
People think an ESOP is, “When you sell the employees the company.”
But that’s NOT REALLY what happens in an Employee Stock Ownership Plan.
Here is what really happens:
1. The employees invest no money. Not a cent.
2. The employees take no risk. They don’t have to guarantee the loan.
3. The COMPANY is borrowing the money, and the COMPANY is responsible for paying it back.
4. The employees are gifted their shares in the company.
5. When an ESOP is 100% owned by the employees, the company no longer has to pay State or Federal income taxes.
6. This is why a successfully managed ESOP can make gigantic profits.
7. Many owners stay actively involved in their company after selling to an ESOP. They can still be employees or consultants after the sale. They don’t have to leave the business.
8. ESOPs are the only thing that Ted Cruz and Bernie Sanders can agree upon. The left and the right both recognize the wisdom of helping employees become business owners.
9. As long as the cash is within a retirement plan (which is what an ESOP essentially is,) it isn’t taxable. Taxes are paid only when cash is withdrawn, just as it would be from an IRA or 401K. ESOPs are not entirely tax-free, they are tax-deferred.
10. The employee-owners of an ESOP are gifted a fantastic retirement account and in the end, the government gets the taxes they deferred.
The employee-owners of Kesslers recently got together for the annual party where Joe Gehrke, their CEO and financial genius, tells them the current value of the shares of stock that each of them owns. The group decided they would have an 80’s-themed party this year. The next day, Joe Gehrke got this email from the public speaker they hired to deliver the keynote:
Hi Joe! Thank you for introducing yourself and chatting a bit. I wanted to follow-up again to emphasize what a cool vibe there was on Sunday. There was a fun, vibrant, and “we like each other and we love Kesslers” feel. I’ve done some reading on employee-owned, but I may have to look into it further. I just had a conversation yesterday with a speaking event I’m going to do with a small cheese company. One of their frustrations was the lack of initiative and ownership in the past couple of years. I immediately thought of your company. Employee ownership makes a lot of sense on a lot of levels. And you want to talk about…well, ownership…owners take ownership! : )
As I mentioned, I work with a lot of cultures and experience a lot of teams. There are only a handful of times over my twenty years where I walked away thinking, “Wow! They’ve got something special going on there!” and Sunday was one of those times. (Kwik Trip was another!) I mean, seriously, the financial guy revealing the stock price through a Pac-Man video!?! Next level!!! Every one of the presenters I saw went the extra mile creatively and that means something. A lot of sparkles in that room! : ) And themes and bits can fall flat if there isn’t buy-in, but it was obvious how much fun and joy the owners were having. It truly had a celebratory feel!
Anyway, I could go on and on, but I’ll end with… keep up the great work! You made an impact on me!