Creating a Culture of Ownership

Posted on November 7, 2012 by Stephanie Silverman

Lifetouch, based in Eden Prairie, Minn., is Photography for a Lifetime. Best known for the tradition of school pictures, Lifetouch also operates retail studios across the country and provides portraiture and directory services for churches and organizations. Lifetouch has been capturing memories for families since 1936.

Following the death of his business partner in 1972, co-founder Bruce Reinecker began exploring options to reward the people who had devoted their lives to working hard for his company. By 1978, he and his management team found the answer within a new framework of employee ownership. It was a structure that made sense for Lifetouch which had always depended on an entrepreneurial spirit and personal touch.

Susan Enlow began representing Lifetouch as outside counsel in 1981, advising on the company’s ESOP and other business matters. She was a long-time ESOP advocate, having represented other ESOP clients. She was intrigued by employee ownership and the unique culture generally found in ESOP companies. Enlow was thrilled to become an employee-owner at Lifetouch when she and her law partner, former general counsel and current ESOP Trustee Richard Hassel, formed the company’s in-house legal department.

The photography business has faced challenges as technology has created competition for photography professionals. Lifetouch has survived and prospered in large part because employee-owners have worked together, innovating and differentiating Lifetouch with high quality professional portraits.

Enlow has found that owners of other photography operations want to sell their business to Lifetouch because they can retain a sense of ownership while participating in a successful retirement plan, something many do not have as an independent company. “I talk about how ownership motivates employees and how they have a real stake in the company’s success. Their efforts can increase the value of their retirement benefit,” says Enlow.

Today, she continues as an ESOP advocate to the 17,000 Lifetouch employee-owners. “Put simply, our ESOP has fostered a culture that encourages our employee-owners to work together for the common good. We know our individual contributions drive results,” shares Enlow.

“Every day I see how our ESOP changes lives, from new employee-owners just starting to save for retirement to our retirees who are able to leave Lifetouch with healthy retirement balances and memories of working somewhere truly special.”

Posted in Personal Stories | Tagged , , , , , , , , , , , , , | Leave a comment

The Importance of Having a Retirement Account Early in Your Career

Posted on November 1, 2012 by Stephanie Silverman

When she graduated from college two years ago with an accounting degree, following the worst financial crisis since the 1930s, Drea Arnoldin had some idea that finding work near her hometown of Missoula, Montana might require some career flexibility.

“But if you had told me I’d be working in a scrap yard, I wouldn’t have believed it,” she added.

Drea (short for Andrea) sometimes jokes about the rough image of her work at Pacific Steel and Recycling, but the truth is that metal recycling is a logistically complex, international, multi-billion dollar a year industry that demands every bit of what she learned in school—including the accounting.

When you are a young person like Drea, keeping careful track of someone else’s money on a spreadsheet can be easier than giving a thought to your own retirement saving. Drea said she didn’t think too much about the fact that Pacific is owned by its employees when she started working for the company. In a relatively a short time, however, participating in Pacific’s ESOP has transformed her attitude toward work and her views about saving.

First, she started hearing about long-time Pacific employees, some of them with modest salaries, who had managed through the employer-provided ESOP to save considerable sums—more than enough for a secure retirement. She then asked herself whether she would have chosen to start putting aside enough savings, through an IRA or a 401(k) plan, to build this kind of nest egg.

Drea said she realized that “the best thing about the plan, at least for me, is that I don’t have any choice about it.” Pacific makes contributions to the fund on her behalf and unlike a 401(k) plan, there aren’t provisions to make withdrawals or borrow from it. “I like the fact that I can’t touch the money,” she said.

Employee ownership has made Drea think about work for Pacific as a career, instead of only her first job out of school. She travels to other Pacific facilities around the Northwest advising younger employees about the value of the company’s ESOP. “I tell them ‘look at what this can do for you,’ and I think it gives them a good reason to stick with the company.”

