The ESOP Association Blog

Covering ESOPs and employee ownership

How To Make Your AACE Entry Stand Out

AACE Awards LogoPaul Horn, volunteer coordinator for the AACE Awards Program, provides members with a few quick tips on entering AACE.

More information, along with entry forms, can be found on the Association’s website

The judges review many excellent submissions in a number of categories.  Here are some factors that past judges have said make a submission stand out and be memorable.

1.    Clear and concise description of event(s) or item.

2.    Labeling of photos with captions and dates.

3.    Indication of special effort or time spent.  For example, an owner’s handbook that looked like your car’s owner manual.

4.    Themes that tie into your company’s line of business.

5.    Community action and volunteer events.

6.    Events with other area ESOP companies.

7.    Hosting elected officials at your company.

8.    Fundraiser for Employee Ownership Foundation or ESOP PAC.

9.    Employees writing to or visiting elected officials.

10.  Employee outings or recognition events.

11.  Ongoing ESOP events throughout the year.

Paul Horn is president of WorkPlace Consultants, LLC located in Bethesda, MD. He is a member of The ESOP Association’s Advisory Committee on Ownership Culture and a Chapter Officer of the Association’s Mid-Atlantic Chapter.

Filed under: AACE - Annual Awards for Communications Excellence, Member Services, TEA Members, , ,

Guest Post – C. S. Davidson, Inc: From Family-Owned To Employee-Owned Business

Today, we welcome David M. Davidson Jr., Chief Financial Officer of C.S. Davidson, Inc. located in York, Pennsylvania. C.S. Davidson is a member of The ESOP Association and will be celebrating 90 years in business this year. In this guest post, Mr. Davidson shares his thoughts on the value of employee ownership. Congratulations to C.S. Davidson on a successful 90 years.

C. S. Davidson, Inc: From Family-Owned To Employee-Owned Business

David M. Davidson Jr., P.E., P.L.S., Chief Financial Officer, C.S. Davidson, Inc.

David M. Davidson Jr., P.E., P.L.S., Chief Financial Officer, C.S. Davidson, Inc.

By David M. Davidson Jr., P.E., P.L.S., Chief Financial Officer, C.S. Davidson, Inc.

In 1923, Carl Schaefer Davidson opened a modest surveying and engineering business in Hanover.  He later moved to York and, in 1948, incorporated the business as C. S. Davidson, Inc.  This is the story of a company that spanned three generations of the Davidson family, and continues to this day as an ESOP, or employee-owned, business.

Things were much more straightforward in the early years.  There were no regulations to speak of, and zoning was a concept that had only recently been introduced in New York City.  Engineers were hired for their imagination, creativity and ability to design.  Calculations were done painstakingly by hand – our archives are filled with hand-lettered calculations and meticulously drafted diagrams that reflect the time that could be spent on the design of a project.  Labor was cheap back then – old invoices show surveyors’ billing rates of less than a dollar an hour.

From the very beginning, C. S. Davidson, Inc. was very much a family-owned and family-operated business.  Carl’s sons David and Bayard and I, his grandson, got our introduction to “engineering” by working on survey crews, cutting brush and carrying bundles of stakes.  My father, David Sr., became president of the firm in 1965, and I in 1983.

At some point, every business owner has to deal with “ownership transition.”  The options are limited: internal sale, external sale or closing the doors – although there are many variations within each option.  We initially attempted a direct sale of stock to a limited number of employees.  As is usually the case, the value of the business exceeded the financial resources and/or risk tolerance of the prospective purchasers.  We could see that a straight cash sale would never accomplish the intended goal.

We have never considered a sale to an outside interest, although we receive many inquiries.  Acquisition by another firm—no matter how similar in services and size—would inevitably lead to the loss of the culture that makes us uniquely “CSD.”  Even though we’ve become a large firm (by local standards at least), we’ve managed to retain the feeling of a much smaller firm.  We like that.

An ESOP (“Employee Stock Ownership Plan”) seemed to be the answer.  Not only does it provide a mechanism to gradually transfer ownership to employees, it doesn’t require any investment (other than their continued hard work!) on their part.  It has the added advantage of a tax-deferred sale (to the owners), a tax-deferred retirement benefit (to the employees) and a tax deduction (to the corporation).

In addition to the tax advantages, it has a less tangible (but in my opinion, more important) benefit of educating everyone to think like they’re an owner.  It may seem an insignificant distinction, but as time goes on it is essential that the sense of ownership, as well as the actual ownership, changes hands. It’s the only way that CSD can expect to enjoy continued success for, hopefully, another 90 years.

All in all, an ESOP seemed like the right thing to do from a variety of perspectives.  It was expensive, time-consuming and difficult – but in the long run it will be one of the best investments we’ve ever made.

CS Davidson Post - CSD.90thLogo.Site

Filed under: TEA Members, , , ,

Guest Blog – Employee Ownership Outlook

Today we bring you a guest blog from Corey Rosen, cofounder and former executive director of the National Center for Employee Ownership. He is now focusing his employee ownership work through the Rosen Ownership Opportunity Fund. A bio can be found here.

With all the talk about Iowa’s ESOP initiative, we thought this would be an interesting discussion.

States and Employee Ownership

According to a 2011 study by GoodJobsFirst, states spend about $70 billion per year on economic development, largely through tax incentives to get companies to relocate to or expand in the states (Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs).  reports that states distributed $1.8 billion in incentives and tax credits to the entertainment industry alone between 2006-2008.

By contrast, states spend perhaps two million dollars on encouraging companies to become employee owned, even though employee owned companies grow 2.5% per year faster than they would have without an ownership plan, distribute billions of dollars a year in ownership benefits to employees that they can then spend on the local economy, and, in many cases, provide a way for owners to transition ownership that does not mean the company will be moved out of state when someone else buys a company or when new buyers reduce or eliminate staff.

