The last recession carved out deep losses in retirement portfolios. As a result, people and companies are seeking alternative ways or tools to grow retirement. One of those tools is employee stock ownership plans (ESOPs). An ESOP is defined contribution plan that gives a company’s employees an ownership interest in the company via stock or shares.
According to Washington, D.C.-based The ESOP Association, there were approximately 10,000 ESOPs in the United States — covering 10.3 million or 10 percent of the private sector workforce — as of 2012. That number continues to grow in areas like San Antonio and other parts of Texas as employers and employees weigh their options, says Stephanie Silverman, president and executive director of ESOP advocacy organization Employee-Owned S Corporations of America (ESCA), also based in D.C.
A group of area professionals who offer their employees ESOPs, plus a 401(k) as a secondary retirement option, sat down with the Business Journal to express their views on the topic.
Mike Bye, Senior vice president, Vermeer Texas-Louisiana
Industry: Construction equipment selling, leasing and servicing
- When did your company become an ESOP? We became an ESOP in 1995.
- How do ESOPs help your company’s bottom line? It’s the culture that it creates. Every employee is a multi-tasker with no complaints. It allows us to put value added to our customers. … And quite honestly as a manager, it sure makes your job easy when everybody acts like a team.
- Why is an ESOP beneficial? In and of itself, it preserves and builds wealth for people. As an example, unfortunately, a long-time employee had automobile accident and ended up disabled. He got a check for almost a quarter of a million dollars from the ESOP. The important thing about that is he probably would’ve never saved that money by himself; and it didn’t cost him anything but his sweat equity.
Don Kuykendall, CEO, Alterman Electric
Industry: Electrical construction
- When did your company become an ESOP? We started our ESOP in 1984. At that time we instilled an ownership culture in our business.
- How do ESOPs help your company’s bottom line? Our ESOP has given people kind of a piece of the pie. … When they work and are productive, the company is a success, their retirement account grows and their security in retirement grows. We currently employ more people now than we did at the beginning of the financial crisis of 2008. We’ve done very well, and a lot of it is the long-term approach to our business … and how we treat our customers.
- Why is an ESOP beneficial? In today’s environment, we Baby Boomers are thinking about retirement a lot. So it provides a real incentive for people to participate in the ownership of the company. … We offer a 401(k) match program. Our average ESOP account is four to five times larger than our average 401(k).
Jason Jansen, Project manager, Garney Construction
Industry: Water and wastewater transmission and treatment construction
- When did your company become an ESOP? In 1986. We are a 650-plus, 100 percent employee-owned company.
- How do ESOPs help your company’s bottom line? When the economy went down (during the recession) we actually soared and encountered some of our most profitable years to date. And over the course of the next few months, we’ve got some projects … in West Texas which will bring in another 50 or 75 employees. When the company does well, employees do well.
- Why is an ESOP beneficial? Each and every person, from top to bottom is 100 percent involved in the organization. All their efforts … in turn lead to secure financial retirement. As an example: Most of my family upon retirement had no way of providing for themselves (and) had to rely upon other family members. I knew that if I joined an organization with a strong ESOP ownership, that my financial security was secure.
Tom Wendorf, Vice president and project director, HNTB
Industry: Architecture, engineering, planning and construction firm
- When did your company become an ESOP? We’re one of the 100 largest ESOP companies in the nation and about 57 percent of our employees (nationwide) are participants in the ESOP. We’ve been an ESOP since 2000.
- How do ESOPs help your company’s bottom line? Since I joined the company in 2007, I believe stock price has grown from $60 per share to $160 per share. … The fact is that we’re working as a team to try to improve that share price through better management, better technology solutions and less waste. By being more efficient, effective and productive I think it creates a really good environment for me as a professional engineer to operate with them (our employees) and it helps our clients tremendously.
- Why is an ESOP beneficial? We believe our company’s success needs to translate to our employees’ success. The other thing is: Just working together shoulder-to-shoulder, we all have skin in the game because we own the company and so we want to see the company succeed.
Tamarind Phinisee serves as the copyeditor of the newspaper and also works as a reporter covering finance, Mexico/international trade and education.