Advocacy Update: Support for ESOPs Rises on Capitol Hill

You can never have too many friends in Congress. Politics is inherently changeable, and while it may seem that members of Congress have a job for life, in every session many are replaced—sometimes unexpectedly.

Some announce their retirement while others are defeated in primaries or elections. Some resign for health concerns and some leave for other factors entirely. Whatever the reason, a significant number of elected officials don’t return the following session.

(Has one of your representatives retired this year? See the Atlantic’s up-to-date retirement tracker for the latest word.)

Congressional turnover matters to us. We must constantly add new supporters to make up for the ones we will lose.

The good news for our community is that we continue to garner new support on Capitol Hill. The better news is that we continue to gain supporters from members on both sides of the aisle.

Since this session started on January 3, 2018, 32 members of Congress have become first-time supporters of the ESOP model. This support is bipartisan and bicameral. The group breaks down in this way (as of July 31):

  • 23 members (five percent) of the House
  • 9 members (nine percent) of the Senate
  • 16 Republicans
  • 16 Democrats

The percentage of new supporters in the Senate is particularly noteworthy. Another fact that illustrates our support in the Senate: In 14 states, both senators support pro-ESOP legislation.

In another five states, both senators have supported ESOPs in the past, but one or both have yet to support ESOPs this session. Those states are: Arkansas, Indiana, Kentucky, Louisiana, and North Carolina.

If you live in one of these states, please consider inviting these Senators to visit your company—perhaps during October, which is Employee Ownership Month. These Senators have supported us before, and likely will respond positively to a request for renewed support today.

To date, we have support from approximately 40 percent of the members of Congress. This is a huge success and testament to the important role ESOPs play in communities across the country.

Below is the list of the 32 House and Senate members who have joined the ranks of ESOP supporters this session. (The most recent supporters are at the end of the list.) If these individuals represent you in Congress, please consider thanking them for the support:

2017-2018 New ESOP Advocates

  1. Roger Marshall (R-KS)
  2. David Young (R-IA)
  3. Lou Barletta (R-PA)
  4. Brian Fitzpatrick (R-PA)
  5. Brian Higgins (D-NY)
  6. Jackie Walorski (R-IN)
  7. Derek Kilmer(D-WA)
  8. Josh Gottheimer (D-NJ)
  9. Don Bacon (R-NE)
  10. Deb Fischer (R-NE)
  11. Ruben Gallego (D-AZ)
  12. Scott Des-Jarlais (R-TN)
  13. Christopher Coons (D-DE)
  14. Joe Donnelly (D-IN)
  15. Patty Murray (D-WA)
  16. Ted Lieu (D-CA)
  17. Luis Correa (D-CA)
  18. Jim Banks (R-IN)
  19. Lloyd Smucker (R-PA)
  20. Dina Titus (D-NV)
  21. Mo Brooks (R-AL)
  22. Nydia Velazquez (D-NY)
  23. John Kennedy (R-LA)
  24. Cory Booker (D-NJ)
  25. John Ratcliffe (R-TX)
  26. Vela Filemon (D-TX)
  27. Bruce Poliquin (R-ME)
  28. Thom Tillis (R-NC)
  29. John Faso (R-NY)
  30. Michael Capuano (D-MA)
  31. Tammy Duckworth (D-IL)
  32. Chris Van Hollen (D-MD)

On the Hook for Saving America’s Cod Industry

Why employee ownership was the right choice for America.

What do Independence Day, ESOPs, and fishing have in common? More than you might think.

During the Revolutionary War, the British attempted to wipe out America’s Cod fleet because it was a critical part of our economy and a source of able hands for America’s growing Navy. Those efforts left the industry crippled for years after the last musket was fired in Yorktown.

George Washington, John Adams, Thomas Jefferson, James Madison and Alexander Hamilton, founders of this nation, considered the idea of employee ownership to be the single best economic plan for the republic and thus recommended it for the Cod industry.

The idea was that, instead of the fleet owners reaping all the profits, the entire Cod community from fishermen to engineers and Cod drying operations shared in the success of the industry. The shared ownership inspired and motivated each individual to work harder and work together towards a common goal – ultimately saving the industry.

