In the spirit of Thanksgiving, I thought of three reasons we should be thankful for Employee Stock Ownership Plan (ESOP) companies.
1) ESOPs are like pumpkin pie with extra spice. ESOPs make your employees more engaged and satisfied with their jobs. Studies have shown that even symbolic cues of working together for a common goal raise motivation, so a direct potential future benefit like an ESOP naturally increases motivation exponentially. I have visited bunches of ESOP companies over the years and there is something special when you walk through their doors. Their employees care about the future of the company more than most non-ESOP company employees do. ESOP company employees are all working for a common goal to drive the value of the company up over time and sustain its future.
2) ESOPs are gravy. Employees should be saving on their own through their 401(k) Plan and other retirement vehicles like IRAs. ESOPs are not guaranteed, but just like the gravy you ladle on your turkey each Thanksgiving, ESOPs can help your employees attain a dignified retirement.
3) ESOPs keep jobs in the local community and business owner legacies alive. Business owners who choose to sell their businesses to an ESOP keep jobs in the local community as opposed to businesses who sell out to competitors who frequently restructure the organization cutting jobs. Studies have shown that when ESOP companies who continuously explain the long-term benefits of the ESOP and build an “ownership culture” grow 6-11% fast than their peers. A 2010 General Social Survey found that only 2.6% of employee-owners reported being laid off in the previous 12 months, compared to 12.1% of non-employee-owners. Also, 24.3% of non-owner employees intended to look for a new job in the near future, while only 12.9% of employee-owners did.
While an ESOP is not appropriate in every situation, business owners should understand what an ESOP is as they plan their long-term exit strategy. There are pros and cons to everything and ESOPs are no exception. Take the time to learn the facts about ESOPs and you might be surprised what kind of results you can generate for you, your company and your employee owners. Happy Thanksgiving!