initial esop communications esop association two-day conference las vegas, nevada 9:00 am --...

Initial ESOP Communications

ESOP Association Two-Day ConferenceLas Vegas, Nevada

9:00 AM -- November 4, 2004

Loren RodgersOwnership Associates

www.ownershipassociates.com

Agenda1.ESOP Training

2.Getting the Most from Required Communications

3.Going Beyond the Nuts and Bolts

4.Tips for Making it Work

ESOPTraining

Start with the Basics.

DESIGNING ESOP COMMUNICATIONS

So, what is an ESOP?

Employee

Ownership

ESOPs……are retirement plans,

and…they invest primarily in company stock.

Cover the “hard issues”

The “Hard Facts”

• Participant legal rights

• Risks of ownership

• Benefit trade-offs

• Sole ownership / joint ownership

• Direct ownership / beneficial ownership

ESOPs and Rights

Psychologically:Employee-Ownership means rights.

Legally:• Access to Plan Documents• Annual Account Statements• Voting on major corporate decisions

– Liquidation– Sale of substantially all assets– Recapitalization– etc.

Describe the upside -- without making promises.

Research Highlights• ESOP companies, on average, outperform

non-ESOP companies by approximately 2.3% on a number of measures.

• ESOP companies file for bankruptcy less often than non-ESOP companies.

• On average, ESOP participants have approximately 2.5 times more retirement assets than non-ESOP participants, without a loss in

income.

Share the “big picture” – and employees’ role.

Standard Employment Deal

8 hours pay

8 hours work

8 hours pay

8 hours work

Ownership Rewards

Ideas and Effort

Employee-Ownership “New Deal”

Ideas and Effort

DepartmentPerformance

IndividualPerformance

Ownership Rewards

StockValueESOP

DepartmentPerformance

IndividualPerformance

StockValueESOP

Employee’s Return on Effort

Required every year, after the books have been closed.

Three main methods:• Asset• Income• Comparison

Stock Valuations

Use images.

Total allocation = 850 shares

If the total allocation is 850 shares,Suppose eligible payroll is $2,500,000

Total payroll = $2,500,000

Eligible Payroll ESOP

Beth’s $25,000

and Beth earns $25,000

John’s $20,000

and John earns $20,000.

Beth’s 8.5 shares

Beth gets 8.5 shares

John’s 6.8 shares

and John gets 6.8 shares.

Stage 2: Allocation

Getting the Most from Required

Communications

Account statements and the SPD can help… or hurt.

Account Statement: Part 1

Account Statement: Part 2from the year beforecurrent year allocation from the companyInvestment gain or loss

distributions

additions from other people forfeiting unvested value

miscellaneous bookkeeping

Going Beyond the

Nuts and Bolts

ESOPs are not an “off-the-wall” idea.

Number of ESOP Companies in the US

10,000

12,000

1974 1981 1984 1987 1990 1996 2000

Growing Popularity

ESOPs in the United States

201 or more

101 to 200

71 to 100

51 to 70

0 to 50

Number of ESOPsin Each State

Where are they? Map of the U.S.

Where are they in New England?

Berlin City Car Center

Cianbro Corporation

Howell LaboratoriesJ & S Oil Co.

Sebago Technics

Hypertherm

O’Connor GMC

AdmixCirtronix

DENS PartnersNormandeau Associates

Carris ReelsKing Arthur Flour

LITECONTROL

Ownership means…

investment

employee involvement

a good benefit

equalitybogus

teamwork

incentive

what is it?

The government actively supports ESOP development.

LONG, Russell Billiu, born: November 3, 1918; US Senate 1948 to 1986. Chairman, Committee on Finance. Died: May 9, 2003.

Russell Long

Legislative Balance

Legislative Goals Business Concerns

• Increase competitiveness

• Share ownership broadly

• Protect retirement savings

• Tax benefits

• Stable ownership

structure

• Orderly Process

Oversight of ESOPs

• Internal Revenue Serviceensures that tax benefits only go to companies who run the ESOP equitably and fairly according to the rules.

