1. Scan the session QR code upon entering the breakout room, using the Annual Conference Event app
2. Participate in the instructor-led question / discussion
3. Complete the CE survey via the session page in the mobile app
“The Congress is deeply concerned that the objectives sought by this series of laws will be made unattainable by regulations and rulings which treat [ESOPs] as conventional retirement plans, which reduce the freedom of the employee trusts and employers to take the necessary steps to implement the plans, and which otherwise block the establishment and success of these plans.”
Tax Reform Act of 1976, § 803(h), 90 Stat. 1590, quoted in Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 416 (2014)
Litigation and the DOL’s lack of regulation has increased over time, which block the establishment and successful operation of ESOPs.
Identify main sources of risk for ESOP trustees and related consequences of those risks
Understand measures trustees take to mitigate ERISA decision-making risk
Consider and evaluate potential solutions for reducing liability
1. Background and congressional intent for ESOPs
2. Litigation is an increasing challenge to establishment and successful operation of ESOPs
3. Trustees are the lightning rod for litigation
4. What are solutions to reduce risk for ESOP fiduciaries?
• Typically, the most important trustee activity (other than transaction)
• Trustee selects valuation firm (DOL Settlement Agreement)
• Appraiser must report solely to Trustee
• Trustee reviews draft and final valuation reports
• Sharing (or not) valuation report
• Confirming adequacy, accuracy & reasonableness of company financial data provided to valuation firm
• Communication with Board & participants
• Potential conflict issues for an internal trustee
• Trustee should monitor
• Potential impact on valuation
• Future outlook
• Also, the Board’s responsibility to monitor and assess in context of overall capital allocation planning
• The Company’s RO strategy can impact valuation (redeem vs. recycle)
Adequate consideration
Fairness opinion and adequate consideration
Sale of ESOP assets
Control valuation
Warrants
Redemption transactions
The term “adequate consideration” means the fair market value of the asset as determined in good faith by the trustee or named fiduciary pursuant to the terms of the plan and in accordance with regulations promulgated by the Secretary of Labor.
“Fair Market Value” means the price at which an asset would change hands between a willing buyer and a willing seller the when former is not under any compulsion to buy and the latter is not under any compulsion to sell, and both parties are able, as well as willing, to trade and are well informed about the asset and the market for such asset.
An opinion from an independent financial advisor as to whether or not the consideration to be paid / received in a proposed transaction is fair, from a financial point of view, to the Company’s ESOP
Usually in the form of a brief letter and schedules, accompanied by a presentation to the Trustee
Deep level of analysis from financial advisor
• Fair market value opinion test – absolute fairness
• Understand market clearing process
• Waterfall & net proceeds
• Escrows
• Employment agreements
• Synthetic equity payouts
• Buy versus hold decision
• Premium analysis
• Control premiums & discount for lack of control
• Valuation advisors review multiple factors in transaction context regarding Trustee’s ability to exert control
“Control is a bundle of sticks”
Controlling rights can include:
• Elect the board of directors and hire management
• Determine management compensation
• Declare and pay distributions
• Acquire or sell treasury shares
• Acquire or liquidate corporate assets
• Set policy and change the course of business
• Make acquisitions
• Select companies with whom to do business and award contracts
• A warrant is a financial instrument that provides the holder the right to purchase equity securities from the issuer at a specified price within a preestablished time frame
• Provides market-based returns for subordinated debt holders while allowing for flexibility in cash flows post-transaction
• Number of warrants issued and exercise price is negotiated as part of Transaction
• Must be IRC 409(p) compliant
• Exercise price no less than 90% of FMV at issuance
• Typically valued based on intrinsic value (FMV – exercise price)
A deal structure involving redemption of shares by company from shareholder followed by an ESOP transaction and/or contribution of ESOP shares
• Board may request a solvency opinion
• Trustee could request analysis of third-party advisor to support solvency and their process
• Business judgment rule
• Focus on process is key
• Reviewing analysis of legal and financial advisors
• Committee meetings and discussion
• Subjective assessments (“Why is [__] reasonable?”)
• Documenting process is important for future reference
• Corporate veil: separation of management and investment
• Shareholder decisions are typically
• Vote to elect board directors
• Approve fundamental changes to corporation
• Mergers, sale of assets, dissolutions, changes to governing documents, etc.
