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Suggest who benefitsThe Hard-Nosed Business Case for Employee Ownership
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Suggest questionThis week, in episode 137, Jay Goltz explains how he got interested in selling a percentage of his business to his employees and why he quickly lost interest once he started reading books, attending seminars, and talking to accountants and lawyers who specialize in employee stock ownership plans. To Jay’s ear, they all made ESOPs sound expensive, complicated, and risky. This was not something he needed to do. So why go to the trouble? Why take the risk? But he kept asking questions, and over time, he sensed that many of the problems he was being warned about didn’t have to be problems. As of now, he’s pretty much concluded that an ESOP could help him secure retirement for his employees while generating more profit for his business. In fact, he says, “I'm confident I can make more owning 70 percent of the company than I am now owning 100 percent.” But he still has a few lingering questions, which is why we invited Corey Rosen to join the conversation. Corey helped draft the legislation that created ESOPs, he's the founder of the National Center for Employee Ownership (https://www.nceo.org/) , and he literally wrote the book on how the plans work. All of which led to an inevitable question for both Jay and Corey: If ESOPs are so great, why are there so few of them?
Show Notes: Here’s Corey Rosen’s most recent book, written with John Case: “Ownership: Reinventing Companies, Capitalism, and Who Owns What (https://smile.amazon.com/Ownership-Reinventing-Companies-Capitalism-Owns-ebook/dp/B09WWVKQRW/ref=sr_1_2) .” Here’s a previous book Corey wrote with Scott Rodrick: “Understanding ESOPs (https://smile.amazon.com/Understanding-ESOPs-Update-Corey-Rosen-ebook/dp/B0896XT6JL/ref=sr_1_1) .” And here’s a book written by Jack Stack and Bo Burlingham: “A Stake in the Outcome (https://www.amazon.com/Stake-Outcome-Building-Ownership-Long-Term/dp/0385505094) .”
About 21 Hats
The proponents of employee stock ownership plans can make them sound like the greatest thing ever. A business owner can take a big chunk of money off the table—or even all of it—while still getting to run the business. And there are some pretty great tax breaks. Oh, and it will also solve income inequality in America. On the other hand, if ESOPs are so smart, why are there so few of them?
Jim Kalb of Triad Components Group in San Diego and Jeff Taylor of Crafts Technology in Chicago have both implemented ESOPs. Jay Goltz of the Goltz Group in Chicago has reached his 60s without a succession plan, and he’s considering his options. In this 21 Hats Conversation, you get to listen in on a street-smart discussion of the pluses and minuses of ESOPs from the business owner’s point of view.