The Kelsos
The people behind the ideas.
Louis O. Kelso invented the ESOP and the theory behind it. Patricia Hetter Kelso was his collaborator from 1963 and carried the work forward for decades.
1913 to 1991
Louis O. Kelso
Lawyer, economist, merchant banker, and the inventor of the Employee Stock Ownership Plan.
Louis Kelso was a political economist in the classical tradition of Smith, Marx and Keynes. He was also a corporate and financial lawyer, an author, a lecturer and a merchant banker. Today he is remembered mainly as the inventor of the ESOP, which he designed so that working people without savings could buy stock in their company and pay for it out of its future earnings.
He began his own investigation into the cause of the Great Depression in 1931, when he was not yet 18. His family lived just above subsistence for the whole decade, and he paid his way through school as a stonemason, a newspaper hand at the Denver Post and the driver of a dynamite truck. He graduated from the University of Colorado at Boulder with a business degree in 1937 and a law degree in 1938.
During World War II he served in naval intelligence in San Francisco and the Panama Canal Zone, writing his first manuscript, The Fallacy of Full Employment, in his free afternoons. He came home in 1946, the same year Congress made full employment the goal of national economic policy, and he decided the time for his ideas had not yet come.
In 1956 he designed the first ESOP so the employees of Peninsula Newspapers could buy the company from its retiring owners. Two years later he published The Capitalist Manifesto with the philosopher Mortimer J. Adler and used a consumer stock ownership plan to help Central Valley farmers build their own fertilizer plant.
Kelso believed lawyers had a special duty to improve society’s institutions in the light of its democratic values, and that the business corporation was society’s greatest social invention. Near the end of his life he found the name for what he had been describing all along: binary economics.
In the press
Wired named Louis Kelso CFO of history’s ultimate management team.
“The chief financial officer reinvented compensation. … His claim to fame is as the father of employee ownership.”
Read the article on Wired
Wired’s ultimate management team
Chief Executive Officer
Matthew Boulton
Helped launch the industrial age.
VP, Marketing
P. T. Barnum
The master showman of selling.
VP, Research and Development
Henry Oldenburg
Built the Royal Society’s network of scientists.
VP, Business Development
Eiichi Shibusawa
Helped found hundreds of Japanese companies.
Venture Capitalist
Queen Isabella
Bankrolled Columbus.
Chief Financial Officer
Louis Kelso
“Hatched the scheme to distribute capital to the working class.”
“Before meeting either Kelso or his co-author, Mortimer J. Adler, I had read The Capitalist Manifesto and The New Capitalists. My reaction had been, ‘Eureka, this is it!’”
Patricia Hetter Kelso, What Louis Kelso Knew
1927 to 2025
Patricia Hetter Kelso
Patricia Hetter met Louis Kelso in 1963 and became his collaborator for the rest of his life. Together they wrote How to Turn Eighty Million Workers Into Capitalists on Borrowed Money (1967), later retitled Two-Factor Theory: The Economics of Reality, and Democracy and Economic Power (1986), along with dozens of essays for newspapers, journals and conferences.
After Louis’s death in 1991 she carried the work forward for more than three decades. She saw Democracy and Economic Power published in Russian and Chinese, lectured in Europe, wrote new essays and forewords, and led the Kelso Institute.
Important dates
A life’s work, year by year
From a Depression-era question to a federal law and translations in Russia and China.
1913
Louis O. Kelso is born.
1931
Not yet 18, Kelso begins his own investigation into the cause of the Great Depression.
1938
Graduates from the University of Colorado law school, a year after his business degree.
1946
Returns from naval service with the finished manuscript of The Fallacy of Full Employment.
1956
Invents the ESOP so employees of Peninsula Newspapers, Inc., of Palo Alto, California, can buy the company from its founders.
1958
Creates the Consumer Stock Ownership Plan for the farmer-owners of Valley Nitrogen Producers. Publishes The Capitalist Manifesto with Mortimer J. Adler.
1961
The New Capitalists, also with Adler, is published by Random House.
1963
Meets Patricia Hetter, who becomes his collaborator.
1967
How to Turn Eighty Million Workers Into Capitalists on Borrowed Money, later retitled Two-Factor Theory: The Economics of Reality, written with Patricia Hetter.
1972
Puerto Rico’s Governor Luis A. Ferré introduces the first application of Kelso’s General Stock Ownership Plan.
1973
Kelso meets Senator Russell B. Long, Chairman of the Senate Finance Committee. Congress defines the ESOP in law for the first time in the Regional Rail Reorganization Act.
1974
ERISA writes the ESOP into the Internal Revenue Code. Minnesota becomes the first state to encourage ESOPs with tax-benefit legislation.
1975
Kelso and the ESOP are featured on 60 Minutes with Mike Wallace.
“Americans,” says Kelso, “are a nation of industrial sharecroppers who work for somebody else and have no other source of income.”
1976
After Kelso’s December 1975 testimony, the Joint Economic Committee of Congress endorses broadened capital ownership as an economic goal for America.
“It should be made national policy to pursue the goal of broadened capital ownership.” 1976 Joint Economic Report
1978
The Revenue Act of 1978 creates the General Stock Ownership Corporation, led by Senator Mike Gravel of Alaska.
1986
Democracy and Economic Power: Extending the ESOP Revolution, by Louis O. Kelso and Patricia Hetter Kelso, is published by Ballinger.
1990
Bill Moyers interviews Kelso for A World of Ideas on PBS.
1991
The second edition of Democracy and Economic Power is published by University Press of America. Louis Kelso dies.
1993
The first Russian edition of Democracy and Economic Power is published in Moscow.
1996
The first Chinese edition is published by Nanjing University Press.
Today
John Schooler Jones, who worked with Louis Kelso in the 1970s, leads the Kelso Institute into its next chapter.
Their legacy
Read their work for yourself, free.
Four books, two dozen essays, lectures and reviews, all in the Library.
Explore the Library