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Consumer Stock Ownership Plans (CSOPs)

A Consumer Stock Ownership Plan (CSOP) does for consumers of public utilities (or members of marketing cooperatives) what an ESOP does for corporate employees. It links capital growth and future investment opportunities in the corporate sector to an expanding base of citizens through access to self-liquidating, productive credit.

Corporations in the non-competitive, regulated segment of the economy (such as telephone companies, electric and gas production and distribution utilities, mass transit, cable-vision systems) would gain opportunities to fund their expansion through new equity issuances sold to CSOPs and ESOPs, with low-interest credit provided from commercial lenders and repayable with future pre-tax profits.

A new mass transit system, for example, might have 25% of its total construction funded by an issuance of equity shares through an ESOP covering all those involved in constructing the system. Another 25% could be financed through an ESOP covering its operating and maintenance employees, and the remaining 50% financed through a CSOP designed to build equity shares into each of its future regular customers. (In order to ensure high levels of performance and cost-consciousness among those hired to operate and maintain the system, significant individual equity stakes– perhaps based on an ownership slice equal in value to five to ten times the enterprise’s total fixed compensation– should be reserved for employees of the going concern, before determining the proportions of total share acquisition credit to be divided among construction employees and customers.)

A Consumer Shareholders’ Association (CSA) could be established instead of a trust to administer the CSOP, receive the loans and hold legal title to the shares on behalf of its consumer-shareholders. Where there is joint employee and consumer ownership, an Employee Shareholders’ Association (ESA) could play the same role on behalf of the employees, with the ESOP establishing the rights, privileges, and powers of the association’s employee participants. Like the ESOP, the CSOP would be a tax-free equity accumulator and an account would be set up for each regular customer, tied into his monthly billing account. No cash would be required from the customers, other than that paid through their monthly billings, and customer-shareholders would not be personally liable in the event of non-payment of loans to the CSA to acquire their shares

In the mass transit system CSOP model, rates would be set by the enterprise’s board of directors, instead of by a public sector regulatory body. In the beginning, to inspire greater confidence in those providing loan funds, the majority of the board of directors might be appointed by and accountable to the lenders whose resources would be wholly at risk during the loan repayment period. Some of the initial board members could be elected by the workers through their ESA and the balance elected by the consumers through their CSA, all on a one-share, one-vote basis. Gradually, the board of directors would become wholly and democratically accountable to its employee- and consumer-shareholders, as the new shareholders earn their shares and repay the lenders from future profits and dividend distributions. After taking into account any real estate profits earned by the mass transit system, mass transit riders would cover the full capital costs and operational costs of the system, without government subsidies and without further protections against competitors.

For his patronage, the regular user of the system would get back ownership rights, represented by shares released to his CSOP account as the CSOP’s debt is repaid with pre-tax earnings paid in the form of tax-deductible dividends on CSOP-held shares. Released shares would be allocated among users according to their relative patronage of the system. Future dividends on CSOP stock would be used to offset each user’s monthly bill. The CSA would also create an internal market for repurchasing shares where there is no public marketplace.