Posted in Personal Stories | Tagged , , , , , , , , , , , , | Leave a comment

Congressman Erik Paulsen Visits Employee-Owned Inland Truck Parts in Kansas City

Posted on November 1, 2012 by Stephanie Silverman

Inland Truck Parts Company’s Kansas City location opened its doors to House Ways & Means Committee Member and S ESOP supporter, Congressman Erik Paulsen (R-MN) last week. Inland, an employee owned company, has been providing quality truck parts and service since 1944. Inland’s CFO and ESCA Board Chair Greg Klein and store manager Jim Adams escorted Congressman Paulsen around the main store, the component rebuilding shop and the service shop to give him a feel for the daily workings of an employee-owned company. Inland’s employee-owners greeted Congressman Paulsen with thanks and enthusiasm for his efforts in supporting employee-owned businesses.,

The Congressman joined with 5 of his colleagues from the House Ways and Means Committee to introduce H.R. 1244, The Promotion & Expansion of Private Employee Ownership Act. He is a proponent of the benefits that S ESOPs provide, from the substantial retirement savings, to the notable job stability and job creation. Congress created the S ESOP structure in 1998 to encourage and expand retirement savings, and it has done exactly that. Further, a study by the National Center for Employee Ownership found that S ESOPS are powerful savings vehicles, creating retirement account balances that are 3-5 times higher than the average 401k.

As the Congressman toured Inland, he was very interested in learning about one of the Midwest’s largest truck parts and service providers. “Congressman Paulsen asked more detailed questions about how we fix trucks than any of the Members of Congress who have previously visited Inland stores,” Mr. Klein mentioned. Adding with a smile, “If we could have had him there for a few more hours, I’m convinced he would have been willing to roll up his sleeves and start rebuilding a transmission.” While visiting Inland, Congressman Paulsen experienced the culture of ownership that exists among employee-owned companies. Employees often refer to themselves as “part of the team” because they have both a personal and financial stake in the success of the company.

ESCA wants to thank both Inland Truck Parts for hosting the Congressman, and Rep. Paulsen for his support to promote and expand S corporation ESOPs around the country.

Posted in Site Visits | Tagged , , , , , , , , , , , , , , , , , , , , , | Leave a comment

A Look Back at the Creation of S Corporation ESOPs and the Benefits They Provide for American Workers and the Economy

Posted on October 23, 2012 by Stephanie Silverman

Effective January 1, 1998, the U.S. Congress passed a law to enable U.S. employees to own Subchapter S companies where they work through an employee stock ownership plan (ESOP). In establishing S corporation ESOPs, Congress was careful to ensure that the benefits of this ownership structure were broad-based, not just for the executives.

An ESOP is a qualified defined contribution plan that provides a company’s workers with retirement savings through their investments in their employer’s stock, at no cost to the worker. Congress authorized the S corporation ESOP structure to encourage and expand retirement savings by giving American workers in all 50 states the opportunity to have equity in the companies where they work. Today, S corporation ESOPs are functioning in the way Congress intended them to do: creating jobs, generating economic activity and promoting retirement savings.

Data from a recent study by Alex Brill, tax advisor to the Simpson-Bowles deficit reduction commission, demonstrates the value S corporation ESOPs have for workers and the economy. The study analyzes data from 2001 to 2011 and finds that S ESOPs have created more jobs than other private sector businesses, significantly expanded the pool of U.S. workers who are saving for retirement, and boosted company productivity.

Further, a  2008 University of Pennsylvania/Wharton School of Business study found that S corporation ESOPs contribute $14 billion in new savings to their workers each year beyond the income they would otherwise have earned, and that S corporation ESOPs offer workers greater job stability and increased job satisfaction. The study also found that S corporation ESOPs’ higher productivity, profitability, job stability and job growth generate a collective $19 billion in economic value that otherwise would not exist.

These studies, along with the thousands of personal stories from employee-owners across the country, demonstrate how S ESOPs have had a positive impact on U.S. workers and the economy. The benefits of S corporation ESOPs are particularly important in light of the challenges Congress faces in addressing the current difficulties plaguing the American economy, working Americans, and their families.  Accordingly, it is important that Congress work to pass the “Promotion and Expansion of Private Employee Ownership Act” (H.R. 1244/S. 1512) in order to protect and expand employee ownership in S corporations and allow more working Americans the opportunity to become employee-owners.

Posted in S ESOP History | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Kansas City Business Journal Names 100% Employee-Owned Burns & McDonnell The Best Place To Work In Kansas City

Posted on October 18, 2012 by Stephanie Silverman

We are pleased to announce that ESCA Board Company Burns & McDonnell Engineering has been named The Best Place To Work by the Kansas City Business Journal. The Kansas City-based engineering, architecture and consulting firm celebrated 25 years of employee ownership last year, and they are without a doubt proud of their ESOP structure and the many benefits it has provided for their hardworking employees-owners and loyal customers.