• The Department of Laborensures that employees receive a fair benefit from the ESOP.

Describe the ESOP transaction... and the motivations for the ESOP.

Outside Purchaser

Founding Shareholder

Smith and Others

The Transaction: Option A

What happens to

OurCo, Inc.?

OurCo Employees?

Our “OurCo Culture”?

The ESOP:A Trust for

OurCo Employees

OurCo StockOurCo, Inc.

(Cash and Loans)

OurCo Stock

Founding Shareholder

Smithand Others

The Transaction: Option B

Stays intact!

People want to know: why are we doing this?

Investment

Return

Incentive OnlyLow to

MediumLow

(-1 to 2%)

Culture + Incentive HighHigh(5 to 13%)

“Return on Ownership”

The Five Challenges

1.The Policy Challenge

2.The Interpersonal Challenge

3.The Literacy Challenge

4.The Information Challenge

5.The Entrepreneurship Challenge

Build systems to ensure perceptions of fairness and trust.

Tips for MakingIt Work

1. Support Middle Managers

2. Repeat / Use Multiple Channels

3. Use Structured Peer-to-Peer Learning

4. Warn About “First Year Dip”

5. Use Games

6. Be Careful with Projected Account Value

7. Interactive Learning

Tips1. Support Middle Managers

2. Repeat / Use Multiple Channels

3. Use Structured Peer-to-Peer Learning

4. Warn About “First Year Dip”

5. Use Games

6. Be Careful with Projected Account Value

7. Interactive Learning

Common Feelings About Ownership

Wait and See

What is it?

Enthusiasm

Cynicism

Common Feelings About Ownership

Write down one letter:

a. Fear

b. Cynicism

c. What is it?

d. Wait and See

e. Enthusiasm

1. Physical Working Conditions

2. Election of Employees’ Committee

3. Speed of Production

4. Job Assignments

5. Safety Rules and Practices

6. Quality Standards and Measurement

7. Hiring

8. Promotions, Performance Evaluation

9. Equipment Layout

10. Asset Purchases

11. Employee Compensation and Benefits

12. Firing

13. Marketing and Advertising Strategies

14. Raising Capital, Relationships with Banks and Investment Groups

15. Product, Technology, and Investment Strategy

16. Lay-off Policy, Employment Levels

17. Management Compensation

18. Distribution of Profits (dividends, reinvestment, debt reduction)

19. Selection and Oversight of Senior Management

20. Constitutionalism: Setting and Moving Decision-Making Boundaries

21. Selection of Board of Directors

22. Fate of the Company: merger, sale, major location change

Standard List of Corporate Decisions

22. Fate of the Company: merger, sale,major location change

21. Selection of Board of Directors

20. Constitutionalism: Setting & MovingDecision-Making Boundaries

19. Corporate Strategy

18. Distribution of Profits (dividends,reinvestment, debt reduction, etc.)

17. Selection and Compensation ofSenior Management

16. Lay-off Policy, Employment Levels

15. Product, Technology, andInvestment Strategy

14. Raising Capital, Relationships withBanks and Investment Groups

13. Marketing & Advertising Strategy

12. Firing

11. Employee Compensation & Benefits

10. Asset Purchases

9. Equipment Layout

8. Promotions, Job Evaluations

7. Hiring

6. Quality Standards and Measurement

5. Safety Rules and Practices

4. Job Assignments

3. Speed of Production

2. Election of Employees’ Committee

1. Physical Working Conditions

CORPORATEPOLICY

Influence Chart

Types of Influence

MANAGERIALOPERATIONS

Board of Directors

21. Selection of Board of Directors20. Constitutionalism: Setting & Moving

Decision-Making Boundaries19. Selection and Oversight of Senior

Management18. Distribution of Profits (dividends,

reinvestment, debt reduction, etc.)17. Management Compensation16. Lay-off Policy, Employment Levels15. Product, Technology, and

Investment Strategy14. Raising Capital, Relationships with

Banks and Investment Groups13. Marketing & Advertising Strategy12. Firing11. Employee Compensation & Benefits10. Asset Purchases9. Equipment Layout8. Promotions, Performance