• Inspect corporate documents
• Sue for wrongful acts
• ESOP trustees are diligent shareholders
• Duty of Ordinary Care vs Prudent Person Standard
• Manage trust assets in best interest of participants and beneficiaries
What attracts litigation?
Common claims in ESOP litigation
Fiduciary Duties
Breach of fiduciary duty claims
Prohibited transaction claims
Classic fact patterns
State law theories
Other defenses and issues for discussion
• Only binding on the trustee involved in the litigation
• Provide insight into what the DOL considers best practices
• May help establish that trustee acted prudently in fulfilling its fiduciary obligations
• Take reasonable steps to determine prudence of relying on ESOP sponsor's financial statements
• Critically assess reasonableness of projections
• Document in writing its analysis of final valuation report, including:
• Marketability discounts, minority interests, and control premiums
• Analysis of the company's strengths and weaknesses
• Comparability of any companies chosen
• Propriety of methodologies chosen
• Adjustments to the company's historical financial statements
• Analyze valuation report, with an eye to:
• Inconsistency of conclusions with data and analyses
• Internal inconsistencies in material aspects
• DOL claimed trustee paid too much for stock
• Settlement included payment by trustee to ESOP, penalty under ERISA 502(l), loan forgiveness, and process agreement with ESOP Trustee
• FNB will not enter into any agreement providing for indemnification by an ESOP or by an ESOP-owned company (irrespective of whether the ESOP owns some or all of the company's stock) against and from any damages, expense, liabilities, and losses resulting from claims of fiduciary breach and/or prohibited transactions related to the Transaction or that otherwise would be in violation of ERISA.
• Must obtain additional information on valuations within past 12 months
• Allow "sufficient time" to analyze the transaction
• Document its determination, including internal process
•
If ESOP acquires a "controlling interest," must have certain rights
• Issue: increased risk over time has blocked the establishment and successful operation of ESOPs.
• One of the critical challenges is the trustee’s exposure to risk.
1) Requiring the DOL to issue clear guidance on central topics such as adequate consideration;
2) Developing the insurance marketplace for ESOP fiduciaries;
3) Reducing the threat of costly class-action lawsuits; and
4) Encouraging more professional ESOP trustees to enter the marketplace.
• Regulation is undefined and EBSA’s enforcement varies by region
• Process agreements are not a substitution for regulation
• Regulation through litigation is not fair in the US legal system
• Immediate priorities are:
• Definition of fair market value
• Expectations on valuation methodology
• Standards for value of control, financing vehicles
• Standards for what is a good-faith negotiation of employer securities
• Insurers do not understand ESOP transactions
• Premiums are increasing at an unsustainable rate
• How can we promote a healthy insurance marketplace?
• ESOP litigation is attractive to plaintiff’s lawyers because rewards (fees) are high, and settlements are likely
• Solutions:
• Cap attorney’s fees much like the medical industry
• Arbitration
• Increased pleading standards
• Other?
• Establish acceptable standards of practice and ethics
• Example: ABA, AMA, AICPA, even dog breeders!
• Self regulation
• Assist in the courtroom with expert witnesses?
• Promote communication among trustees
• Provide training
• Encourage and support new trustees
• ESOPs were created in 1976 to promote employee ownership
• Congress’s express intent was to avoid barriers to establishment and successful operation
• Litigation and DOL oversight have become problematic
• ESOP Trustees are the lightening rod
• Acting as professional shareholder has a high exposure to risk
• Standards of valuation and due diligence are unclear
• What solutions exist to resolve this challenge?
Amanda Clark Black & Veatch
1. Scan the session QR Code on the door or directional signage nearby
2. Engage in the session content for all 60 minutes.
3. Input the secret word in the CE Session Survey. The secret word will be revealed in the speaker's presentation.
4. Complete the CE Survey.
10,600+
Mission: Why we exist
Building a world of difference through innovation in sustainable infrastructure
Vision: What future we aspire to achieve We work relentlessly to solve humanity’s critical infrastructure challenges
Values: What we believe and how we behave Safety | Accountability | Collaboration | Entrepreneurship | Integrity | Ownership | Respect
#13 Top 500 Design Firms
#2 Power
#6 Telecom
#2 Solar Power
#8 Water
#4 Hydro Plants
#8 Refineries & Petrochem ical Plants
#2 Towers and Antennae
#11 Sewer & Waste
Current Engineering News-Record rankings.
