# Opinion: California studied employee ownership. SB 1174 would put the evidence to work. > Source: > Published: 2026-08-12 10:45:58+00:00 **Getting your** [Trinity Audio](//trinityaudio.ai)player ready...Two years ago, California commissioned a major study of worker ownership under the POWER Act. I led the research team, in partnership with the Rutgers Institute for the Study of Employee Ownership and Profit Sharing. We reviewed decades of research, conducted original statistical analyses, and examined employee-owned companies across several industries, including California road construction. The evidence was strong, though not uniform. Employee ownership is associated with greater job stability and, in many studies, higher productivity. One study tracking privately held ESOP companies found that they were only about half as likely as non-ESOP firms to go bankrupt or close. A large meta-analysis also found a modest but statistically significant positive relationship between employee ownership and firm performance. The gains for workers can be substantial. Employee stock ownership plans, or ESOPs – the most common form of broad-based employee ownership in the United States – build company-funded retirement wealth in addition to wages. Our California study concluded that ESOPs substantially increase employees’ retirement wealth. In the California road-construction company we studied, which is 100% employee-owned, longtime employee-owners, including equipment operators and other field employees, have retired with company-funded ownership accounts worth more than a million dollars. But decades of research point to an important qualification: ownership works best as part of a system. The strongest gains tend to appear when a financial stake is paired with information sharing, training, and meaningful participation in workplace decisions. For example, in the road construction case study, equipment operators and other field employees also described considerable autonomy over how they did their jobs. Ownership without voice can still build wealth. Ownership combined with skills, information, and authority to improve the work can also change how a company performs. SB 1174 — authored by Republican state Sen. Suzette Valladares of Santa Clarita —would give qualifying ESOP contractors a modest preference when bidding on state-funded Caltrans construction work: 2% for firms that are 30% to 49% ESOP-owned, 3% for 50% to 99% ownership, and 4% for 100% ownership. Contractors that are signatories to a qualifying collective bargaining or master labor agreement would receive an additional percentage point. My support is not a claim that employee-owned firms are always better, nor should California treat ownership structure as a substitute for price, quality, safety, or performance. The case for SB 1174 is narrower: California has credible evidence that broad-based employee ownership can improve job stability and worker wealth, along with evidence of better firm performance. A modest procurement preference is a reasonable way to encourage more of it. Critics may reasonably ask whether a procurement preference could increase the state’s contracting costs. California has long accepted that modest bid preferences can advance broader public purposes, whether supporting small businesses, disabled veteran-owned businesses or disadvantaged business enterprises. SB 1174 fits within that same framework. More importantly, the relevant question is not simply bid price, but value. If employee-owned firms deliver stronger worker retention, lower business failure rates and higher productivity – as much of the research suggests – the state may realize benefits that are not captured in the initial contract price alone. A recent study of Sacramento County public works projects found that union contractors completed projects with lower cost overruns and faster delivery than comparable non-union firms. Whether employee ownership produces similar results is ultimately an empirical question, not an ideological one. SB 1174 creates an opportunity for California to find out. The state should also use SB 1174 as an opportunity to generate better evidence. Caltrans should track whether employee-owned contractors differ in cost overruns, delays, safety, quality, worker retention, and other measures of performance. Over time, California could also test whether firms that combine employee ownership with training, information sharing, and genuine decision-making authority deliver better results. Public procurement should reward outcomes, not labels. California has already taken a bipartisan step in this direction. In 2022, lawmakers unanimously passed SB 1407, the California Employee Ownership Act, establishing the framework for a state Employee Ownership Hub to increase awareness and reduce barriers to employee ownership. SB 1174 builds upon that foundation by testing whether California’s purchasing power can encourage business models that produce better outcomes for workers, employers and taxpayers alike. *David I. Levine is the Eugene E. and Catherine M. Trefethen Professor of Business Administration at the Haas School of Business, University of California, Berkeley. He led the state’s POWER Act study of worker ownership, submitted to the California Labor and Workforce Development Agency.*