Evaluation7. Hiring6. Quality Standards and Measurement5. Safety Rules and Practices4. Job Assignments3. Speed of Production2. Election of Employees’ Committee1. Physical Working Conditions

OVERALL POLICYAND STRATEGY

Influence Allocation Chart

Types of Influence

CORPORATEManagerialOperations

DEPARTMENTLocal Policy,Planning andCoordination

Management

Shareholder Voting

DecisionMaking

Represent-ation Voting

2001 Ownership Associates, Inc. Cambridge, MA.

Board of Directors

21. Selection of Board of Directors20. Constitutionalism: Setting & Moving

Decision-Making Boundaries19. Selection and Oversight of Senior

Management18. Distribution of Profits (dividends,

reinvestment, debt reduction, etc.)17. Management Compensation16. Lay-off Policy, Employment Levels15. Product, Technology, and

Investment Strategy14. Raising Capital, Relationships with

Banks and Investment Groups13. Marketing & Advertising Strategy12. Firing11. Employee Compensation & Benefits10. Asset Purchases9. Equipment Layout8. Promotions, Performance

Evaluation7. Hiring6. Quality Standards and Measurement5. Safety Rules and Practices4. Job Assignments3. Speed of Production2. Election of Employees’ Committee1. Physical Working Conditions

OVERALL POLICYAND STRATEGY

DirectInfluence

SharedInfluence

RepresentativeInfluence

ConsultativeInfluence

Influence Allocation Chart

Types of Influence

CORPORATEManagerialOperations

DEPARTMENTLocal Policy,Planning andCoordination

Em ployee Partic ipationCommittees/Task Forces

W ork Team s

Management

Shareholder Voting

2001 Ownership Associates, Inc. Cambridge, MA.

The Present at CCC

1 Fate of the Company: merger, sale, etc.

2 Selection of Board of Directors

3 Approve Minutes

4 Distribution of Profits

5 Holding Senior Management Accountable

6 Senior Management Compensation

7 Capital Improvement (Investment Strategy)

8 Manufacturing Technology

9 Selection of Senior Management

10 Acquisitions / Start Ups

11 Product Development

12 Raising Capital, Rel.'s with Banks, Investors

13 Marketing & Advertising Strategy

14 Employee Compensation

15 Management (Exempt) Hiring

16 Constitutionalism / Governance

17 Quality of Worklife Issues

18 Communications / Training

19 Allocation of Employee Benefits (Mgt. Budget)

20 Product Pricing

21 Lay-off Policy, Employment Levels

22 Firing

23 Equipment Purchases 24 Wage Changes, Raises

25 Setting Production Standards 26 Equipment Layout

27 Setting Safety Rules and Practices

28 Setting Quality Standards and Measurement

29 Performance Evaluation

30 Promotions 31 Disciplinary Action

32 Hourly (Non-Exempt) Hiring

33 Enforcing Safety Rules and Practices

34 Enforcing Quality Standards and Measurement

35 Determining Work Assignments

36 Election of Steering Committee Representatives

37 Participate in Taskforces and Committees

38 Local Work Environment

Site Management

Employees

Supervisors

Shareholders*

Steering Committee

Senior Management

Board of Directors

Dept. Managers

President / Vice-President

PRIMARY AUTHORITY (Z-AXIS)

initial esop communications esop association two-day conference las vegas, nevada 9:00 am --...

esop communications

esop training slide

effort slide

allocation slide

required communications

nonesop companies

nonesop participants

esop companies file

Documents

esop guardian

presentation1 esop

employee ownership as a jobs strategy for michigan ·...

esop online brochure

esop guardian presentation

tata-corus & esop

esop - overview

esop liyaquat khan

introduction to esop

sample esop report

esop financing webinar

esop viata 251p

esop presentation

esop best practices

do employees / beneficiaries and management understand the...

basic esop valuation

studi esop

business, legal corporate 3 · 3/1/2012 · 2.3.2.1 esop...

guidance note - esop

esop association registry