Can the DFC Compete with China’s Belt and Road Initiative?
Lafayette Square Institute’s Executive Director, Jack Moriarty, and Jim Sorenson of Sorenson Impact recently coauthored an op-ed in The National Interest exploring how employee ownership can be utilized by the U.S. International Development Finance Corporation (DFC) to support development outcomes in emerging markets while advancing the strategic foreign policy interests of the United States.
Incorporating employee ownership into the DFC’s statutory mandate could strengthen market institutions, level the playing field for US private investors competing with China’s Belt & Road Initiative, and empower workers in small and medium-sized businesses to directly participate in wealth creation.
New White Paper: Financing the Growth of Employee Ownership
In June of 2025, Lafayette Square Institute released a new white paper titled: “Financing the Growth of Employee Ownership: Policy Landscape Report” which examines employee ownership and the nature of the private financing gap—its sources, mechanics, and relevant policy interventions to date at the federal and state levels.
The analysis concludes by offering a menu of new policy opportunities at the state and federal levels to harness private institutional capital sources to create, grow, and sustain employee-owned companies.
The evidence is clear that employee ownership and ESOPs offer the chance to bolster our national competitiveness and productive capacity while creating generational wealth for American workers. We just need to spur our capital markets into making it happen.
Lafayette Square Institute Applauds the Bipartisan Introduction of the American Ownership and Resilience Act (AORA)
Washington, DC – May 7, 2025 – Lafayette Square Institute applauds the bipartisan, bicameral introduction of the American Ownership and Resilience Act (AORA), which is expected to strengthen the economic security of the United States by accelerating the growth of employee ownership. The AORA legislation would create a zero-subsidy cost investment facility at the Commerce Department designed to encourage private institutional capital sources to finance the sale of privately held businesses to an Employee Stock Ownership Plan (ESOP) or worker cooperative.
Lead sponsors of the legislation include Senators Chris Van Hollen (D-MD), Jerry Moran (R-KS), Todd Young (R-IN), and Tammy Baldwin (D-WI) alongside Representatives Blake Moore (R-UT), Lori Trahan (D-MA), Dusty Johnson (R-SD), Bill Foster (D-IL), and Mike Baumgartner (R-WA). Additional original cosponsors include Senators Eric Schmitt (R-MO), Jeanne Shaheen (D-NH), and Peter Welch (D-VT).
“The American Ownership and Resilience Act is a tremendous bipartisan opportunity to accelerate the growth of employee ownership by mobilizing private investment to enhance the resilience of our manufacturing base while making generational investments in the retirement security of American workers and families, said Jack Moriarty, Executive Director of the Lafayette Square Institute.
Business succession not only risks the loss of jobs and local investment but also constitutes a risk to the vitality of the American industrial base when businesses either close or are sold to a buyer that offshores production. According to Lafayette Square Institute research, over half of U.S. businesses operating in sectors designated by the Commerce and Defense Departments as critical to the economic and national security of the United States have an owner that is aged 55 or older—posing material risks to our domestic supply chain resilience and productive capacity should those firms reduce their U.S. operating footprint following a sale.
Employee ownership is a market-tested strategy to preserve domestic ownership and production while creating retirement wealth for American workers and families. ESOP companies have been empirically shown to improve retention, grow faster, innovate more frequently, lay off fewer workers during economic downturns, and provide superior pay and benefits including an ownership stake that significantly supplements other retirement income.1 More recent research by the Rutgers Institute for the Study of Employee Ownership and Profit-Sharing also suggests that ESOP-owned manufacturing companies demonstrate higher rates of labor productivity than their peers, suggesting employee ownership may be an additional strategy to help reverse the recent labor productivity slowdown in the American manufacturing sector.2
The bill is designed to address the traditional lack of liquidity for the seller in an ESOP sale relative to alternative exit options. It would create a zero-subsidy cost investment facility at the U.S. Commerce Department dedicated to providing low-cost, government backed debt to private investment funds that are eligible to receive an Ownership Investment Company (OIC) license. Ownership Investment Companies would receive long-duration, fixed rate debentures from the Commerce Department to supplement their privately raised capital in order to create, grow, and sustain small and medium-sized employee-owned companies.
Read Senator Van Hollen’s press release here
Read Congressman Johnson’s Press Release Here
Lafayette Square Institute is a data analytics and public policy platform. Our mission is to bridge the gap between investors and policymakers to create economic opportunity for workers and families. We develop, analyze, and amplify policy solutions at the federal and state levels designed to mobilize private capital to advance the national interest. Our core areas of focus involve the nexus between private investment and employee ownership, housing supply, and access to worker benefits. For more information, please visit www.lafayettesquareinstitute.org.
Media Contact:
info@lafayettesquareinstitute.org
Footnotes:
1 “What the Research Says: The Impact of Employee Ownership” National Center for Employee Ownership, 2018-2023; “Does employee ownership improve performance?” IZA World of Labor, 2016; “Employee-Owned Firms in the COVID-19 Pandemic: How Majority-Owned ESOP & Other Companies Have Responded to the COVID-19 Health and Economic Crises.” Employee Ownership Foundation, Rutgers School of Management and Labor Relations; Kurtulus, Fidan and Kruse, Douglas “How Did Employee Ownership Firms Weather the Last Two Recessions?: Employee Ownership, Employment Stability, and Firm Survival:1999-2011.” Upjohn Institute, 2017.
2 Kurtulus et al. “Employee Share Ownership, Management Practices, and Firm Outcomes in U.S. Manufacturing.”, Rutgers Institute for the Study of Employee Ownership and Profit-Sharing, Forthcoming 2025; Lashkari, Danial and Pearce, Jeremy “The Mysterious Slowdown in U.S. Manufacturing Productivity.” Liberty Street Economics (Federal Reserve Bank of New York), July 16, 2024.
Lafayette Square Institute has released a short-form brief
In April of 2025, Lafayette Square Institute released a short-form brief, “Critical Industries and Employee Ownership: Assessing the Risks of Business Succession to U.S. National and Economic Security”
High-level takeaways:
· Business succession often results in a sale to a buyer not committed to domestic employment and production or even outright business closure.
· The “silver tsunami” of retiring baby boomers poses a risk to the U.S. industrial base, particularly in sectors designated as “critical industries” to national security.
· Evidence points to Employee Stock Ownership Plan (ESOPs) as a proven, bipartisan tool to mitigate these business succession risks while building generational wealth for American workers.
Policymakers have the opportunity to turn the demographic risks of business succession into a U.S. competitive advantage by accelerating the growth of employee ownership.
Lafayette Square Institute’s 535 Insights Release
In February of 2025, Lafayette Square Institute released its inaugural version of 535 Insights. 535 Insights is a new analytics series investigating economic mobility tailored to the constituencies of all 535 members of Congress. Our inaugural version of the analysis explores economic mobility, housing affordability, and employee ownership statistics broken down by state and congressional district.