ESOP: What are the Benefits of working with an Employee-Owned Company?
An Employee Stock Ownership Plan (ESOP) treats employees as assets because the employees are also owners, investors and shareholders of the company. While there are various legal and tax definitions of an ESOP business, the simplest explanation is that it allows a company to sell itself to its employees. The Bernard Group exists as a 100% employee-owned company.
Why do business with an ESOP? As opposed to the traditional business model, where CEOs work for their shareholders, and those shareholders are institutional investors, hedge funds and large stockholders, an ESOP ensures a for-profit corporation benefits its employees without sacrificing profitability goals. Employees actively participate in the growth of their employer via company stock held in their retirement accounts.
Think about it: When was the last time you heard a CEO of a public company discuss the value created for their employees? Or how they work for their employees and not the other way around? Simply put, CEOs of public companies focus on revenue, earnings and shareholder value, which all take priority over employees and customers alike.
So what happens when a public or equity-backed company fails to meet their profit goals? Since shareholder value takes precedence over employees and customers, the common response is restructuring, reorganization or headcount reduction, aka layoffs. With an ESOP, that’s never the case.
We asked Matt Chapman, vice president of our online division, Smartpress, a few questions about the ESOP program:
How does the ESOP program work at Smartpress and The Bernard Group?
Matt Chapman: “Every employee’s security badge has ‘Co-owner’ under their name and photo. All full-time employees automatically join the ESOP program after their first year of employment and are 100% vested after six years of service. Money is contributed to our accounts every year and dependent on the value of the company.
“As The Bernard Group grows, the value of our ESOP accounts grows with it. It’s set up as a retirement savings account, so it’s part of our long-term compensation strategy, with a vision to help our employees fund a better life for themselves. What’s great is that, in addition to the ESOP program, we also have a 401(k) and company matching benefit. It’s all part of our total rewards approach.”
How do employees benefit from the ESOP?
“We are all invested in the long-term success of the company, and continued success is returned to the employees with a financial benefit. Every major decision we make considers what’s best for our customers, the company and our employee owners. We find that the best decisions benefit all three stakeholder groups.
“I believe it also creates a culture of servant leadership from our management team. As a senior leader in our online printing business, I recognize that the teams I manage are also my shareholders. My goal is to help empower teams to make decisions and improvements that they can own themselves, since after all, they’re owners of the company!”
How do customers benefit from purchasing products from an ESOP company?
“Customers absolutely benefit from doing business with an ESOP company. First, they can be assured that employees across the organization take additional pride in their work, and we’re big believers in minimizing the impact of that work on the environment with a strong sense of corporate social responsibility.
“We think we can make a difference in people’s lives by distributing profits back to our employees, the same people who make our customers happy day in and day out, through high-quality products and online printing services, plus world-class customer service. As a Smartpress customer, please know that you are contributing to something bigger than a corporate entity or a stock symbol. Together, we will make a meaningful difference in our community and the future of our employees and their families.”
What else would you like to share about the ESOP program?
“After working in public companies, venture-backed organizations and under large private equity holdings, I wish more companies would embrace the ESOP culture and approach. I’m concerned about the growing gap between executive compensation and the average worker’s salary and its contribution to wealth inequality in our country.
“With an ESOP, I feel that our success is more broadly shared across the company from top to bottom. And while an ESOP isn’t perfect, I’m very happy to be part of a company and culture that cares deeply about its customers, its employees and the broader community in which we serve.”
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