Huston, 31, started working at Dansko 11 years ago, sorting shoes for delivery.
Now a warehouse processor, she said the idea of owning a piece of the company
made her nervous at first—though she wasn’t worried about her retirement
savings, since the company offers a separate 401(k) plan. Over the past year,
she’s begun referring to Dansko as “our company.”
A family business goes to the
family, right? Well, sometimes. And if passing the biz on to family is not an
option, you can always look at an outside buyer … or an ‘inside” buyer too.
Would your employees be good candidates for ownership?
When all is said and done, the
only ones who know and care enough about the company may just be your
employees. Sound intriguing? If yes, then you need to explore a win-win means
through which your employees can become owners.
Have you ever heard of an
Employee Stock-Ownership Plan, or ESOP?
ESOPs have been growing in
popularity, especially when the market was down and outside buyers were scarce.
That said, their popularity has not waned, although ESOPS can be a strange and
Essentially, an ESOP mixes a
family exit strategy with a company retirement plan. There is a great deal to
it with many layers of protection regarding the operations and management of
Of course, there are some that
are wary of the ESOP model. MarketWatch
recently featured the ESOP and some criticisms of the approach in an article
titled “When founder cash out, do workers lose?”
Some of the criticisms are broad generalizations, especially as to the topic of
valuation. Other criticisms are well taken.
As the article points out, this
does affect the employees by opening them up to some of the risks of actual
ownership. Is this a good thing? It can mean a whole new kind of motivation and
source of innovation, as many have experienced, but it can also become a tricky
game of all-your-eggs-in-one-basket for employees-turned-owners. There is a
reason some people have the mettle to be owners and others are content to be
From success stories to
criticisms there are many voices talking about the ESOP. The original article
is worth reading for due diligence purposes if you are on the employee side of
the table. Regardless, an ESOP can be a very special tool for all parties at
the table and one worth understanding and, just maybe, putting into force.
(May 17, 2013) “When founder cash out, do workers lose?”