Firmat admits that the biggest challenge of the ESOP experience has been teaching employees what it means to be owners. This can be a challenge in blue-collar businesses where employees rarely have any experience with entrepreneurship and little understanding of compensation beyond hourly rates. Firmat had to address the misconception that those on the floor could arbitrarily award themselves new raises. In private ESOP companies, employees can vote on critical issues, such as plant
closings or relocations. In public ESOP companies such as Proctor & Gamble, employees can vote according to their shares on all matters.
Kloke concedes that getting the employees to understand that they benefit from the company’s future success has been a “long, long-term process.” Even so, after employees get over their initial misperceptions, Rosen claims that they embrace the ownership ideal, and the benefits of this are significant. Research by professors Douglas Kruse and Joseph Blasi of Rutgers University has shown that ESOP companies perform 2.3 percent better per year, on average, than their non-ESOP counterparts. Full Sail has lowered its break-even point and increased its value each year since instituting the ESOP.
Finally, an ESOP allows an owner to part with his business gradually. Still trucking at 74, Kloke no longer owns any stock; the full ownership transfer took over 10 years. He still reports to work—often six days a week—and he is the company’s lowest-paid employee, earning $5,000 per annum. For some owners, however, Rohr says the unhurried disassociation with the company is too difficult. One client calls it “slow bleeding.” In cases in which an owner desires an expeditious exit—particularly if his health is a concern or the business causes family strife—the far horizon of an ESOP is ill advised.
|
