On May 10, the prestigious Aspen Institute held a panel discussion on employee ownership that was attended by individuals and groups involved in policy making and thought leadership. The ESOP Association assisted in gathering potential speakers.
The event featured a visit from Rep. Erik Paulsen (R-MN), and a four-person panel representing corporate members of The ESOP Association. The panelists included:
- Steve Vogt, retired President and CEO of King Arthur Flour.
- Markita Madden-Puckett, Customer Service Representative at Comsonics.
- Amy Hall, Vice President of Social Consciousness at Eileen Fisher.
- Steve Smith, President and CEO of AMSTED Industries.
Heather Long, an Economics Correspondent for The Washington Post, moderated the discussion, which covered a range of topics and offered insights into how different companies implement employee ownership.
Professor Joseph Blasi of the Rutgers School of Management and Labor Relations introduced Rep. Paulsen, and mentioned there are more pro-ESOP bills in Congress today than ever before.
Rep. Erik Paulsen provided opening remarks at the Aspen Institute.
Rep. Paulsen picked up that theme in his remarks, saying: “More members of Congress are interested in doing what they can to promote this concept among their own constituents, because at its heart, employee ownership is about opportunity.”
At a time when “44 percent of Americans have no retirement savings planning at all,” said Rep. Paulsen, employee ownership gives “very low and modest income families a leg up in retirement planning, which is very important. And I think that’s why companies that have employee ownership consistently outperform those companies that do not have that option.”
Rep. Paulsen cited legislation he has introduced several times—with support from Representatives Ron Kind (D-WI) and Dave Reichert (R-WA)—that would encourage business owners to sell to an S ESOP and would ensure that such businesses retain their certification with the Small Business Administration.
There are about 14 million people who benefit from an ESOP plan, said Rep. Paulsen, “but there absolutely can be and there should be more.”
The panel, from left to right: Moderator Heather Long, Steven
Vogt, Markita Madden-Puckett, Amy Hall, and Steve Smith.
Early on, the question of employee participation in decision making emerged, and the companies offered a variety of perspectives.
While Eileen Fisher has a collaborative culture where “everyone is comfortable speaking up and having a voice,” there is no formal mechanism for involving employee owners in business decisions, said Hall.
At Comsonics, the chair of the Employee Advisory Council is a full voting member of the Board of Directors, said Madden-Puckett, who filled that role for seven years.
At AMSTAD Industries, all active ESOP participants get to vote on the entire board every year. Smith recognized that the arrangement is a bit unique, but said “it’s a structure that’s worked really well for us.”
ESOPs and Culture
Throughout the discussion, the panelists touched on the interplay between the ESOP, the financial success it can bring, and the influence it can have on an organization’s culture.
“The ESOP is legally structured as a trust–but that’s not just a legal structure. It affects how management thinks as well,” said AMSTAD’s Smith. “A lot of transactions and acquisitions are done, I think, for the ego of management sometimes, or to be in the press, and you really don’t want to do that when it’s the people sitting outside your door whose futures you are going to jeopardize if you take undue risk. So I think it makes us better managers, on the whole.”
Madden-Puckett still remembers the day she interviewed at Comsonics and noticed “there was something different about the place. It was like, ‘these people are just too happy.’ There’s a certain amount of satisfaction that comes from working in a place where you show up, you do your job and it makes a difference, it reflects on that bottom line.”
Hall noted that “every year we get that statement that says what the current value is, it’s rather exciting.”
Madden-Puckett described Comsonics’ efforts to practice open communication and transparency. “We have quarterly meetings with all the employees,” she said, and the presentation the CEO gives to employee owners is “the same presentation that he is giving to our full Board.” As a former board member, she saw that for herself.
Smith said the combination of an ESOP and a culture that promotes employee engagement provides a powerful economic engine that is hard to beat. “Once you are in that structure and it’s working and the employee engagement produces success, and that culture produces success…it’s difficult for an outsider to come in and say ‘well, there is a better financial model that is ultimately going to produce better returns for the shareholders’—who are your employees.”
Imagine the Future
When asked to imagine a future with more ESOPs, the panelists offered inspiring answers.
Vogt noted that some ESOP companies, like King Arthur Flour, practice open book management and make efforts to educate their employee owners about the financial aspects of the business. And if there were more ESOP companies like that? “Imagine if we have a nation of entrepreneurs who really understand some of these tough business decisions that get made,” he said.
He added: “There’s a lot of very positive, empowering things in the employee owned companies I’ve had experience with, and to imagine a whole country focused on that, benefitting from that—that’s exciting.”
Hall said that having more ESOPs could “serve to solve a lot the inequalities that we have right now. I feel like if more companies went this route not only would we be supporting more people post-retirement in a way that we can’t—as a society—right now, but there would be that a closing of the wealth gap too.”