A Better Way to Fly: TSA should be purpose trust-owned
A guest post by Corey Rosen of the National Center for Employee Ownership
I am one of those lucky flyers whose home airport, San Francisco International, was not affected by the recent TSA nightmare. That’s because TSA employees at SFO are hired by a contractor rather than directly by the federal government. It is one of ten such airports in the country.
The idea of privatizing TSA has been proposed by a number of people, but privatization runs the risk of corporations placing shareholder value concerns over customer safety and working conditions for TSA agents. But what if there were a way to privatize TSA that could put the TSA employees and the passengers front and center? Transferring ownership to a purpose trust would be one way to do this. Purpose trusts are legal vehicles set up to own corporations for the benefit of a specific purpose. For instance, Patagonia is now owned by a purpose trust that former owner Yves Chouinard set up to receive his shares. The trust uses profits from the company to benefit environmental causes.
A more common form of trust is the employee ownership trust. These trusts are very common in the United Kingdom where tax laws encourage their formation, and have been becoming more common here, although they have no tax incentives. The model for these trusts was the John Lewis Partnership, one of the United Kingdom’s largest companies and operator of the John Lewis department stores and Waitrose supermarkets. The company is a much beloved icon. It has been owned by an employee ownership trust since 1929. Employees elect a council to help oversee the company.
In the US, employee ownership trusts are a new variant of employee ownership, alongside the more common Employee Stock Ownership Plan (ESOP). Employee ownership trusts are typically designed to be permanent, with the trust charter stating that the company is not for sale. Instead, the company operates for the benefit of its employees by sharing profits or dividends that the employees helped create. Optimax Systems[HMC1] , for example, is a multi-million dollar, high-tech optics company in Rochester, NY, that has been trust-owned since 2020, and its permanence has given its customers new confidence that their contracts will not be disrupted by a buyout.
In the TSA case, the purpose trust would also be designed to be permanent so that the new company could not be sold. Instead, its charter would state that its purpose is to provide secure jobs for employees and secure travel for passengers. Congress could appropriate funds on a regular basis to pay for TSA activities, much as Congress does now. The difference would be that the employees would no longer be employees of the federal government and subject to repeated shutdowns. The company’s board could consist of representatives of employees, the Department of Homeland Security, the airline industry, airline unions, and airports. If the company is sufficiently profitable, it could provide profit sharing or dividends to TSA employees, something that research has shown helps reduce turnover and increase commitment.
It is politically practical as well. Employee ownership has been one of the rare ideas that has virtually unanimous political support. Changing the system in this way would not impose any additional costs on the taxpayer, while creating a far better way to deal with employee security going forward.
Corey Rosen is the founder of the nonprofit National Center for Employee Ownership, a sponsor of The Stakehold.
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