Big company luncheon and meeting.
Introductions to our trustee and valuation company rep.

40% ESOP. President is keeping 60% for now. He's also agreed to take his payout over time so the ESOP did not have to float any debt to buy it's 40%.

I pretty glad he chose to do this and very optimistic. I worked at a 100% ESOP in the past as definately felt a stronger sense of camaraderie across all levels.

I seem to be the only person with ESOP exerience in the past so a lot of people are coming to me with questions.

Big company luncheon and meeting.
Introductions to our trustee and valuation company rep.

40% ESOP. President is keeping 60% for now. He's also agreed to take his payout over time so the ESOP did not have to float any debt to buy it's 40%.

I pretty glad he chose to do this and very optimistic. I worked at a 100% ESOP in the past as definately felt a stronger sense of camaraderie across all levels.

I seem to be the only person with ESOP exerience in the past so a lot of people are coming to me with questions.

That sounds pretty encouraging for the employees there, Discordian. :cool: A couple of months after I started here, my company discontinued the ESOP much to the displeasure of several managers, my boss included. :mad:

What does ESOP stand for? Employee Stock Options or something like that?

Congradualation's Discordian :biglaugh: .

I believe that it stands for Employee Stock Ownership Plan.

I wish our company would do something like that.

What does ESOP stand for? Employee Stock Options or something like that?

Employee Stock Ownership Plan

essentially the (former) owner is selling 40% of the company to the employees.
It's essentially a pension plan as the shares are not public. So the company buys them back when you leave or retire.

That sounds pretty encouraging for the employees there, Discordian. :cool: A couple of months after I started here, my company discontinued the ESOP much to the displeasure of several managers, my boss included. :mad:

how did they go about doing that?
Did they have to buy back the stock from the ESOP?

What does ESOP stand for? Employee Stock Options or something like that?

Thanks for asking. I was going to Google, but got distracted.

how did they go about doing that?
Did they have to buy back the stock from the ESOP?

I'm not sure of the details, but from what I understand it was phased out, and wasn't offered as an option for new hires. I don't know how it was handled with the folks who were already retired and receiving pension. Sorry I don't have anymore details. :( This happened within my first 2-3 months here.

Good Luck to you and your employees. Only bad experiences in our area with Employee Stock Ownership Programs.

We have a 100% ESOP here also. I do not see any benefit from it, nor do any employees. Vesting occurs over 7 years, with 0% for the first 3. Supposedly, this encourages long term retention, but from where I stand, it simply fosters alot of employee resentment. While they are called "owners" all the time, the employees have no input in any processess. The owner/CEO makes all descisions, sits on all oversight boards, and is in fact the only member of these 'boards'. Employees resent never having been asked to "buy" the company, it was just "announced". We dont even know how much we paid for it. The general feeling here is that with empowerment of these "owners", it is just a big tax scam.

The ones in this area were 100%. Keep an eye on everything that is done. Find out about your retirement, etc. There is usually a reason for a gift horse

I'm interested in hearing more about the bad experiences... as objectively as possible of course.

I worked for 100% ESOP from 2000-2003 and the experience was mixed.
The people were great. The sense of camaraderie was very good. We did a lot of things together and had a lot of involvement. I believe this helped make a success out of the QMS I implemeted there.

On the other hand... the experience with CEO was very similar to what hogheavenfarm described. He ran the place like he was the owner because he is the guy the orchestrated the ESOP transaction. It seemed that when anyone became a threat by understanding too much about the system he'd get rid of them. In my three years there he went trough 2 plant managers, 2 controllers, 3 Sales directors, then me. So I feel I was a casualty of that paranoia.

however - I am positive about ESOPs in general and the theory behind them. And, of course, the tax benefits. I see this as going hand in hand with the programs I am implementing as I utilize cross-functional, multi "level" teams in just about everything I do.

The ones in this area were 100%. Keep an eye on everything that is done. Find out about your retirement, etc. There is usually a reason for a gift horse

The reason for this gift horse was plainly disclosed.
The boss' financial advisor told him he had better diversify to provide financial security to his family and good way to do that was sell 40% of the company to the employees.
In other words - he's cashing out 40%.

I have no problem with that.

Plus it has no impact on 401k. A lot of ESOPs tie together 401k and the ESOP. We did not. They are totally separate systems.

One company was private that had sold stock to get started, the value before the ESOP was about $98 after 1.14 was the value of what the employees received. They had a magic formula that you were given so much per years of service. Did not amount to much for the floor employees, I guy had worked there for 35 years and ended up with about 90 shares. About three months after official ESOP all there shareholders were assigned the cost of the fees for transfer. Basically it was used to automate, reduce the amount of employees (higher paid), reduce benefits to employees all in the name of getting the price of your shares up. The last I heard they were worth a little over two.

other company they used it to as an excuse to file bankruptcy. Employees lost all their retirement, ESOP is gone and original owners have the company but split the two divisions. dad owns one, daughter owns other and supposedly avoided the big taxes.

The intent of ESOP is great, but how many existing companies want to do it, just to be nice guys!!

Plus it has no impact on 401k. A lot of ESOPs tie together 401k and the ESOP. We did not. They are totally separate systems.


Actually, it does affect the 401k. Since the 401k is paid out with pretax money, less is available to go into the ESOP pool. Companies have and do discourage 401k's to increase the ESOP funds. I know of instances where the 401k's are deliberately downplayed and discouraged for this purpose. I am unaware of anyone actually discontinuing a 401k at this time, but I suppose it has been done. The benefits of an ESOP are heavily in favor of owner/sellers, not employees. At least I can control my 401k.:caution:

Actually, it does affect the 401k. Since the 401k is paid out with pretax money, less is available to go into the ESOP pool. Companies have and do discourage 401k's to increase the ESOP funds. I know of instances where the 401k's are deliberately downplayed and discouraged for this purpose. I am unaware of anyone actually discontinuing a 401k at this time, but I suppose it has been done. The benefits of an ESOP are heavily in favor of owner/sellers, not employees. At least I can control my 401k.:caution:

sure - some companies do that, but not all.
In my former position - with a 100% ESOP - 401K was highly encouraged and participation was was also high. When I left I had a substantial amount to rollover - more than my my stock was worth, had I been vested.
In my current company 401K was also encouraged at the kick-off meeting and, coincidentally or not, we are having a 401K meeting today with the plan administrator.