ENGAGE – Employee Ownership Network Structure
Executiv
Sponsors CFO &
Culture Committee
Treasurer
Chief Operating Officer
VP of Change Enablement
AVP of Global Benefits
Director of Talent Management & Talent
Development
Director of Finance, Resource Management
Director of Benefits
International Leader
Benefits
Talent Development
Culture
Marketing (Internal/External)
Others as needed
Support Team
Treasurer*
Communications
Marketing & Events
Change Enablement
r
Network
Network Leaders
Sector Finance Officers
Lead HR Partners
Office Leaders
Domestic Ambassadors
International Ambassadors
Role Purpose Meeting Cadence
Executive Sponsors Review and approve overall strategy, objectives, and key activities
People & Culture Committee
Ensure Employee Ownership strategy and key activities are aligned with [the company’s] overall [culture] strategy and goals
Steering Committee
Provide guidance to the Core Team and liaise with Executive Sponsors and the [culture committee]
Core Team
Advocate and promote [the company’s] ownership culture by establishing the Employee Ownership strategy and leading support team initiatives
Support Team
Lead and support development and execution of Employee Ownership activities that promote [the company’s] ownership culture and encourage ownership thinking and behaviors
Ambassador Network
Establish and implement action plans to advocate and promote [the company’s] ownership culture and initiatives that encourage ownership thinking and behaviors with the goal of transforming all professionals into engaged employee-owners who drive company growth
Quarterly Updates
Quarterly Updates
Bi-monthly (45 minutes)
Monthly (45 minutes)
Ad hoc based on activities
Quarterly
Network Leaders
Identify and guide Ambassadors and act as sponsors for the deployment of all [company] Employee Ownership initiatives
Domestic Ambassadors
International Ambassadors
• Sector Finance Officers
• Lead HR Partners
• Office Leaders
• Regional domestic professionals
• Headquarters-based professionals
• Geographic representation across eligible international countries
Engage
• Ambassadors will be selected based on a combination of recommendations by Network Leaders and interest and passion about employee ownership from professionals
• Ambassadors will serve 2- or 3-year terms
Domestic professionals
International professionals
99% of Black & Veatch professionals are a part of a BV employee ownership plan
1 2 3
What does being an owner mean?
What are the benefits for you as an owner?
What are the expectations from you as an owner?
• New Professional Orientation every other month
• “We Own It, Let’s Grow It! – How We Make Money and Grow BV Value”
• Lead by CFO, Treasurer, and Employee Ownership Relations (or some combination of the three)
• What does this orientation look like?
Company objectives and how we make money/drivers of our business
How we measure financial performance and why employeeowners should care
Drivers of the company’s valuation Live
Annual contributions made by BV
Educate employee-owners on how BV is valued and the primary drivers of our annual stock price by launching the “All About Valuation” video and trivia questions based on information shared in the video
Platform
Microsoft Forms
Results and Prizes
Raffle drawing using Forms
export, winners announced at Owners’ Meeting
Communication
All Company email, article on internal homepage, Yammer posts
Description
Find out everything you never knew about your Ownership Plan in this fun, interactive session led by a panel of experts
Panelists
HR Benefits and Employee Ownership Relations teams
Description
Join the fun in this trivia game, where our panelists will test your employee ownership knowledge
Panelists
CEO, CFO, and international leaders
Description
This Bingo game will help you learn what more you can do to grow our enterprise value – and have some fun too
Leaders and representatives from market sectors and corporate functions
crowd.live/59K39
• Scan the QR code with your phone camera and follow the link
• Input a nickname for yourself to enter the game
• Answer the questions as we go and test your general Employee Ownership and NCEO knowledge!
