What Kinds of Stock Ownership Plans Should There Be? Of ESOPs, Other SOPs and “Ownership Societies”

Present-day advocates of an “ownership society” (OS) do not seem to have noticed the means by which, since the 1930s and 1960s respectively, we have worked to become an OS already where homes and “human capital” are concerned. Nor have those advocates considered whether these same means ­ which amount to publicly augmented private financial engineering ­ might be employed to spread shares in business firms as widely as we have spread homes and higher educations. This Article, the third in a trio of pieces devoted to fleshing out what a contemporary OS consistent with American values, endowment psychology and legal tradition would be, seeks to fill-in that gap. First it shows that there is indeed a gap to be filled ­ that firm-owning remains nowhere near as widespread as home- and human capital-owning. Next the Article shows that the Employee Stock Ownership Plan (ESOP) can be viewed as a tentative first step toward filling that gap. Indeed the ESOP, not accidentally, partly replicates our home- and education-spreading programs ­ but does so in what appears to be needlessly piecemeal, suboptimal fashion. The ESOP is widely observed to concentrate income-risk, which an OS should spread. Yet more importantly, this Article argues, the ESOP is needlessly unambitious: It confines itself to labor patronage as the sole desert base upon which the reward that is share-spreading is predicated, and to tax-break-assisted firm borrowing as the sole credit base upon which leveraged financing is grounded. But there are many more forms of patronage than labor, and many more bases of credit than share-issuing firms, that we can exploit to complete an OS. The Article accordingly generalizes from the ESOP along two salient dimensions ­ the patronage and credit dimensions ­ in order to complete SOP-financing’s replication of our federal home- and higher education-finance programs. It first proposes a number of analogues to the ESOP grounded upon non-labor patronage forms, then a “capital mortgage” financing program that is the full analogue to our present-day methods of home- and higher education-finance. Our fuller OS, the Article concludes, is a “three-legged stool” that awaits our completing its third leg