The Value of Employee Stock Owned Plans
I had the extraordinary opportunity in last November, together with 14 other small business owners, to speak with President Obama and his top economic advisors about the current economic climate and its effect on our respective small businesses. The story of Dansko and how it became 100% employee-owned aligned perfectly with the President’s vision of Shared Prosperity – expanding economic opportunity, reducing inequality, promoting innovation and real economic sustainability for generations to come. Our Employee Stock Ownership Plan (ESOP) makes that vision a reality.
According to the ESOP Association, about 10,000 ESOPs, covering around 10 million employees, already exist in this country. There are any number of indicators of their success - a 60% increase in employment from 2001-2011, employees of ESOPs being four times less likely to be laid off than non-ESOP employees, 9% higher sales per employee than their non-ESOP counterparts - but the truest measures of success can’t be quantified as easily.
By giving workers a stake in the companies they work for, ESOPs improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy.
Having set up an ESOP trust, this is what we have found at Dansko:
- ESOPs perform better - not just on profits, but for employees. Because they give workers a stake in the company, companies with ESOPs demonstrate increased productivity, higher sales relative to their non-ESOP counterparts, and better compensation and job security for employees. Meanwhile, most ESOP companies, ours included, offer significant employer contributions to 401K plans as well as an opportunity to participate in the growth of their own companies, cashing in on that growth when they retire. It shouldn’t be a surprise that companies with broad-based ownership consistently account for nearly 80% of Fortune Magazine’s “100 Best Companies to Work For.”
- ESOPs give employees benefits beyond better pay and job security. ESOPs allow employees who might not otherwise have the resources or temperament to start their own ventures to experience both the joys and the sleepless nights that come with business ownership. Taking ownership seriously gets people committed on a whole new level.
- ESOPs provide founders a way to assure the continuity of their company’s culture and safeguard their legacy. Unlike other exit strategies, going public or selling to a strategic buyer or private equity partner, selling to an ESOP enhances the ability of founders like us to protect our legacy, maintain operational independence, preserve local jobs, and align the interests of the employees with those of shareholders - since employees essentially are the new shareholders. Creating a more democratic vision of capitalism, where wealth belongs to the people who create it, and where employment is more than just a job, will be our legacy.
- ESOPs strengthen communities, benefitting people both inside and outside the company. This extends even beyond employee gains, company benefits and economic growth; the community benefits by having a stable, engaged and supportive business in its midst, and we all benefit when employee ownership confers a greater sense of belonging and participation among people who might otherwise feel little stake in society.
Co-founded in 1990 by wife and husband team, Mandy Cabot and Peter Kjellerup, Dansko, literally translated as “Danish shoe,” is a leader in innovative comfort footwear. Dansko is a winner of the “Triple Bottom Line Award” from the Sustainable Business Network of Greater Philadelphia. Dansko is 100% employee-owned, changing the quality of people’s lives through our products, our passion, and our commitment to a better tomorrow
As a founding B Corporation, social responsibility and environmental stewardship are at the very heart of Dansko’s business philosophy, brought to life through its employees, in the operations of the company, and through the community outreach initiatives of the Dansko Foundation.
Mandy Cabot is the CEO of Dansko based in West Grove, PA