We posted back in January about this topic:
We know our members in Iowa have been working with the Governor’s office and have been steadfastly promoting employee ownership in the state. When we heard that Mick Slinger, the CFO Van Meter Inc. (an ESOP Association member) sent an essay on ESOPs to The Gazette in Cedar Rapids, IA, we asked if we could reprint his essay here as a guest post.
Thanks to Mick and all our members in Iowa spreading the ESOP message.
The employee owners of Van Meter are pleased to see that Iowa lawmakers are considering a bill to encourage the creation of more Employee Stock Ownership Plans (ESOPs) in Iowa.
We clearly know from experience that ESOPs are good for the state. They help save and create jobs. They also help businesses be more competitive and successful, while at the same time creating a mechanism for the employee owners to share in that and accumulate significant retirement savings. We believe this because we are an employee owned ESOP company.
Van Meter became an ESOP in 1993. At that time, 30% of the company was sold to the employees through the use of an ESOP. From 1993 to 2005, Van Meter continued to increase its employee ownership percentage to the point of becoming 100% employee owned in January 2005, where it still stands today. Our goal is to stay 100% employee owned forever. From 2005 to today, during periods of high uncertainty and through one of the worst economic downturns since the Depression, our business has grown over 8% annually. In an industry with significant consolidation and movement of companies around the globe, the ESOP has been an effective growth and succession planning tool allowing our company and jobs to stay within Iowa.
At Van Meter, we work hard at building a culture of ownership and employee empowerment for the long-term success of our business. The ESOP gives every employee owner a stake in that outcome. Equity sharing is a benefit that pays for itself by putting everyone in the same boat. We each share in the risks and rewards of being an owner, rising together as one. Every employee owner has influence over the direction and success of our business.
We learned early on, however, that giving employees stock is not a magic pill. Like any other thing, ownership needs to be taught. We believe in a saying that if we capture the employees’ hearts, their minds will follow. We invest heavily in the learning and development of our people. At Van Meter, our company is the product, and our purpose is to create a culture where the right people come to work, stay, and achieve their potential. We focus heavily on growth and opportunity for our people. In doing that, our voluntary turnover is less than 4% annually, which leads to significant productivity gains.
Our culture is based on our core values, what we call our 5Ps. People – our culture is committed to the development and well-being of our people. We strive for 100% engagement. Providers – take care of our customers and suppliers who provide us the opportunity to be in business. Continuous imProvement – everyone everyday making improvements in the business; Place – giving back to the communities where we blessed to work and live in; Profit – we don’t run our business to make a profit, we make a profit to run our business. In a nutshell, we are extremely committed to our employees, our communities and Iowa.
Since 2008, the beginning of the so called Great Recession, Van Meter has done just the opposite of what our competitors and what we hear many others have done and are doing. Our motto was “why waste a good recession”. So during this latest economic downturn, the employee owners of Van Meter committed to having no layoffs or workforce reductions. We continued to invest and hire new people while everyone else was cutting back. We believed that as the economy recovered we would be in a much stronger position in the long run, growing market share and providing additional job security and growth to our employee owners here in Iowa. This has proven to be a good decision.
Not only do we invest heavily in our people, the ESOP has helped us to make significant investments in facilities across Iowa. Since the great recession, employee ownership has allowed us to create fifty-five new jobs and add more than four million dollars in payroll, and also to invest over $8 million dollars in new inventory and $32 million in new facilities in Cedar Rapids, Iowa City and Sioux City and machinery and equipment. This year, we have plans to build two more new facilities in Des Moines and Muscatine.
On the intangible side, we have things like an annual poster contest to help discover what employee ownership means to our people. Outcomes have been phrases like; “Let’s pull together and brighten our future”; “The ESOP helps see our future more clearly”; “Where will you leave your footprint with employee ownership”; “Your ticket to our ESOP future – get in the game”; and “Get your two cents worth – it all adds up”. Through the ESOP, employees recognize the opportunity they have to create financial security for themselves and for one another.
But beyond the numbers, the real success stories for Van Meter’s ESOP come from the heart. We recently had an employee owner who retired early to pursue his real passion, going back to the family farm with his dad. He had just turned fifty and had been with Van Meter over twenty years and participated in the ESOP since day one. He shared the success of the Van Meter ESOP allowed him the financial freedom to retire early and he felt incredibly blessed for the opportunity to do this. This is what makes our ESOP so special.
So if ESOPs are so great, why do we need legislation to encourage them? In today’s credit environment, banks are hesitant to finance 100% of the ESOP transaction so sellers usually have to carry some of the debt. The legislation creates a $1 million dollar fund to help defray some of the costs of setting up an ESOP and it would exempt business owners from capital gains tax.
We believe from what we contribute to our community in payroll and taxes that this legislation will more than pay for itself by stimulating economic growth in the state. We became an employee owned company because we care deeply about our employees, communities and our state. It would be devastating for our towns if locally owned businesses or profits were moved out of the state. We need to save all the jobs and business we can. In an ESOP company, we are dealing directly with owners who have a shared, vested interest in the long-term success of the business and community in which they live. This legislation is a great way to promote growth, investment and job creation in Iowa. We appeal to Iowa lawmakers: let’s keep our home grown businesses right here in Iowa.