Act by a large margin of 331 to 87. The title sounds promising: employee ownership, when designed well, can be a key part of democratizing the workplace, and cities like New York have taken steps to promote worker cooperatives.

Bernie Sanders has also been a strong advocate of worker cooperatives. Is the House suddenly feeling the Bern?

If only.

Currently, private companies that compensate their employees with more than $5 million in company stock per year have to provide said employees with certain disclosures, including two years of (unaudited) financial statements and information about the risk involved in the securities. This bill would raise the threshold at which such disclosure requirements kick in to $10 million and then index it to inflation.

In their minority report in Financial Services Committee, Maxine Waters (CA-43), Gwen Moore (WI-04), Al Green (TX-09), Mike Capuano (MA-07), and Joyce Beatty (OH-03) explained the dangers of this:

This information may be even more important for employee-investors since they may be more susceptible to suggestion and coercion, may not have the resources to otherwise know the value of their shares, and may not understand the nature of the risks associated with these private, illiquid securities that are not freely tradable. Indeed, rather than encouraging more employees to own their employer’s stock, the bill only encourages individual employees to own more of their employer’s stock, exposing them to concentration risk in their retirement accounts. This is more troubling in the context of the Jumpstart Our Business Startups Act of 2012, which made it easier for privately-held companies to remain private by, for example, exempting employees who receive stock compensation from counting toward the threshold for public company reporting. Therefore, the bill would enable large private companies to encourage overinvestment by employees in stock that they cannot value and may not ever be permitted to sell, except back to the company.

Republicans have acted as though this is an overwhelming burden to the companies in question. However, the only companies that would be benefiting from the higher threshold have at least $34 million in assets.

Nonetheless, when the bill came to a vote, it sailed through easily. Only 86 Democrats and 1 Republican — Walter Jones (NC-03) — voted against it.

Here are the 86 to be commended for their vote:

Alma Adams (NC-12)

Nanette Barragan (CA-44)

Karen Bass (CA-37)

Joyce Beatty (OH-03)

Suzanne Bonamici (OR-01)

Bob Brady (PA-01)

G. K. Butterfield (NC-01)

Mike Capuano (MA-07)

Andre Carson (IN-07)

Joaquin Castro (TX-20)

Judy Chu (CA-27)

David Cicilline (RI-01)

Katherine Clark (MA-05)

Yvette Clarke (NY-09)

James Clyburn (SC-06)

John Conyers (MI-13)

Charlie Crist (FL-13)

Elijah Cummings (MD-07)

Pete DeFazio (OR-04)

Val Demings (FL-10)

Mark DeSaulnier (CA-11)

Debbie Dingell (MI-12)

Lloyd Doggett (TX-35)

Mike Doyle (PA-14)

Keith Ellison (MN-05)

Adriano Espaillat (NY-13)

Dwight Evans (PA-02)

Lois Frankel (FL-22)

Marcia Fudge (OH-11)

Tulsi Gabbard (HI-02)

Ruben Gallego (AZ-07)

John Garamendi (CA-03)

Al Green (TX-09)

Raul Grijalva (AZ-03)

Luis Gutiérrez (IL-04)

Colleen Hanabusa (HI-01)

Sheila Jackson Lee (TX-18)

Pramila Jayapal (WA-07)

Hakeem Jeffries (NY-08)

Hank Johnson (GA-04)

Eddie Johnson (TX-30)

Marcy Kaptur (OH-09)

Robin Kelly (IL-02)

Ro Khanna (CA-17)

Dan Kildee (MI-05)

Jim Langevin (RI-02)

Brenda Lawrence (MI-14)

Barbara Lee (CA-13)

Sandy Levin (MI-09)

John Lewis (GA-05)

Alan Lowenthal (CA-47)

Nita Lowey (NY-17)

Michelle Lujan Grisham (NM-01)

Ben Lujan (NM-03)

Stephen Lynch (MA-08)

Betty McCollum (MN-04)

Jim McGovern (MA-02)

Grace Meng (NY-06)

Gwen Moore (WI-04)

Jerry Nadler (NY-10)

Grace Napolitano (CA-32)

Frank Pallone (NJ-06)

Donald Payne (NJ-10)

Chellie Pingree (ME-01)

Mark Pocan (WI-02)

Jamie Raskin (MD-08)

Cedric Richmond (LA-02)

Lucille Roybal-Allard

Bobby Rush (IL-01)

Linda Sanchez (CA-38)

John Sarbanes (MD-03)

Jan Schakowsky (IL-09)

Adam Schiff (CA-28)

Bobby Scott (VA-03)

Jose Serrano (NY-15)

Terri Sewell (AL-07)

Albio Sires (NJ-08)

Adam Smith (WA-09)

Mark Takano (CA-41)

Bennie Thompson (MS-02)

Paul Tonko (NY-20)

Nydia Velazquez (NY-07)

Maxine Waters (CA-43)

Bonnie Watson Coleman (NJ-12)

Pete Welch (VT-AL)

Frederica Wilson (FL-24)