Day 1 Agenda
❑ Safety and Company Values
Moments
❑ State of the Business – CEO
Day 2 Agenda
❑ 2023 Focus Behaviors – CEO
❑ Financial Update and Stock Price
Reveal – CFO
❑ Annual Awards
❑ Videos from Global Leaders
❑ 2023 Strategy – CEO
❑ Employer Value Proposition and Culture – CHRO
❑ Leader Perspectives
❑ Annual Awards ❑ Q&A
❑ Q&A
Performance
Management
Employee Ownership
Network partners with the Culture Committee
Celebrations & Rewards
Diversity, Equity & Inclusion
Company Values
Refreshers
Employer Value
Proposition
How we are going to market ourselves for recruiting and retention throughout this year
Cultural Workshops
What it means to be an employee-owner
Annual Contribution percentage
Timing of when employee-owners will see the annual contribution in their ownership accounts
Links to BV Employee Ownership resources and Owners’ participant accounts site
Couple the vesting ceremony with an education moment prior to the ceremony
Create a video explaining how an employee-owner becomes vested and what that means for them going forward
• Hold in conjunction with Employee Ownership Month
• “Vest” all ESOP-vested employee-owners to-date
• During the ceremony, “vest” a handful of leaders on stage who will then “vest” a handful of professionals
• Future vesting ceremonies to honor those employeeowners that have vested in that past year
Bring leaders on board prior to campaign launch – executives, sector leads, HR
Post articles and “Together, we…” video on company’s internal homepage
Use social media to share about the celebration day, yammer campaign and ownership month
ESOP and GEO contribution announcement
Valuation education and trivia game
Owners’ Meeting with first annual stock price reveal
New Professional Financial Acumen Training – “We own it, Let’s grow it”
Ambassador Network Rollout
People Conference session – Employee-Owner Rights and Responsibilities
Annual Employee Ownership Survey
Intern Session – BV’s Employee Ownership Benefit
Recruiter Training – BV’s Employee Ownership Benefit
Employee Ownership Month celebration, video, and sessions
Vesting education and recognition celebration (as part of EO Month)
1.Scan the session QR code upon entering the breakout room, using the Annual Conference Event app
2.Participate in the instructor-led question / discussion
3.Input the secret word in the CE Session Survey. The secret word will be revealed in the end of the is presentation
4.Complete the CE survey via the session page in the mobile app
At the end of the session, you will be able to:
1. Identify a conflict of interest within board of directors
2. Understand how to minimize board conflicts of interest
3. Recognize special situations that present greater risk
Covered in Today’s Session:
1. Overview Board Governance
2. Conflict of Interest Defined
3. Minimizing Conflicts of Interest
4. Special Situations
• Information provided in presentation does not, and is not intended to, constitute legal advice. We are not your attorneys and are not creating an attorney-client relationship by participating in this presentation or answering questions. Participants should contact their counsel to seek advice on a particular legal matter.
• Material presented herein represents the views of the presenters and not their employers.
• Grow shareholder value
• Set corporate strategy
• Declare dividends
• Review corporate financial statements
• Appoint, monitor, remove senior officers
• Determine CEO, senior officer compensation
• Evaluate/approve significant corporate transactions (e.g., acquisitions, merger or sale)
• Succession planning
• Monitor risk
• Appoint, monitor and (if necessary) remove the trustee
• Understand the ESOP valuation
• Understand/monitor the company’s repurchase obligation
• Adopt, amend and terminate the ESOP
• Communicate with trustee on significant corporate matters (sale, purchases, executive compensation, valuation)
• Determine, approve contributions to the ESOP
• Appoint the plan administrator
BOARD
• Duty to all shareholders, including the ESOP as a shareholder
• Governing body
• Plan Sponsor/Administrator
• Appoints/monitors Trustee
• Shareholder of record
• Duty to ESOP participants; no duty to other shareholders
• Duty to avoid conflicts
• Duty to act exclusively in interests of participants and beneficiaries
• Day-to-day operations
• Report to CEO
• Generally, no ERISA fiduciary duty unless otherwise specified
BOARD
APPOINTS
OFFICERS
ENGAGES
TRUSTEE
“A real or seeming incompatibility between one’s private interests and one’s public or fiduciary duties.”
Black’s Law Dictionary (11th ed. 2019)
“A situation in which an individual may profit personally from decisions made in his or her official capacity.”
Oxford English Dictionary
• Executive compensation
Transacting business with the company • Real estate transactions
Corporate opportunities
Business Judgment Rule:
– Director decisions upheld as long as they were made in good faith, with the care that a reasonably prudent person would use, and with the reasonable belief that the director is acting in the best interests of the corporation
–
Burden on plaintiff
Entire Fairness Standard:
– Applies where directors had a conflict of interest in corporate action. Directors then need to substantive and procedural fairness
–
Burden on director to prove entire fairness
ERISA Prudence Standard:
–
Act with care, skill, prudence and diligence under circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use
• Identify, document and disclose conflict
• Remove/sequester conflicted person from decision
• Outside Board Members
• Committee Governance, Special Committees
• Independent fiduciary (purchase or sale transaction)
• Hire independent advisors
• Independent studies (compensation)
• Governance documents
• Not an employee (former employee?)
