By Loren Rodgers
(From the EO Report: Nov. – Dec. 2017)
As I write this, 350 people are heading back home from the Fall Employee Stock Ownership Plan (ESOP) Forum in Tampa. The meeting had 48 sessions covering everything from the new DOL settlement agreement with First Bankers Trust Company to valuation basics, from ESOP feasibility and financing to making acquisitions and best practices in corporate governance for ESOP companies. The keynote address on take-home lessons from ESOP-owned Wawa and the dense peer networking gave participants ideas they can start implementing as soon as they get home.
But as someone who has been to a lot of business conferences, what stood out to me was the atmosphere. Everyone was engaged. Attendees peppered speakers with questions during the sessions and followed up in the hallways. People met strangers, traded business cards, and made plans to stay in touch. We had more first-time attendees than we’ve had in years, and the veterans were happy to make them feel at home.
The sense of common purpose and mutual support—and all the conversations that ended in laughter—make it tempting to think that employee ownership is easy. Someone walking into a conference or an employee-owned company for the first time might even be tempted to think of it as magic.
And, in fact, some of the research on employee ownership shows an impact that, in an era of frustration with policy making, does make ESOPs look almost magical. The NCEO’s research on economic well-being found that the employee owners in the dataset, all aged 28 to 34, had 92 percent higher net household wealth, for example. (See more details at OwnershipEconomy.org).
But really, employee ownership is the opposite of magic. A magician’s act is a trick, and it only works when there is an audience that does not know the secret.
Unlike magic, employee ownership works when people do know the secret. Instead of a mystified audience, employee owners are insiders, fully aware about what causes success and failure. In the most successful companies, employees know exactly what their own priorities and the company’s priorities are, and they know what they need to do to contribute. There is no man behind the Wizard-of Oz curtain: The whole company is full of people with their hands on the levers and their brains engaged.
Employee ownership is not a sleight of hand or a flick of a wand: It will only fulfill its potential with hard work and prudent risk-taking. Employee ownership means understanding complicated things, from valuation to corporate structure to communicating business literacy. In successful employee-owned companies, people at all levels of the company push themselves to learn more than they would need to in a conventional business.
There is also no magic behind the reason that Congress created the legislation to create ESOPs. ESOPs were not a rabbit pulled out of a hat, but a carefully crafted policy response to address goals held by members of both parties, such as enhancing retirement security and making American companies more competitive. ESOPs did not appear suddenly or secretly. The current state of ESOP legislation is the result of a long process of writing and re-writing laws that developed over decades through debates, compromises, and the lessons of experience.
The atmosphere in Tampa was all about letting people in on the secret that there is no secret. Employee ownership does not create better companies automatically or by itself. Companies swapped stories about things they did and how well they worked. Service providers talked about how to work with employee ownership with eyes wide open, aware of both the promise and the potential pitfalls.
Employee ownership is not magic: It is people working hard, working smart, and working together toward a common goal.
Loren Rodgers, executive director, National Center for Employee Ownership