By Chris Thiel, Alterman Inc.
Over the past few weeks, there have been numerous stories about companies raising millions of dollars through an Initial Public Offering (IPO) to go public on a stock exchange. While this is indeed a success story in America, it has me wondering “what might have been.” A significant portion of the money raised will go into the pockets of private equity. Although that too is a part of the success story, I wonder what might have been different if these owners had opted for their companies to become an ESOP (Employee Stock Ownership Plan) instead of selling to private equity. How would have their employees’ lives been enriched by owning a piece of the pie, by becoming an owner?
In my near decade of working at Alterman, I have seen the power of the ESOP. Our Alterman team pulls together to make the company successful. What’s more, employees can retire early to enjoy travel, to tend to the health of a loved one, or to do whatever it is they’ve looked forward to during their working years.
ESOPs provide solutions to many of the most fundamental issues America faces today—the creation of jobs, retirement with dignity,and the distribution of wealth.
Job Creation: Through the economic downturn in 2007 and 2008, Alterman, like most ESOPs, actually increased employment while non-ESOP companies reduced staff in excess of 20 percent on average. Furthermore, we have doubled in size since 2010. This is consistent with a study done by Alex Brill in March of 2017 that shows ESOPs create jobs faster than the private sector on average and have fewer business exits as well.
The ESOP structure allows us to make acquisitions and create more employee-owners. Expanding the 1042 benefit that C-Corp companies get from their sale to an ESOP to S-Corp companies would accelerate the number of employee-owners to the benefit of the economy and those employees.
Dignified Retirement: With broad-based ownership at Alterman, we are seeing employees retire on time or early at all levels of the company. Most important, they can enjoy retirement while they still have their health. They are accomplishing this while relying less on social security, which eases the pressure on the government to provide for them.
Wealth Distribution: In January of 2016, Jared Bernstein published a report that shows ESOPs reduce inequalities in wealth and wages. This is definitely true at Alterman. We are able to pay for full health insurance for our employees and their families, and we have other generous benefits that allow all of us to live better today and have a better retirement tomorrow.
So, while an ESOP might not work for everyone, we at Alterman know that ours has created a family that works together to achieve greater success each and every year.
Alterman is an employee-owned electrical contracting firm based in San Antonio, TX. Alterman maintains a workforce of more than 650 employees and has served commercial and industrial clients in San Antonio and surrounding areas in South Texas since 1923.
Chris Thiel is Executive Vice President & CFO at Alterman, Inc.