The subject of raising a national minimum wage has been a hot topic in the news lately and even an issue raised by both presidential candidates.
Ken Dillon of D & D Roofing and Sheet Metal decided he would do something even better for his employees. He would make them all owners of the company through an ESOP or Employee Stock Ownership Plan. So today D & D Roofing and Sheet Metal is 100 percent owned by its employees.
So what exactly is an ESOP program and what does it mean for the employees at D & D? It works like this. The company sets up a trust fund and gives every employee stock in the company at no cost to the employee. The amount of stock given is according to a pre-established formula based on salary, and time of service. A new hire must wait a year to start receiving stock.
The value of the stock is determined annually by an independent appraiser to comply with federal regulations. So the value of the stock fluctuates according to how the company is doing financially like any company’s stock. Obviously employees would seem to have a little more incentive to push a little harder since they feel they have a vested interest in the success of the company.
Each employee at D & D can truthfully say that they don’t just work at D & D they are an owner of the company.
Then each year, like a bonus, every employee at D & D receives additional stock, again at no cost to them, based on the same formula of salary, and time of service. They are fully vested after six years of continuous employment.
When an employee leaves, the company is obligated to buy back that person’s stock at the current market value of that stock.
Management and the Board of Directors, however, still maintain the overall control of the operation and decisiomaking of the company.
Does at ESOP have an effect on the performance of a company? For example, a national survey has shown that such ownership firms grow as much as 2.3 to 2.4 percent faster after setting up their ESOP than without it, and some have reported as much as 8 or 10 percent.