States are clearly missing a bet. Experience shows that extremely modest expenditures on promoting employee stock ownership plans can yield major gains in job retention and expansion. Currently, only Vermont, Ohio, and Indiana have such programs. That is why a new initiative in Iowa is so encouraging (and one that can be copied).

Local ESOP company leaders met with state economic development officials and mapped out ideas for encouraging employee ownership. On January 10, Governor Terry Branstad announced that promoting employee ownership would be one of his three top priorities. The proposal has broad bi-partisan support and is expected to pass.

Branstad’s plan has several key elements:

  • Business owners would not have to pay state capital gains taxes for sales to ESOPs. That is a significant 9% in Iowa.
  • The Economic Development Authority (EDA) also would offer technical assistance and legal advice to employee buyers and companies, including to help pay for feasibility assessments.
  • The EDA would also work to make people more aware of ESOPs and how they work.

Existing State Programs

Three states currently have active employee ownership programs. The oldest is the Ohio Employee Ownership Center, based at Kent State University. It was started by the late John Logue, a professor at Kent State, in 1987. It provides technical assistance, training, and outreach to business owners, employee groups, local governments and organizations, and existing employee owned companies. It holds a large annual conference, operates an active network of ESOP companies, publishes books and papers, and holds a very successful series of seminars on succession planning. It is funded primarily by the state, but also receives foundation money and money from operations.

The Vermont Employee Ownership Center was formed in 2001 and also “provides information and resources to owners interested in selling their business to their employees, employee groups interested in purchasing a business, and entrepreneurs who wish to start up a company with broadly shared ownership.” It is funded through government and foundation grants, and from contributions from individuals and businesses.

Both the Ohio and Vermont centers are non-profit organizations, not part of the state government.

In 2007, Indiana, State Treasurer Richard Murdock (now a Republican Senate candidate) created a $50 million linked deposit program in which the state links making deposits into banks that make loans to ESOPs. The loan rate for the linked deposit funds is the CD rate plus 3.25%, but not less than 4.25%. Several ESOPs have been formed using the program.

State Programs in the Past

The late 1980s and early 1990s were the heyday of state employee ownership programs. New York, Washington, Oregon, and Michigan all had programs similar to Ohio’s, albeit with fewer staff than the Ohio Center now does. Massachusetts had a smaller program. All focused on providing technical assistance (often by arranging it through providers linked to the organizations), seminars, and publications. There was typically very little funding for feasibility studies. All of these programs succumbed to state budget cuts in the 1990s.

An NCEO analysis of the Ohio, New York, and Washington programs found that they increased the number of new ESOPs by about 30% over what would have been expected. That was an impressive return on investment—these programs typically had significantly less than $1 million in funding. Simply making people more aware of ESOPs created more plans. Harder to measure is the impact the programs had on the quality of plans, but there is good anecdotal reason to believe that by providing opportunities to companies to learn from one another, the plans were more effective.

Moving Forward

The argument for these plans is persuasive. At a nominal cost, they can create many new employee owned companies, often saving jobs and generating new sources of community wealth. By contrast, research on the net job creation impact of tax incentives for economic development is at best mixed. There is no question that the cost per job is very high.

The Iowa experience suggests that simply bringing this idea up with local state officials (generally those in economic development) and state political leaders may be enough to get things moving.


Filed under: Employee Ownership Message, , ,

Guest Post – 2012 AACE Awards

Since the deadline for the 2012 AACE (Annual Awards for Communications Excellence) Awards has been set (Thursday, March 1, 2012), we thought it would be a good time to invite Paul Horn, volunteer coordinator for the AACE Awards Program, to talk about why the AACE Awards are important and why your company should enter.

 You can download a copy of the 2012 AACE Awards brochure here and more information can be found on the Association’s website here. Please take a close look as several categories have been updated for this year.

AACE is a great way to document your ESOP communications program and see how your company compares with other ESOP companies.

Are there ways to help your AACE submission stand out?  We discussed some ideas in a session at The ESOP Association’s 2011 Annual Conference held in Washington, DC and I thought I’d share a few key points.

1. Be creative and think “outside the box.”  The AACE judges review numerous entries in a variety of categories.  Think of something different that will grab the judge’s attention.  For example, last year a company designed shirts that said “I Am a Repurchase Liability.”  Another company had children draw pictures of their parents or relatives as employee owners.

2. Highlight your employees.  Active employee ownership is best evidenced with articles by and pictures of employees in action.  Last year’s internet winner had highly effective videos of employees talking about the value of employee ownership.

3. Homegrown education.  ESOP education and open book materials you develop yourself carry greater impact.  The more color you use, the more it will catch the eye.

4. Events.  Pictures and descriptions of company meetings and events are a great way to showcase your ownership spirit.  For example, meetings with elected officials, themed events, and community activities help make your submission memorable.  Make sure to document when the events occurred.

5. Fun.  Games, food, more games, and more food are always ESOP company favorites. The stranger the game, the more exotic the menu, and the greater the employee participation, the more likely your submission will stand out.

6. Organization.  Clearly document your category submissions in a notebook. A display board and other company paraphernalia also will help draw attention to your materials.

Good luck and we look forward to receiving your 2012 AACE submissions.

Paul Horn is president of WorkPlace Consultants, LLC located in Bethesda, MD. He is a member of The ESOP Association’s Advisory Committee on Ownership Culture and a Chapter Officer of the Association’s Mid-Atlantic Chapter.

Filed under: AACE - Annual Awards for Communications Excellence, Employee Ownership Message, Member Services, , , ,

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