The Citizen’s Share, written by professors Joseph Blasi, Richard Freeman, and Douglas Kruse, traces the development of employee ownership throughout American history and explains how today’s economy can, and will, benefit from the basic principles of employee ownership and profit sharing. While the book starts with the founding fathers and the foundation of America it quickly gets into explaining why employee ownership is important in modern times.

Capture
The Citizen’s Share, by professors Joseph Blasi, Richard Freeman, and Douglas Kruse.

In one study, conducted in 2000, Blasi, Freeman, and Kruse found that ESOP firms had, “significantly higher sales growth and higher sales per worker” when compared to similar companies without ESOPs.

Today, almost 20 years later, ESOPs are well recognized as having almost exclusively positive effects on a company. Increased motivation, increased productivity, and improved morale and corporate culture are just the tip of the iceberg when it comes to the benefits of ESOPs. ESOP companies even outperformed their peers during the great recession!

Independence Day is a time to reflect on everything that makes this nation special. The ability for employees to own a part of the company they work for is a unique and important part of what makes this country successful.

So, at the end of the day, we must go back to the old adage, “If it ain’t broke don’t fix it.” Employee ownership has been working successfully in the US since the revolutionary war and is poised to continue to perform well today and tomorrow.

Aspen Institute Holds Employee Ownership Event

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.

Congressional Momentum

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.

DSC_0347 for blog

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.”

DSC_0353 for blog

The panel, from left to right: Moderator Heather Long, Steven
Vogt, Markita Madden-Puckett, Amy Hall, and Steve Smith.

Employee Involvement

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.”

 

Using Social Media to Promote Ownership Culture

At Entertainment Partners, with our 1,100 employee owners spread out across more than 10 locations nationwide, we rely heavily on technology to help us communicate and connect with each other. To us, “social media” encompasses any technology that enables us to create and share content and make those connections. It could be software specifically geared toward fostering collaboration in the workplace or it could be the same website you use to share hilarious cat videos or that perfectly angled selfie.

Internally, our intranet serves as our main communication hub for company news and information. We our intranet—and the articles and videos we post there—to:

  • Foster our company community, ownership culture, and communication.
  • Increase company pride (because we work in an amazing industry!).
  • Increase our work efficiency.

External social media tools allow us to communicate with clients, coworkers, potential new hires, and totally random strangers. That’s what we’re trying to do, right?

As employee-owned companies, we’re doing more than communicating to plan participants. We’re also promoting ourselves and the idea of employee ownership to the world at large. If we want people to know the potential impact of ESOPs, we need to start getting our stories, photos, comments, and videos out there.

For us, it starts with our dedicated social media accounts for recruiting @epworklife. To attract the right talent, we need to tell them who we are, the value of working here, and what programs we offer—from wellness, to our new hire buddy program, to employee development and learning opportunities.

We have to show how employee ownership is better for individuals, companies, and the economy.

What can you do to support the employee ownership movement? Post all your advocacy work with elected officials. Share when you’re attending culture-building related events or conferences. And of course, post about all your internal ESOP activities!

We are all in this together. More than 13.5 million Americans participate in ESOPs and share in our special style of productive, collaborative work culture, while enjoying better job and retirement security.

So get social and connect with ESOP organizations and other ESOP companies. Then share, retweet, repost! Getting the word out about the power of employee ownership is up to all of us and we can help each other do it.

Lauri Veverka will be joined by Aaron Moberger from Harpoon Brewery for a session on this topic at The ESOP Association’s Annual Conference in Washington, DC. Register today to learn more about available technology and social media platforms and how you can use them to connect internally, promote your own culture externally, and support the ESOP movement.

Helping Employees Own Health and Wellness

By Jim Winterscheid, SVP-HR, Travel and Transport

Most businesses wrestle with their health care costs. Being an ESOP does not make us immune to this challenge.

Travel and Transport is a 1,400-person company with offices from Boston to Seattle. We have a self-insured health plan in which approximately two thirds of our employee owners participate. Our plan has run large deficits the past several years and, as a result, we are in the midst of making some major changes.

In 2019 we will move to a high deductible health plan, coupled with a health savings account for all insured employee owners. While this will present a savings for many of our employee owners, those who are high-consumers of medical care and pharma will face financial challenges.

