I was excited to learn about Cliff Bar’s Employee Stock Ownership Plan (ESOP). Since I am comfortably retired, I see that as a goal for every American. Believe it or not, I set retirement goals before I was even 21! When I joined the military and they promised half of my salary at retirement, I yelled BINGO!
A little research on ESOPs puts forth a pretty good reason for having them, but I was astonished to learn that few major public stock companies have established them. If you are a regular reader, you probably know that I am a proponent of unions as long as they are progressive and do not lean on the old model of class and economic conflict. Employee ownership and other participatory methods are the new demands that unions can make while ensuring that companies thrive.
According to my research, companies which have an ESOP and other employee participatory plans grow over 2 percent per year more than companies without them. I think that the reasons for this are self-evident. When you are vested in the success of the company, you are as interested as the entrepreneur who started it in seeing the company continue to prosper.
One of the economic trends that has been in the news lately has been the demise of brick-and-mortar retail. Every pundit around expounds of the effect of the internet. I believe they miss the mark. I, at least in part, blame the lack of ESOPs.
In the ‘60s, I was employed by Sears in its credit department. At that time, most of the employees were full time and their retirement was funded by an ESOP. I noticed that every employee with some seniority in my department was not shy about correcting any false step I took. As I took advantage of my employee discount and shopped, I found that the sales associates were deeply knowledgeable about their product. Even in the clothing department. I could find competent help in selecting items which were just right.
In the intervening years, Sears dropped most full-time employees as well as their ESOP retirement. Customer service went down. Commission sales in some departments helped, but the general atmosphere in the stores changed. Why shop in a store when your webpage says, “Welcome back! Here are some things that might interest you.” Even if someone comes up to you and asks if you want help, that help is often hard to find when you really do want to ask a question. Disembodied as it is, a chat-based helper is more responsive than an absent sales clerk. Would the former business plan have prevented the closing of stores? Perhaps.
Somewhere along the line, employees became things to be manipulated rather than partners in enterprise. I can understand how this can happen when I consider the amount of people who are employed in the financial industry and whose eye is on stock price. Notice I do not say dividends, profit, a company’s ability to stay in business. Decisions are made without much concern for human cost, and our society may be becoming a reflection of that thinking.
Employees who have a financial investment in the company are interested in profit, but they are also interested in a company’s ability to endure. Yes, they may be less willing to take risks, but they are also more willing to shoulder burden in hard times. They pay closer attention to competition and are more interested in quality and reputation.
I know that WinCo is an employee-owned company. Bob’s Red Mill was recently turned over to the employees as well. Round Table Pizza and Roberts Hawaii (tourism in Hawaii) are other examples. Most of the top companies offering an ESOP are smaller, but there is no reason larger companies couldn’t go that way, given the impetus.
As new economic models emerge in the 21st century, it seems to me that some degree of employee ownership of an enterprise is imperative. Work is almost synonymous with life. Everyone should be involved with a project or task as long as they live. We cannot divorce the employee from the enterprise and expect to have continuing success of either a venture or a society.