When Governor-elect Mikie Sherrill told local officials at the League of Municipalities that New Jersey should be a place where you can work one job, get ahead, and have a nice retirement, she captured an ambition that crosses party and geography: economic opportunity that lasts a lifetime, rather than living paycheck-to-paycheck. Delivering on that promise will require tackling a quiet but growing economic challenge. Over half of New Jersey businesses have an owner aged 55 or older, meaning thousands will face a business succession decision in the next five to ten years. If we drift into that future without a strategy, it will mean small business closures, lost jobs, and diminished innovation.
Right now, the default succession path for many owners is to either shutter their business in the absence of a buyer or take the most attractive bid from a financial buyer or competitor — often from out-of-state. Those buyers usually pay in cash, close quickly, and proceed to maximize returns for their investors. That sometimes works out just fine for New Jersey communities, but in too many cases, this translates to job cuts, relocation, or disinvestment in the communities that helped those firms grow.
It doesn’t have to be this way. There is a proven succession plan that keeps companies rooted locally, strengthens innovation, and most importantly, builds real wealth for New Jerseyans. Through employee ownership models such as Employee Stock Ownership Plans (ESOPs), employees earn shares in the company where they work at no cost to them. National research shows that workers at ESOP companies accumulate more than double the retirement wealth of their non-ESOP peers, enjoy higher wages, and are less likely to be laid off in downturns.
Sherrill understands the transformational impact of employee ownership. In 2022, then a member of Congress, she visited the Morristown offices of Burns & McDonnell, a 100% employee-owned engineering and construction firm, to discuss its role in energy innovation and affordability and its commitment to creating local, high-paying jobs. As governor, she will have the tools to scale employee ownership across the state to advance those goals.
Crucially, she can do this with partners across the aisle. Employee ownership is one of the few economic ideas with deep bipartisan support (including in the New Jersey Legislature),
giving Gov.-elect Sherrill a chance to govern as a bipartisan leader committed to keeping small businesses and good jobs in New Jersey. New Jersey already has a strong base from which to build, with over seventy privately held ESOP companies employing nearly 23,000 New Jerseyans. But that’s a tiny fraction of the state’s businesses now owned by baby boomers. Without a new approach, most of those firms will never seriously consider selling to their workers.
The reason for this isn’t lack of interest. It’s math. A typical ESOP transaction asks the selling owner to be the bank. Commercial lenders have structural and regulatory constraints that cap how much they can finance in an ESOP transaction, which often leaves a sizable gap in the deal. That gap is usually filled with a “seller note,” where the retiring business owner agrees to be repaid over the course of five to ten years. Faced with a choice between a full-cash offer from a financial buyer at closing or a decade-long IOU from their own company, many owners understandably take the check. In a state where housing, taxes, and everyday costs run well above the national average, locking in retirement security quickly is difficult to argue with.
Sherrill has a chance to change the economics of employee ownership and build immense wealth for New Jerseyans in the process.
The N.J. Economic Development Authority she will inherit looks dramatically different from the one Gov. Phil Murphy entered office with in 2018. It has grown into a comprehensive economic development institution that in 2024 deployed more than $1.8 billion across 60 programs. It is high time to leverage that toolkit to expand employee ownership.
The EDA already has taken an important first step. Following recommendations from Murphy’s Wealth Disparity Task Force, the EDA recently launched an ESOP Assistance Program in partnership with the Rutgers Institute for the Study of Employee Ownership and Profit-Sharing that covers up to 90% of the cost of feasibility studies for New Jersey businesses exploring employee ownership.
But technical assistance alone won’t overcome the capital gap impeding the growth of employee ownership.
Sherrill can close that gap with a simple but powerful tool: a revolving loan fund (RLF) for employee ownership. A dedicated RLF would build on NJEDA’s lending capabilities to provide low-cost, flexible gap financing to employee ownership deals, replacing a portion of the seller IOU. Owners would take more cash at closing, and repayments to the RLF would generate revenue and be recycled to finance additional employee ownership conversions. By co-investing alongside senior lenders on patient, affordable terms, the
EDA could lower the cost of capital in employee ownership transactions and make it easier for retiring owners to choose to sell to their employees.
With over half of all New Jersey businesses facing a near-term succession decision and with families straining under high costs, making more New Jerseyans into employee-owners is a bold affordability and innovation strategy. If Sherrill’s EDA invests in employee ownership, tens of thousands more residents can thrive in the New Jersey she envisioned at the League of Municipalities: one where they can work one job, get ahead, and retire securely in the state they helped build.
Julien Rosenbloom is a Senior Associate at Lafayette Square Institute, a data and policy platform that aligns markets for opportunity, mobility, and resilience so every family can thrive. He previously advised Governor Phil Murphy’s Wealth Disparity Task Force on employee ownership and served on the staff of President Biden’s Council of Economic Advisers.
