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We hope everyone had a great summer despite all the rain in one part of Canada and the drought and fires in another. Cooler weather will be here soon and it is time for back to school and back to business for the country.
Have ESOP Questions? We Have Some Answers!
- by Perry Phillips, President and Founder of ESOP Builders Inc.
There are two main categories of ESOPs, key-person (limited participation) and broad-based.
Key-person plans are defined as an ESOP that is limited to certain identified employees, usually in upper management or highly skilled technically. The owners are tasked with identifying who these key people are in the company.
Broad-based plans are defined as plans that are open to all employees that meet eligibility criteria.
Pros and Cons of a Key-Person Plan:
The Pros:
- Focuses engagement and productivity within the group of employees that drive company value.
- Attracts and retains key people.
- Allows mentoring of the employees that potentially can take over ownership when owners exit.
- Increases value by locking in key performers.
The Cons:
- Morale can be compromised if some employees who consider themselves as key are excluded from the plan.
Pros and Cons of a Broad-Based Plan:
The Pros:
- Every person in the company can impact profitability and productivity by their decision making. A broad-based plan creates a culture of ownership thinking.
- Attracts and retains employees.
- Increases profitability and productivity.
The Cons:
- Employees’ expectations in regard to decision making must be focused on their area of responsibility and not in areas in which they have no expertise. This is done through proper education and communication of the plan.
Unions and ESOPs
The pros and cons of having an ESOP in a union setting are the same as a broad-based plan. However unions have a special relationship vis-à-vis the owners, especially in a private company. Unions generally are suspicious of owners and management and vice versa. Some unions are pro-ESOP, usually because they work in tandem with owners and management. These unions tend to be in the minority. Most unions are anti-ESOP and will try to stop its implementation for fear of losing control over the union members at the company.
Suggestions on How to Steer Uber Into the Future
- by Corey Rosen, National Center for Employee Ownership
Chobani CEO Hamdi Ulukaya made a big splash last year by giving 10 percent of his company to employees — to the tune of roughly $150,000 per staffer. “I’ve built something I never thought would be such a success, but I cannot think of Chobani being built without all these people,” he reportedly said at the time.
This year, the private equity firm KKR did something similar with three of the industrial companies it bought, one of which, Gardner Denver, just went public. Employees got $100 million worth of stock. Pete Stavros, the KKR partner who made this happen, told the Milwaukee Journal Sentinel that to improve operations, “you need the engagement of frontline employees … by making them owners.”
Uber, are you listening? You could drive your business to the next level and set aside negative publicity in one fell swoop: by making your drivers owners. ... [More...]
ESOP Owners
- by Perry Phillips, President and Founder of ESOP Builders Inc.
Over 20 years we have had the honour of meeting many business owners who wanted to implement an ESOP for their company. We have also interviewed thousands of employees of these companies on their desire to become owners.
In our opinion there are two types of owners. The first we call Founding Owners. These are people who start a business where none existed before. They have an idea, a passion, and a skill which they believe will be wanted by clients and customers. Then they risk everything to start the business. Many go without salary, raising funds from family and friends and putting up their own assets as collateral for bank funds. The highest risk for a business is the first 5 years as most start ups fail during this period. But this risk does not deter Founding Owners.... [More...]
All the Canadian ESOP Guidance You Need in One Book
ESOPs in Canada: How to Implement an Employee Share Ownership Plan to Grow and Exit Your Business with Your Legacy Intact is a comprehensive and practical guide to every aspect of designing and implementing an Employee Share Ownership Plan in Canada.
“This is a must read for those business owners thinking about exploring the notion of employee ownership and discovering that “skin in the game” for those on the front lines of leadership is a secret weapon to surpassing your wildest dreams and forecasts! It is magic”
~ Doug Flynn, CEO, Flynn Group of Companies
More information and order details here
Notable Quotables
"To win in the marketplace you must first win in the workplace." -- Doug Conant, CEO of Campbell’s Soup
Upcoming ESOP Events
See ESOP Builders events page for details on upcoming ESOP events.
Canadian ESOP and Ownership Thinking Books
ESOPs in Canada: How to Implement an Employee Share Ownership Plan to Grow and Exit Your Business with Your Legacy Intact (2015) by Perry Phillips and Camille Jensen. Buy this book on Amazon or FriesenPress.
The $10 Trillion Opportunity: Designing Successful Exit Strategies for Middle Market Business Owners: A Guide for Professional Advisors - Canadian Edition (2007) by Perry Phillips and Richard E. Jackim. Buy this book on Amazon.
Dr. Carol Beatty's book, Employee Ownership: The New Source of Competitive Advantage (published by Wiley and Sons 2001 - ISBN 0-471-64641-5). Buy this book on Amazon.
Brad Hams' book, Ownership Thinking: How to End Entitlement and Create a Culture of Accountability, Purpose, and Profit (published by McGraw-Hill 2011- ISBN-10: 0071772456 - ISBN-13: 978-0071772457). Buy this book on Amazon.
If you have any questions or feedback (or suggestions for future email newsletter content), please let us know at lisa@esopbuilders.com
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www.esopbuilders.com - 1-877-995-ESOP (3767)
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