• Not another stakeholder (shareholder, customer, vendor)
• Best practice, not required
• Functional experience (ESOP, Finance, Governance)
- Review/approve financial statements, CapEx, projections
- Auditor Meetings
- Review annual share valuation
- Risk assessment and legal exposures
- Regulatory compliance
- Determine Board, CEO compensation and performance
- Benefits oversight
- Compensation structure (base pay, bonus program, SARs)
- Committee structure
- Director compliance
- Succession planning
- Trustee evaluation
- Board performance review/education
- DEI Initiatives
- Identifies and reviews new director candidates
- Nominates director candidates
- Identifies board needs
• Used for specific purpose (acquisition, sale) to avoid conflicts
• Ensure true isolation
• Delegate authority
• Avoid undue influence
• Caution with communications
• Trustee control provisions in bylaws and articles
• The “ERISA Carve Out” and directed trustees: Directed trustees are only required to follow “proper directions . . . which are made in accordance with the terms of the plan, and which are not contrary to” ERISA. 29 U.S.C. § 1103(a)(1)
• Board members as shareholders
• Deal bonuses and incentives
• Rollover opportunity
• Employment agreements
• Board duties for annual valuation
–Confirm accuracy of financials
–Review draft report, if available
–Understand report –Potentially meet with trustee, financial advisor
• Board duty to monitor independent trustee in transaction
• Financial projections
–Who is preparing projections?
–
Who is reviewing/approving?
–Is there a conflict or bias?
• Consider use of valuation
–
Does plan distribution involve board member or senior management?
–Is director or senior management benefiting from transaction?
WillHeidbreder
JD, MBA, CPA, CLU
Principal Financial Group
Heidbreder.Will@principal.com
RonScheese
President & CEO, CPA
Andesa Services, Inc.
Ron.Scheese@andesaservices.com
RolandBurdett
President & CEO
Miklos Systems, Inc. (MSI)
rburdett@miklos.com
1. Scan the session QR Code on the door or directional signage nearby
2. Engage in the session content for all 60 minutes.
3. Input the secret word in the CE Session Survey. The secret word will be revealed in the speaker's presentation.
4. Complete the CE Survey.
• The liability a company incurs when vested participants are entitled to receive distributions from an ESOP
• Closely held companies must provide the funding necessary to repurchase shares from ESOP participants owed a distribution
• Typical Repurchase “triggers”
o Retirement
o Death
o Disability
o Option to diversify*
o Terminations (voluntary and involuntary)
• Companies often perform a repurchase obligation study to estimate their long-term liability
• This forecasting study is a projection of the distributions required when employees retire, die, become disabled, terminate employment, etc.
• Common factors that impact the calculation include
o Company growth rate
o Participant demographics
o Participant balances
o ESOP loans
o Distribution policy
No Funding
Years
• Companies of all sizes use life insurance as a tool for protecting their businesses.
• With traditional Corporate Owned Life Insurance (COLI), the company is the owner and beneficiary of the policy.
• Given that death is an ESOP RL triggering event, companies will acquire COLI on their key employees, particularly those with large ESOP balances.
• What are the company’s future liabilities over the next 10-20 years?
• Does the company have significant debt?
• Does the company have other commitments or opportunities?
• What other benefit plans does the company offer key employees?
• What is the availability of cash on an annual basis?
• What is the desired size of the reserve to be established?
• How much has the company set aside to date?
• Consider the impact to company cash if a death occurred with key employees
• Is the company a C corporation or S corporation?
Andesa is a leading, employee-owned provider of policy lifecycle solutions for the life insurance and annuities industry that offers modern cloud-based systems for transaction management and recordkeeping.
Andesa is the premier COLI solution provider in the industry – a highly complex / niche market.
We are the technology and services to those that sell (brokers) and underwrite (carriers) COLI products.
