In the latest HCI Webinar, Dr. Jonathan H. Westover talks with Kelly Finnell about the impact of employee-ownership on morale and productivity. Below is a summary of the main points from their conversation! Check out the full episode and let us know what you think!
Watch the episode here:
Quick Recap
Jonathan and Kelly discussed the impact of Employee Stock Ownership Plans (ESOPs) on employee morale and productivity, exploring their dual purpose as a liquidity strategy for business owners and a retirement plan for employees. They delved into the benefits of ESOPs for businesses, including promoting a culture of ownership, succession planning, and fostering a collaborative workforce, while also highlighting the importance of communication in ensuring employees understand and appreciate these benefits. Kelly provided resources for further learning about ESOPs and offered his contact information for potential clients interested in implementing such plans.
Employee Ownership Impact on Morale
Jonathan and Kelly discussed the topic of employee ownership impact on morale and productivity, specifically focusing on employee stock ownership plans (ESOPs). Kelly, with 44 years of experience in the field, shared his expertise, including speaking at numerous conferences and his role as the President of EFS Esop Consultants. The conversation was set to explore how ESOPs can be leveraged in organizations, a topic they both believe is underutilized and deserving of more attention.
ESOPs as Liquidity and Retirement
Jonathan and Kelly discussed the dual purpose of an Employee Stock Ownership Plan (ESOP): as a liquidity strategy for business owners and a retirement plan for employees. Esops differ from other employee benefit plans in their ability to borrow money and engage in transactions with parties of interest. Kelly explained that an ESOP is a retirement plan that invests primarily in the stock of the sponsoring employer. The risk of not diversifying is acknowledged, with most clients continuing a 401K plan alongside the ESOP. Kelly and Jonathan also discussed the potential benefits of ESOPs for businesses, including promoting a culture of ownership and succession planning.
Culture and ESOPs in Business
In the meeting, Kelly and Jonathan discussed the role of culture in business success, particularly in relation to Employee Stock Ownership Plans (ESOPs). Kelly emphasized that wise business owners use ESOPs to maintain and enhance company culture as they control the company before and after transactions. ESOPs allow employees to feel like part-owners, fostering a collaborative and interested workforce. Jonathan highlighted the benefits of employee ownership, including increased buy-in and productivity, as supported by numerous studies. Kelly and Jonathan also noted the unique advantage of ESOPs, where the cost of employee ownership is borne by the company, not the employees.
Employee Stock Ownership Plan Benefits
Kelly explained the benefits of an Employee Stock Ownership Plan (ESOP) in an S corporation setting. The company funds the entire ESOP, with no employee contributions, and it operates tax-free post-transaction. The ESOP trustee, being tax-exempt, receives financial reporting, and the company receives a 40% tax subsidy for sharing ownership.
Promoting ESOP Understanding in Companies
Kelly and Jonathan discussed the importance of fostering a positive ownership culture within companies, emphasizing the need for robust communication processes to ensure employees understand the benefits of Employee Stock Ownership Plans (ESOPs). They highlighted the significance of quarterly newsletters and annual meetings to explain the plan to employees, reinforcing the benefits of the ESOP. They also stressed the need for overcommunication, especially for less common benefits like ESOPs. Kelly provided resources for further learning, including the National Center for Employee Ownership and the ESOP Association websites, and her book on the subject available on Amazon.
Listen to the webinar here:
