Today, we welcome Mandy Cabot, co-founder of Dansko, Inc., a 100% employee-owned company located in West Grove, PA and an ESOP Association member. Following is Ms. Cabot’s key note address to the 17th Annual Multi-State (Pennsylvania/Delaware and New York/New Jersey Chapters) ESOP Conference held September 19 & 20, 2012 in Scranton, PA. We wanted to share her remarks here with readers.
First, a bit about Dansko. According the the company’s website: Established in 1990 and now 100% employee owned, Dansko is a leader in providing all day comfort footwear, socks and healthcare apparel while standing at the forefront of ethical business practices. Founded by husband and wife team Mandy Cabot and Peter Kjellerup, Dansko is based in a LEED® Gold Certified headquarters in the rolling hills of Chester County, Pennsylvania. You can find Dansko products at over 2,500 premium US and international retail locations.
You can find out more about Dansko here.
Following is Ms. Cabot’s remarks:
Good evening, everyone,
I am honored to be speaking to you this evening. What a diverse – and impressive – audience!
Some of you are business owners like me, or founders of businesses, also like me. Some of you are ESOP committee members, hungry to learn all you can about how to make your ESOPs even better. Others are professional advisors who know far more about ESOPs than I could ever know.
What could I say to such a diverse audience? Do I tell the story of Dansko, a shoe company – born, literally, in the basement of our horse farm – that now sells more than 2 million pairs a year? Why would you care about that? Well it IS kind of an interesting story, but that’s not why you’re here.
You’re here because you believe that ESOPs are the right thing to do – right for the long-term growth and sustainability of your business, right as your exit strategy, right as your succession plan, right because you lean a little left and would like to see greater equality of opportunity in our country, right because you lean a little right and see this as a means to greater job and wealth creation.
Or maybe you have yet another reason that I haven’t thought of. The point is that you are all here because you believe, and I’m here because I do too.
I am not a natural-born speaker; in fact, I’m a card-carrying introvert, but we have an opportunity now to rally around a cause that, for whatever reason, we all believe in. And I don’t need to tell you that with the election right around the corner, the time is now.
So let me pause for a minute and give you a few basic facts about Dansko:
- We are, at the simplest level, a shoe company and a footwear brand. “Dansko” literally translated means “Danish Shoe.”
- My husband and I founded the company in 1990 with c. $7500, proceeds from the sale of a young horse. Twenty-two years later we now have more than $150M in revenues and employ c. 170 people.
- As a family and as a company, we are home-grown, entrepreneurial, energetic, hard-working, fun-loving, capable, confident, adaptive, independent, dedicated, generous, conscientious, detail-oriented, personable, and slightly quirky.
- And as of February this year, we are 100% employee owned. We are a Community of passionate, liked-minded people, committed to corporate ethics, mindful governance, responsible environmentalism, and corporate philanthropy. We are willing to take a stand, to make a difference in the world, and leave a legacy we can all be proud of.
- We were NOT born into the shoe business. Peter and I were professional horse trainers when we founded the company, and knew nothing about the shoe industry. Starting the company was pure Serendipity, getting in the path of an unexpected opportunity – the world’s most comfortable shoes – and sharing that.
- We are NOT just about the bottom dollar, but about how we can contribute meaningfully to the communities that we’re a part of. We are members of the Sustainable Business Network of Philadelphia and a founding B Corporation, a rapidly growing group of for-profit AND for-social-benefit businesses, committed to the triple bottom line of people, planet and profits
- Lastly, we are NOT all-about-us. Our stated mission is to be our Stakeholder’s Favorite shoe company, and that mission informs everything we do, every decision we make, every service we provide, every shoe we design, every account we open – all of it.
- We want to be our customers’ favorite – not the only shoes in her closet, but her favorite; not the only vendor on our retailers’ shelves, but the one they most like to do business with; not the only company our employees will ever work for, but their most rewarding; and not the only company that contributes to the communities it’s a part of, but one that serves to inspire others.
So how did we get here? Why are we an ESOP?
Well I guess I better start with the financial reason. Let me get that off the table. A year or so ago, with record-high sales, zero debt, high morale, accolades galore from the footwear industry, and building plans to more than double our current campus, we had what can only be described as an “oh &#$%” moment.
Now it’s not like we hadn’t thought of this before, but we realized, really understood, that if Peter and I were to be hit by the proverbial bus, Dansko would be in mortal peril. We were, by far, the largest shareholders and if we died, the company wouldn’t have the money it needed to pay off our estate.
Our successors would more than likely have to sell the company, or at the very least, recapitalize in such a way that Dansko, as we knew it, would cease to exist. We needed to take control of the situation now, while we had the wind at our backs and the wherewithal to make a plan.
So why not just sell the company now, while we could orchestrate the deal? Well, the fact is we’d already been down that road. We’d already looked down the throat of that beast and walked away. Nearly eight years ago, we were courted by the largest companies in our industry. We were offered what, to me, seemed like an obscene amount of money to sell.
And after nearly 10 excruciating months of soul-searching and negotiations, we actually came within hours of closing a deal — but not because of the money. Peter and I didn’t need it (our lifestyle is pretty simple) and Dansko didn’t need it (we’ve never had any debt and our sales had never been higher).
But I’d had a crisis of confidence that I could take our little start-up to the next level. Our Mom-and-Pop, home-schooling model, as awesome as it was, wouldn’t be enough. And I truly believed that this particular buyer would give Dansko exactly what I couldn’t give it – expertise.
We had given our Baby our values and integrity, our passion and unconditional devotion, but we lacked expertise. This buyer had R&D capabilities that we could only dream of; staggering international sales; sophisticated financial modeling; state-of-the-art operations and a public commitment to “doing well by doing good.” I truly believed that they would not swallow us up and let us languish somewhere as yet another brand in their stable of brands.
But at the 11th hour, I bailed. I walked away. I realized that I would be selling my Baby down the river for one reason only – that I didn’t know how to raise her. How lame is that? So, thoroughly mortified and tail-between-my-legs, I walked away, and set about figuring out my next move.
Dansko had something extraordinary that no other company could give it – our culture. Our Baby had taken on a life of her own, a personality. She was loved and adored by everyone whose lives she touched, and no amount of money was worth the price we’d pay to lose that.
And actually, I loved my job. I loved being the first person in every day; loved being a family; loved designing and providing kick-ass shoes; of being an industry darling and our customers’ favorite. Who doesn’t love to be loved? So it wasn’t an exit strategy I was looking for. Despite my insecurities as CEO of a company with revenues in excess of $100M, I rather liked what we were up to. I loved that we could make the differences we were making in our stakeholders’ lives, all of them.
So from that moment on, sustainability took on a whole new meaning. Sure, we were all about environmental sustainability. My husband is Danish, after all, so he’s hard-wired to be “green.” But it’s more than that. It’s about being around for the long haul; it’s about preparing for the future now, in the present.
As the Birth Mother of Dansko, I’m like all parents – we want our kids to thrive and to outlive us; to go forth and accomplish things that we, as their parents, can only dream of. That’s what I wanted. For Dansko to be truly sustainable, we’d need a solid financial and cultural Succession Plan. We’d need to leverage what we do well now – run a profitable shoe business – with a well-thought-out plan for the future.
Now it might come as a surprise when I tell you that we already had an ESOP in place when we ‘almost sold.’ We’d been funding it every year with company profits to the extent that we could, but our growth was simply too big to make this meaningful. By 2011, we were no more than 4% employee owned. At that rate, we really would be dead by the time we’d reach 100%.
So why 100%, and why now? Well, in the words of a British politician, “Don’t be afraid to take a big step when one is indicated. You can’t cross a chasm in two small steps. ” Or in the words of American pop culture, “Go big or go home.”
I’m sure you’ve all heard the quote from Corey Rosen: “Giving employees a ‘sense’ of ownership is like giving the hungry a ‘sense’ of dinner.” Well, I think he’s right. You can hardly say “we’re all in this together” if employees don’t themselves have a big, juicy piece of the pie.
For Peter and me, becoming 100% employee owned was simply an extension of why we started this company in the first place – to share something great. Believe it or not, my very first business plan went something like this: “If you’ve got something great to share, you share it. And if, in the sharing, you can reinvest in more to share, you do that too. And the gift just keeps on giving.”
By creating Dansko, we could share a whole new set of opportunities — the world’s most comfortable footwear, jobs in a cool new start-up, the opportunity for deep and long-lasting friendships, the opportunity to “see the world” and to deepen our relationships right here in our own backyard. So it made total sense to allow employees to share in the wealth that they help create, to share in both the opportunities and responsibilities of ownership. Selling our shares to the ESOP was the ultimate expression of this.
But there’s another reason as well. As I get older and my vision widens – from our fledging selling-shoes-from-the-back-of-our-Volvo start-up – to becoming a significant player in the US footwear market, I started to think about our legacy. What do we want to be remembered for?
Well, I want to be part of something great, part of this growing groundswell of like-minded business leaders, looking to leave this planet truly better than we found it. That’s why we became a founding B Corp, why our buildings are LEED certified, why 100% of the energy we use comes from renewable resources, and why we choose to belong to this elite group of visionaries called employee-owners.
Now in the interest of full disclosure, I have to admit that I lean a bit left-of-center politically. Remember, I’m married to a Dane – by some accounts, the world’s happiest nationality – and there big government works. I’m appalled at the staggering wealth inequality I see, not just here in the US, but globally. And personally, I have a very hard time reconciling being a ‘Have’ in a world of so many ‘Have-nots.’
But I also see the power of free market capitalism, if it has the proper chance and structure. Right now, though, the system is broken. For all our talk about the virtues of capitalism, there simply aren’t enough capitalists; people who have the opportunity to share in – and pay forward – the wealth that they help create; people who understand the power of business to do real and lasting good.
I come from a long line of capitalists. I also come from a long line of philanthropists — my Dad and his dad before him. But they kept these functions separate. As businessmen they made money. As philanthropists, they gave it away. But look around. Everywhere you look today there are new hybrid forms of socially-minded businesses – for profit AND for social benefit – blurring the distinction between wealth accumulation and wealth distribution.
For me, ESOPs are a way to bring equality of opportunity back into the picture. Providing this opportunity will be my legacy. And what about our employees; what will this mean for them? Well, they now have the opportunity to lead, contribute, share, and leave their own legacies.
So before I get off my soapbox, I want to leave you with one question. What do You want to be remembered for? What’s your story? What’s the Why behind your beliefs?
As I said in the beginning, I can’t begin to know why each of you is here, but I know you believe that we’re on the right track with our ESOPs, whatever your reason, and whatever your level of experience or expertise. So please, get to know your Why. Get to know Your story. And share it – now more than ever.