• The Company was founded in 1983
• Became an 8% ESOP in 2015 / 100% in 2020
• S-Corp / Early stage (focus on debt payoff) / 160 participants
• 2nd stage transaction funding – 95% Leveraged
• 65% Seller Notes/ 30% Bank Debt
• Principal – Recordkeeper
• Repurchase obligation
• Recirculation (Recycling) Funding Strategy
• Given materiality over the next 5 years, the RO will be funded by operating cashflow
• Principal My Perls tool used
• Set up COLI initially in the 90s to fund equity buy-out upon a shareholder’s death
• After the 2nd stage transaction, COLI used to fund debt upon a seller noteholder’s death
• Paying a significant but affordable amount of premium each year
• No payouts to date
• COLI covers 90% of the seller note balance
• Age of those covered – 45 to 85
• The underlying insurance products are term policies – no assets to manage or leverage for additional uses
• Upon payoff of debt, will consider COLI on individual employee-owners
• Government Contractor, providing custom software, web, and database applications
• Founded in 1993, Became an ESOP in 2006, 100% in 2015
• Set up COLI initially in 2010
• Policies covered 1/3 of our employee base
• As we grew, that base shrunk to 1/5, so we insured another tranche in 2017 to get us to 1/2 of our employee base covered
• Paying a significant but affordable amount each year
• This year, we restructured it to stop paying on policies for employees who left us, brought them to “paid up” status
• We wanted a set expense every year that we could plan for
• To smooth our ESOP Contributions
• We wanted an investment with a guaranteed “floor” Return on Investment
• We wanted a way to cover potentially large unplanned expenses in the case of large shareholders passing away
• We are building a “bank” for ourselves that we can borrow against
• For repurchase needs
• For other strategic company needs ... Acquisition?
• New laws require us to get signatures from all insured employees
• We had a couple of interesting meetings explaining this … we explained it to everyone and then sent the forms to the specific individuals we were insuring
• A bit morbid, have the meetings with a dose of humor and sensitivity
• The message was – “We’re doing this to help your family in an unfortunate situation, and to ensure the sustainability of MSI.”
• Unfortunately, we’ve had two of our insured employees pass away
• COLI enabled us to pay off their estates in full the following year
• Without COLI we couldn’t have helped the family when they needed it most
WillHeidbreder
JD, MBA, CPA, CLU
Principal Financial Group
Heidbreder.Will@principal.com
RonScheese
President & CEO, CPA
Andesa Services, Inc.
Ron.Scheese@andesaservices.com
RolandBurdett
President & CEO
Miklos Systems, Inc. (MSI)
rburdett@miklos.com
1. Scan the session QR code upon entering the breakout room, using the Annual Conference Event app
2. Participate in the instructor-led question / discussion
3. Complete the CE survey via the session page in the mobile app
Kyla Alterman
Consultant
Jacob Covell
Media Specialist
• Break into groups of 3
• One person start “filming”
• Answer one question:
• What does employee ownership mean to you?
• What is the most important thing employees need to know about employee ownership?
Know your “why” before starting video production!
• Provide consistent message for all employees
• To be viewed in employees’ own time
• Reach a dispersed workforce
• Standardize ESOP onboarding
• Build employee owner skills
• Keep ESOP top-of-mind
• Communicate important information in a new/engaging way
• Teach ESOP basics in small chunks
• Reinforce other meetings and training
1. Identify needed video modules.
2. Collaborate and write scripts for your videos.
3. Storyboard and offer visualizations.
4. Capture content, pull from existing catalogue or stock website.
5. Video editing process. Go through multiple edits with your team to ensure the video captures your message in a clear way.
• Find employees that are excited & willing to work with you.
• Document everything related to your educational series.
• Let other locations know what you're looking for.
• Find a stock photo/video site that fits your needs to fill in the gaps.
• Hire an editor to put your series together if you don’t have an in-house team.
• Find a testing system that works for your team.
• What quality do you want the video to be?
• Do you have a budget?
• Do you have a team to create or co-create the video?
• Do you want to hire professionals to create or co-create with you?
• Who will write the script and storyboard the video?
• How will the video be viewed/where will it be kept?
Recorded Teams/ Zoom call
Hybrid interview with slides or animation
Animated
PowerPoint
Professional
Videography
Professionally
Animated
• 2-5 minute training videos
• Short quiz after each video
• Assistance with script and storyboards
• Hired a professional animator
• AACE-Award winning program
• Helps employees appreciate ESOP
• 2,000 employee owners with typical 50% turnover
• Among employees who earned CEO certification, retention rate is 97%
• Communicate ESOP basics and company values
• Messages reinforced with biweekly nuggets
• Interviews with key people involved in the ESOP
• Committee involved in selecting new topics
• Personalized training that uses annual ESOP statement to communicate ESOP plan's benefits
• Shows employee owners how the ESOP works and builds ownership culture
• Enter in a raffle
• Swag & prizes
• Make it mandatory
• Lead up to in-person event • Watch in group meetings
What have you done at your company to get participation?
