Mares: ESOPs

Feb 22, 2017

Switchback Brewing, with a thirty thousand barrel production capacity and 30 employees now joins half a dozen other breweries around the country that have established ESOPs - or Employee Stock Ownership Plans. More than six thousand other U.S. firms are now ESOPs, with a total employment of more than fourteen million workers.

There are perhaps 30 ESOPs in Vermont alone - including Carris Reels, PC Construction, Gardeners Supply, and King Arthur Flour.

Current Switchback owner Bill Cherry will remain with the company as brew master and president.

Forty years ago, many businesses were plagued by worker alienation, and sought to engage those workers through improved quality of work life, greater workplace participation and two principal ownership mechanisms, cooperatives and ESOP's.

When Prof. John Simmons of the U. of Mass-Amherst and I were researching the book, WORKING TOGETHER, we looked at a range of worker empowerment practices in the US, Europe and Japan.

We expected to find that the most effective and popular mechanism would be cooperatives with their highly democratic structure - but there are only about 300 worker coops in the country. We learned that rather than being a lifeline to a drowning company, ESOPS are more numerous and successful in part because many have been attractive exit strategies for founder-owners in good economic times.
ESOPs benefit the selling shareholders or management team - as well as the employees through improved corporate performance. Federal regulations governing ESOPs are complex, however, and improved corporate performance will come only if combined with efforts to help employees adjust to their new additional owner responsibilities.

But Don Jamison, executive director of the Vermont Employee Ownership Center says that ESOPs have proven to be an ingenious and powerful way to share wealth more broadly. Owners of companies who sell to an ESOP receive a fair price, the company stays locally-owned, and employees get - on average - more than twice the retirement assets as do workers in conventional companies.

At a time when ever greater wealth and power is concentrated in the hands of a few, it’s encouraging to see the ESOP model succeed – because when it’s done right, everyone benefits.