Balance: Good News for ESOP Advocates

The following article originally ran in the August 2011 issue of the ESOP Report, the newsletter of The ESOP Association, as the Washington Report column.  The ESOP Report newsletter can be found in the members only section of The ESOP Association’s website.

The general view of the U.S. Congress right now is supposedly dog eat dog between the two political parties — the TV cable news says it, the social media says it, the President says it, members of Congress say it, academics say it, and so on.

Well certainly on big picture issues, such as how to control the national debt, how to lower medical care costs, etc., what everyone is saying about Congress is more or less correct.

Some ESOP advocates have heard the big picture news, and express concern that The ESOP Association and the community it represents has gone over to the “Republican” side too much.  These advocates of course have values that trigger voting for Democratic candidates.

Whether one’s world view is more in line with the Democrats or the Republicans, on smaller public issues, and sadly ESOP policy is not a major public issue in the U.S., the general view of U.S. policy making is wrong — having supporters in both parties is the key to preserving a preferred small interest policy.

[For example, a positive signal from the hearing on the DOL appraiser regulation mentioned on page one, was criticism about the proposal was made by both Republican and Democratic members of the Subcommittee.  If the critics were only Republicans, any impact on DOL officials would have been muted.]

So, is it the case that ESOP advocates are tilting in a major way to the Republicans in Congress, so that when the fight over tax reform erupts, and it will sooner or later, a risk if the pendulum swings back in favor of the Democrats before serious tax reform legislation is considered by Congress?

Well, here is the positive news.  ESOP support is balanced in Congress — with an almost equal division between Republicans and Democrats, and even with equal division within the various factions of the two parties — with a good split between the newer Republicans who came to office with the strong backing of the Tea Party, and senior Republicans, and with a good split between the “moderate” Democrats and the “liberal” Democrats.

And there is data to back up this assertion.

Right now, there are 126 members of Congress who have publicly done something, such as co-sponsoring a bill, or writing a letter, in support of a pro-ESOP position.  Ninety-eight are members of the House, and 28 are members of the Senate.

Fifty-four of the House ESOP advocates are Republicans, and 44 are Democrats.  Since there are more Republicans in the House than Democrats, the ten person spread is not that off the mark of the overall percentage of House members divided between the two parties.

Among the 28 Senate ESOP advocates, 13 are Democrats, and 14 are Republicans, and one is an Independent, who caucuses with the Democrats, and has Committee assignments under the Democratic banner.  So the split is really 50-50, and the Senate is nearly evenly split between the two parties.

But set aside the party affiliations.  How did the 126 ESOP advocates vote on the debt ceiling increase that received so much attention in late July and early August?

Again, the 126 ESOP advocates split their votes almost the same as the rest of the Congress.  Most voted yes, as did the entire Congress.  Those voting no were primarily affiliated with their Tea Party backers if Republicans and if Democrats with their more liberal backers, such as those in the MoveOn organization.

Bottom line is that the development of ESOP friends in Congress has not been about which political party should reign; it has been about ESOP companies and advocates promoting the positive impact of employee ownership through ESOPs on employees, on the company, and on the local community.

ESOP advocates have done well, and when the tough fight over tax reform breaks out and it is debated whether to have tax preferences for ESOP creation and operation, this balance will be beneficial.   ESOP advocates should continue to work for ESOPs in their communities, and not put their ESOP beliefs under a basket if their elected official is not of “their” party.