We also are moving to a new wellness provider, and are looking to maximize the investment on our wellness investment for our employee owners and the business.

To that end, we are working to build a wellness program that will provide premium discounts to employee owners who complete certain registrations, wellness assessments, and biometric screenings. We will look to add additional discounts via wellness down the road, but want a measurement that everyone will be able to achieve the first year.

For all these changes to be effective, we must educate and communicate with our employee owners. Being an ESOP, we feel these efforts have a tremendous advantage over businesses that are conventionally owned, In short, our employee owners are used to thinking of the big picture. They understand our business model and the factors that cause our stock valuation to go up or down.

As owners, they understand the need to efficiently manage costs. They also understand that culture is not something we throw out the window when times change.

And times do change. Health care has become increasingly expensive for all businesses. But not all businesses have employee owners who are invested in the outcome of the total enterprise, and will—we hope—be better suited to seeing the big picture of how health and wellness affect everyone.

Jim Winterscheid and Chris Shimokawa, Travel and Transport‘s Director of HR, will present a session on this topic at The ESOP Association’s Annual Conference in Washington, DC. Register today to learn more about the challenges they face and their strategy for incorporating wellness into the fabric of their employee owned company.

You Apparently Excel at Operating Efficiently

For the second year in a row, corporate members of The ESOP Association appear to be managing their expenses extremely well, with resulting positive effects on profits and stock value.

Each year, The Employee Ownership Foundation sponsors the Economic Performance Survey—a poll of corporate members of The ESOP Association. The most recent survey (which is available now in the ESOP Store) shows an interesting relationship: While less than 1 percent of respondents saw revenue rise by 50 percent or more, 15 percent saw profits rise by 50 percent or more. (See the graph below.)

Cost cutting3

It would be unsurprising if profits and revenue rose in lock step. But for profits to rise more than revenue for a significant segment of the polled population suggests the respondents are excelling at doing more with less—finding efficiencies and cutting costs.

That aligns with anecdotal evidence gathered by Association staff members, who often have heard ESOP executives speak of involving employee owners in understanding the business and in managing expenses.

This year’s findings are consistent with the results from the previous survey, which found that only 1 percent of respondents saw revenue rise by 50 percent or more, while 11 percent of respondents saw profits rise 50 percent or more.

And of course, ESOP plan participants reaped the benefits of that performance. Among the 2017 respondents, 4 percent saw their stock price rise by 50 percent or more. (The findings again are consistent with 2016, when 3 percent of respondents saw their stock value rise 50 percent or more.)

Not Everyone Loves ESOPs (Part III)

By J. Michael Keeling, ESOP Association President

In this, our final installment on common criticisms of ESOPs—and why they are wrong—we’ll look at the assertion that ESOPs are not real ownership.

According to cynics, ESOPs are “fake” ownership plans. In “real” ownership, they argue, the owners control their assets by determining such things as who runs the company, who sits on the Board of Directors, when major corporate decisions are made that might impact the future of the company, and so on.

But ESOPs are true ownership.

Cynics say that true owners do things like select the CEO and other executives, select the Board, determine pay and benefits, and decide how to dispose of assets—including whether to sell the company itself.

This criticism is nonsense. It equates having an ownership stake in a company with owning personal property, such as a car, house, or child’s teddy bear.

You can do what you wish with your personal property—buy it, sell it, or throw it away. But those who own shares in corporate stock do not tell the company that issued the stock what to do. Owning 50,000 shares of GM stock doesn’t entitle you to tell the folks at your closet GM plant what color to paint the cars, which models get four doors, or that it is time for the plant manager to find a new place to hang his hat.

Owning stock is not the same as owning personal property. It means you have a stake in the free enterprise economy, and can gain wealth therefrom.

For employee owners, holding shares of stock through an ESOP means they benefit from their own hard work. It means they can see a direct connection between their efforts and the health of the business—and their own personal financial health.

That is something that most businesses are seeking. Call it employee engagement or whatever other term you wish. Plenty of thought leaders and consultants encourage businesses to treat their employees like owners. But with an ESOP, employees truly own their fair share of the business—and enjoy all the potential rewards that brings.