Employee stock ownership plans, or ESOPs, have become a growing trend not only in Maine but nationwide as well. Here are some interesting facts and trends.
Maine trends
Some of Maine’s best-known names in construction and manufacturing are ESOPs, including Cianbro, Sargent Corp., Reed & Reed, Haley Ward, Zachau Construction, Landry/French Construction, Knickerbocker Group, J.S. McCarthy Packaging and Printing, Woodex-MECO Industries and Lie-Nielsen Toolworks.
Construction and manufacturing make up the bulk of Maine’s ESOP community, which mirrors the national trend.
Why is that?
Laura Pfeiffenberger, senior vice president and ESOP client advisor at Portland-based Spinnaker Trust, says historically companies in construction and manufacturing industries have been family-owned and passed down from generation to generation, but that’s changing.
ESOPs as a succession tool
Smaller companies that have been led by the founder or a family member often find the next generation is not there to take over.
“It is getting hard to find that next generation that wants to stay in that line of work, much less assume all the financial responsibility of a sometimes significantly larger company that has grown since their grandparents started it,” Pfeiffenberger said.
ESOP as a retention tool
ESOPs can be particularly beneficial in construction and manufacturing industries, which tend to have high rates of employee turnover. Research shows that ESOPs boost employee retention rates. Once a company adopts an ESOP structure, “young and old employees quickly learn that commitment and tenure pay dividends,” Pfeiffenberger said. “If employees are staying longer, that means management can focus on running and growing operations, rather than having to think about replacements, so it turns out to be a mutually-beneficial decision.”