Burns & McDonnell was among 30 recognized companies at the announcement last week, and after 7 years of being in the Top 10 Best Places to Work in Kansas City, they finally claimed the top spot. Burns & McDonnell sees themselves as trailblazers in the ESOP world as they are “growing and thriving beyond all expectations” since establishing their ESOP, Burns & McDonnell was also recently honored as the 2012 ESOP Company of the Year by the ESOP Association.

What makes Burns & McDonnell one of the best places to work in Kansas City is their increased stability, accountability, and teamwork, which is due in large part to their ESOP structure. When employees are stockholders in their company, a culture of ownership is created where employees work hard and perform at a higher level because the company’s success is quite literally their success. A high level of employee-owner engagement is the backbone of the company and the reason Burns & McDonnell operates so efficiently.

A recent study by Alex Brill, tax advisor to the Simpson-Bowles deficit reduction commission, touts what Burns & McDonnell has personally experienced over the past 25 years. Brill finds that “S ESOPs have created more jobs than other businesses, significantly expanded the pool of US workers who are saving for retirement, and boosted company productivity.” Further, Brill says “employee commitment leads to increased profitability, which in turn allows companies to grow at a faster rate because they can invest more, hire more workers, and increase output.”

As stockholders, Burns & McDonnell employee-owners see their retirement accounts grow with annual contributions from the company. The ESOP grows as the employee-owner stays with the company, creating a high-impact benefit that rewards loyalty and success. They believe that “when people have a real stake in a company, its potential is limitless.” We could not agree more.

Congratulations to Burns & McDonnell for being named The Best Place To Work in Kansas City by the Kansas City Business Journal!

Posted in Awards | Tagged , , , , , , , , , , , , , , , , | Leave a comment

Do you know how ESOPs are funded?

Posted on October 16, 2012 by Stephanie Silverman

Did you know an ESOP is created and funded for workers without requiring them to take savings out of their own paycheck? With an ESOP, an amount equal to a percentage of the employee’s paycheck is added to the ESOP trust, unlike 401 (k) plans, which require a percentage of the workers income to fund the retirement account.Anita Weinzatl had worked in customer service for employee-owned Soderberg Optical for nearly 30 years when Soderberg was acquired by Walman Optical, another employee-owned company serving retail eye care businesses and professionals. Merging the two companies provided stronger, faster growth for Walman Optical and the retirement savings accounts of its employee- owners like Anita.

“It was a surprise, and . . . it really was great that it happened when it did,” said Anita. That’s because this stroke of good luck occurred around the same time that Anita’s family had some bad luck. Due to the struggling manufacturing industry, Anita’s husband, who is a skilled tradesman, was laid off from one factory, and then two years later from a second, after his new employer shifted operations to Mexico. Two years ago, he was laid off from a third manufacturing job. As always, Anita says her husband has bounced back and is working again, but the lesson of the last six or seven years hasn’t been lost on her. “It’s a tough time,” she said. “I think we would have worried a lot more if we didn’t have something to fall back on . . . and the ESOP was a major part of it.”

Anita also saves money with a company- sponsored 401(k) plan invested in the stock market, but she isn’t impressed with its performance over the last decade or so. “It got to the point where I was happy when it wasn’t losing money.” With her family’s income uncertain at times, Anita said she appreciates the fact that the Walman plan doesn’t require her to take savings out of her own paycheck—that an amount equal to a percentage of her pay is added to the ESOP on her behalf. “That makes it feel like more of benefit,” she said.

After 36 years at Walman/Soderberg, Anita has a lifetime’s worth of connections with ophthalmologists and opticians. That knowledge is priceless to a company that emphasizes personal service, and Anita says her growing stake in the company’s ESOP is a powerful incentive to stay on the job and put that experience to good use.

Posted in Personal Stories | Tagged , , , , , , , , , , , | Leave a comment

“Employee ownership binds us together in our difficult and sometimes dangerous work.”

Posted on October 12, 2012 by Stephanie Silverman

As a young volunteer in Sierra Leone and later as a State Department officer, Ann Hudock witnessed the disintegration of that West African nation in a devastating civil war.  She hoped to one day be part of efforts to help it recover.

