Blue Ridge ESOP Associates Industry News

Thinking about forming a union? Think ESOP

Posted by Tom Roback, Jr.

Dec 21, 2022 10:30:00 AM

Partnership Dec 2022Labor unions have been on the decline for several decades, but lately there has been uptick in interest. Workers are feeling more powerful during the Great Resignation and the corporate battle to find new employees. Many employees feel there have been inequities embedded in corporate America and income inequality is real. Over the past three years, Service Employees International Union (SEIU) Local 500 had added new members like the Maryland Institute College of Art, Howard University and the Democratic National Committee. Employees at Starbucks have moved to organize unions after working conditions worsened during the pandemic. Some think Starbucks has closed several locations due to employee organizers, but Starbucks corporate claimed these locations were in dangerous neighborhoods and were not profitable. These labor union movements have grown in many industries or schools that are not suitable for employee ownership through an ESOP, but some workers should look at an ESOP to help meet their goals.

Having a union does not always exclude the possibility and even union participation in an ESOP.

MOSAIC, a print and communications company based in Cheverly, MD, was established in 1948 and has been a 100% ESOP since 2018. The company offers a variety of nationwide services including conventional and digital printed materials; direct mail services; promotional swag; creative and marketing; and fulfillment and storage.

A majority of employees are covered under three separate collective bargaining agreements (CBAs) within the Graphics Communications Conference. Therefore, it was very important to the co-CEOs (and previous owners) Brendan Connors and Joe Fontana, to include the unionized employees in the ESOP. “An important goal of an ESOP is to have all employees rowing in the same direction in the same boat. If only half of our people became employee-owners, a big reason for becoming an ESOP would be lost,” says Sarah Wilson, VP of HR for MOSAIC.

As the ESOP was forming, the union members were provided with extensive opportunities to be educated on the merits of participating in an ESOP. Due to CBA requirements, all major changes to employee benefits need to be part of the collective bargaining process. Thus it ultimately was the union’s choice whether or not to become participants in the ESOP. The benefits of participating in the ESOP were clear and all 3 CBAs voted unanimously to join.   Having all employees, including those who are union members, be part of the ESOP has helped boost overall team cohesion and benefited all of MOSAIC’s employee-owners.

Let’s review some ESOP facts. Majority ESOP-owned companies outperform their peers at retaining jobs by 4x. New studies by Rutgers and funded by the Employee Ownership Foundation show that majority ESOP-owned companies outperformed non-ESOP owned companies during the COVID-19 endemic in terms of job retention, pay, benefits, and workplace safety. These findings echo similar results during the 2008-2010 recession. The fact is that long-term public policy encouraging employee ownership generates greater job stability during a crisis than emergency government spending. Not sure when our country will experience another recession, but new ESOPs can still happen during a recession or when banks pull back because ESOPs can usually use seller financing for transactions. Main Street does not always suffer when Wall Street crashes.

Collective bargaining agreements can provide meaningful increases in wages and benefits and the renaissance of labor unions can bring real benefits to workers. However, employee ownership can bring phenomenal retirement benefits without sacrificing wages. Employees do not contribute their wages for their ESOP benefits, but can be motivated to grow the business so that they can enjoy a dignified retirement. ESOPs work too!

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