• Build into onboarding
Kyla Alterman
Consultant
kalterman@workplacedevel opment.com
Jacob Covell Media Specialist
Dawn
Schatz Brown Glassman LLP
Dir. Tel.: (860) 231-1054
Cell: (860) 490-5481
Rschatz@esopplus.com
Prairie Capital Advisors, Inc.
Dir. Tel.: (404) 809-2443
Cell: (678) 699-2125
mmcginley@prairiecap.com
Executive Vice President TI-TRUST, Inc.
Dir. Tel.: (217) 221-8654
Cell: (217) 430-1664
dawn.g@ti-trust.com
1. Scan the session QR Code on the door or directional signage nearby
2. Engage in the session content for all 60 minutes.
3. Input the secret word in the CE Session Survey. The secret word will be revealed in the speaker's presentation.
4. Complete the CE Survey
• Determine if the company is or is not a good candidate to establish an ESOP, including whether an ESOP transaction will accomplish the company's and its employees' objectives
• Verify if the owner (selling to the ESOP) is a good candidate to undertake an ESOP transaction, including whether an ESOP transaction will accomplish the owner's objectives
• Understand the benefits of an ESOP and help the owner determine both the value of his or her company and what he or she can expect to receive (i.e., managing expectation)
• Owner’s motivation and objectives:
• Are they seeking to implement an exit strategy or desire some liquidity?
• Will they continue with the Company after the Transaction?
• Do the Owners want to keep the company intact with minimal disruption?
• Do the Owners seek to increase employee productivity?
• Do the Owners desire to utilize corporate tax savings to increase growth/accelerate debt repayment?
• Succession Management team:
• Is there in place (or will there be) a competent succession management team?
• Company Financial Condition:
• Is the Company Profitable?
• Does the Company have a strong predictable revenue stream and cash flow?
• Does the Co. have manageable prospective capital expenditure requirements?
• Realistic Assessment of Company Value:
• Are the Owners willing to accept FMV for their stock?
• Are the Owners looking to be paid out all at once or over time?
• Do the Owners desire to utilize corporate tax savings to increase growth/accelerate debt repayment?
• Employee Census:
• Does the Company employ more than 15 employees?
• Ability to repay ESOP debt:
• Does the Company have the ability to make recurring contributions to repay the ESOP loan?
Corporate culture:
Does the Company foster an “ownership culture”?
When Employees own a piece of the company, studies show increased motivation, productivity, profitability, retention, etc.
• Post Closing Governance:
If the Owners are staying with the Company, are they willing to allow for independent directors to control or be on the Board?
Post Closing Involvement in the Business:
Are the Owners willing to dilute “control” at the Board level and/or at the Management level?
Our company operates in more than one state
Our company’s annual net profit before taxes is greater than $600,000
The company’s annual EBITDA is greater than $3,000,000
If our company employs more than 15 non-union employees
If our company employs more than 100 non-union employees
Our owners (which could be family, partners, investors, trustees, and/or corporate shareholder(s)) are now discussing or are interested in selling their stock
Our company has experienced continued increases in profitability in the last two years
Our company is a C corporation, with a sizable block of shares owned by one or more shareholders wanting to sell their shares
Our company is an S corporation, and distributions to shareholders is more than $100,000 a year to help pay their taxes
Our company currently contributes to one or more qualified retirement plans for its employees (e.g., 401k plan, profit sharing plan, defined benefit plan, etc.)
Our company recently had a valuation report/analysis and the value was significant
Our management team is ready or could be ready in 3 to 5 years to assume most of the responsibilities to run the company without the current president/owner
There are family members identified or capable for management succession or to run the company
Our company’s owners/executives desire to work less than usual while still running the company
The company’s marketplace is growing, or the company is growing, in spite of the marketplace
The company’s owners are concerned that if they sell to an outside 3rd party, the employees will be harmed or the company will not retain the legacy of the previous owners
The company’s owners have buy-sell agreements in place to provide a smooth ownership transition
The company has received serious offers to purchase the company (by management or third parties) and/or the owners are looking for an alternative buyer
The company tries to reduce company taxes by paying significant compensation, fringe benefits or other compensation/accounting methods
The company currently pays, believes in, or is interested in rewarding employees with incentive compensation, for the success they create for the company
The company’s owners already share management information, such as the company’s financial and operational performance, to managers and other key employees
Cell: (860) 490-548