That’s one of the projects Ann is most proud of as a managing director for DAI, a for-profit government contractor that has worked in 150 countries to promote democracy and economic development.  DAI employees are helping train police, judges and other officials, working with government in Sierra Leone’s capital, but also with local leaders and citizens groups to ensure that all have incentives to work together to improve public safety.

Incentives are also important in encouraging DAI employees to take on the challenge of working in difficult and sometimes dangerous places. Ann says that making a difference is the most important incentive for DAI’s eager employees, but it helps that they are all also DAI’s owners, sharing in its growth and success.  The company is 100 percent owned by its employees, and Ann says this ownership structure has helped create a corporate culture that is remarkably transparent and collaborative. “I’ve never worked at a place where people are so willing to share information and help each other, she said. “I think the ESOP has a lot to do with that.” After a career in government and non-profits, Ann says that “I can see how [employee ownership] motivates people.”

Americans are often skeptical that foreign aid is always used wisely, and companies like DAI are under constant pressure to prove that they are operating as efficiently as possible. Ann said that employee ownership is a powerful advantage in this regard, since it gives every employee an incentive to ensure that no one is doing less than their best. It is an advantage that she is now taking on the road, spearheading an expansion of the company in Europe, which has a limited history of private companies competing to deliver foreign aid. “I believe that DAI’s strengths, and I would include the ESOP, put us in a really good position to become a global company,” she said.

Posted in Personal Stories | Tagged , , , , , , , , , , , , , | Leave a comment

Senator Al Franken Visits Lifetouch To Talk About Employee-ownership

Posted on October 10, 2012 by Stephanie Silverman

ESCA member company Lifetouch, the world’s largest employee-owned photography company specializing in school portraits, welcomed Senator Al Franken (D-MN) to their National School Studios in Bloomington, MN last week. During the visit, Senator Franken announced his support for S ESOPs by signing onto S. 1512, the Promotion and Expansion of Private Employee Ownership Act.

Senator Franken’s enthusiasm for S ESOPs could not be ignored during his visit with Lifetouch employee-owners. He told them, “you had me at ESOP,” as he explained his reasoning for signing onto S. 1512. “Retirement savings are security, and security means freedom, and that’s what I love about ESOPs,” he continued.

Senator Franken spent time speaking with Nancy Dahl, President and COO Lifetouch National School Studios; Paul Hammel, Chairman and CEO of Lifetouch, Inc.; and several other employee-owners. They discussed how the S ESOP structure has benefited the company since becoming 100% employee- owned in 1978. The ESOP unites many Lifetouch employee-owners through a sense of purpose. In addition, reinvestment in the company and upgrading photography equipment allows employee-owners to execute the highest-quality work.

Franken is a member of the Health, Education, Labor, and Pensions Committee (HELP), which oversees pension policy, so he understands the need to support legislation that helps hardworking Americans achieve meaningful retirement savings. According to the National Center for Employee Ownership, S corporation employee stock ownership plans (ESOPs) are powerful savings vehicles, establishing retirement account balances that are three-five times higher than the average 401 (k) plan. Additionally, 80% of S ESOP companies even offer their workers more than one qualified retirement plan, according to a studying by Georgetown University. But what is special about S ESOPs is that the savings plans are fully funded by the employers, not the workers.

Senator Franken values the importance of preserving and expanding the S ESOP structure, and realizes that new taxes on S Corporations could directly impact American workers and employees’ ESOP accounts, taking away from their retirement savings.

Senator Franken joins his Senate colleague Amy Klobuchar and four members of Minnesota’s U.S. House delegation in supporting pro-S ESOP legislation in Congress. Franken’s support brings the number of cosponsors in the Senate to 22.

We are grateful to Lifetouch for hosting Sen. Franken and helping bring him aboard as a cosponsor of S. 1512. Thanks for your support, Senator Franken!

Posted in Site Visits | Tagged , , , , , , , , , , , , , , , , , , , , , | Leave a comment

“It’s a real motivator. It does make me want to be a better employee.”

Posted on October 9, 2012 by Stephanie Silverman

Life has taught Doug Jordan a lesson or two about the advantages of employee ownership.

Before he came to TransForm Automotive in 2006, Doug worked for 20 years as a machinist at another company in the Detroit area. He paid into a defined benefit pension and viewed that as the central piece of his retirement planning. But then the company ran into trouble and ended up dissolving the pension plan. Doug still expects to get some of what he was expecting from that plan, but not nearly as much as he had hoped.

Doug didn’t have much of a say about what happened to his pension, but that is not true at TransForm, an advanced metal-forming supplier in Sterling Heights, Michigan that specializes in transmission components. As an employee owner, Doug owns a piece of the company. When the statement of his ever-growing equity in TransForm’s parent company, Amsted Industries, shows up in the mail, Doug can see how his hard work translates directly into greater financial security.

“It’s a real motivator,” said Doug, who operates computerized metal forming and machining equipment.  “It does make me want to be a better employee.” Doug says he sees the same effect in his co-workers, who take responsibility for their own work and for the performance of everyone.

The value of Doug’s ownership stake in Amsted has grown much faster than his pension plan from his prior job ever did. That’s reassuring as Doug and his wife raise two teen-aged daughters and look ahead to cars, college and other expenses down the road.

Like many people, Doug doesn’t expect Social Security and Medicare to provide everything he and his wife will need as they grow older.  Amsted’s ESOP will supplement that.  It is a benefit, measured in dollars and cents, that will pay off years from now, but it is already providing something else very valuable: peace of mind in uncertain times. “It kind of makes me feel like I can handle it all,” said Doug.

Posted in Personal Stories | Tagged , , , , , , , , , , , , , , , | Leave a comment

Employee-owned Parksite, Inc. Hosts Congressman Randy Hultgren at Illinois Headquarters

Posted on October 5, 2012 by Stephanie Silverman

ESCA member company Parksite welcomed Congressman Randy Hultgren (R-IL-14)- to their headquarters in Batavia, IL last week. Parksite is a sales, marketing, and distribution company serving many segments of the building industry, with a focus on both interior and exterior products. They are a 100% employee-owned company and have 10 offices along the East Coast.

Congressman Hultgren joined three dozen employee-owners for a luncheon and discussion about the current policy issues facing Congress.  Parksite’s employee-owners also had the opportunity to tell their personal employee ownership stories of how the S ESOP structure has aided them financially and professionally throughout their time at Parksite. As a co-sponsor of H.R. 1244, The Promotion and Expansion of Private Employee Ownership Act of 2011, Congressman Hultgren understands the benefits that S ESOPs provide, from the substantial retirement savings, to the notable job stability and job creation.

With a history of providing exceptional building product solutions, comprehensive training and value-added service, Parksite, Inc. continues to revolutionize the building industry. The company understands how important employee ownership is in creating a company culture where every employee has ‘skin in the game’, working even harder to see the company succeed. Uniting employee-owners ultimately motivates them to be more productive, allowing the company to grow and produce at a faster rate.

Parksite employee-owners understand the importance of engaging their congressional delegation in order to protect the S corporation ESOP model in the tax code. S corporation ESOPs allow workers to own some or all of the company through shares of the company’s stock, which are given to the workers by the company (at no cost to the worker), and are held in a qualified retirement savings plan. As the company profits, the shares increase in value. A study from the National Center for Employee Ownership (NCEO) showed retirement accounts in S ESOP companies have balances three to five times higher than the average American’s 401(k) plan. At a time when many baby boomers are looking to retire, it is important to inform Members of Congress of the need to preserve and protect current systems that are in place that will help current and future retirees meet their goals.

In addition to Congressman Hultgren’s visit, Parksite employee-owners met with staff from Congressman Rush Holt’s (D-NJ-12) office in New Jersey and Senator Sherrod Brown’s (D-OH) staff in Ohio last month. Representative Holt, also a co-sponsor of H.R. 1244, took time to visit Parksite’s New Jersey office and meet with employee-owners there. In Ohio, George Pattee, CEO of Parksite, joined two dozen employee-owners at Senator Sherrod Brown’s office (D-OH), to engage in a question and answer session with the Senator’s staff.

Parksite employee-owners will continue to engage with Members of Congress and staff on a personal level in the coming months. It is more important than ever to reinforce the remarkable benefits that employee ownership has for hardworking Americans across our country.

Posted in Site Visits | Tagged , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment