Turning workers into owners through an employee stock ownership plan, or ESOP, is a good way to provide employees valuable retirement savings and a greater stake in the success of the company. At the same time, moving to an ESOP can be a smart exit strategy for owners considering selling their business.
Legislation awaiting the signature of Gov. Jay Nixon would
expand employee ownership opportunities by allowing business owners to defer up to 50 percent of the taxes gained from the sale of stock to an ESOP as long as the company is more than 30 percent employee-owned. Passed with strong, bipartisan support in both the Missouri House and Senate, House Bill 2030 was sponsored by Rep. Denny Hoskins, a Republican from Warrensburg.
“It provides that opportunity for employees to have the American Dream, be a part owner in a business,” said Rep. Hoskins during a press conference organized by the Missouri Chamber to build support for the proposal. “When, as an employee, you are a part owner in the business that you are working for, your productivity increases, your sense of pride and workmanship increases, and it not only benefits the company, but benefits self-esteem for the worker as well.”
House Bill 2030 is also important to Missouri’s economy because it secures the future of Missouri-based businesses.
“Businesses owned by baby boomers are at a critical time, with owners considering closing or selling their operations. This legislation incentivizes business owners to sell to their employees rather than closing or selling out of state, keeping the companies and jobs in Missouri,” said Dan Mehan, president and CEO of the Missouri Chamber of Commerce and Industry.
Becoming an ESOP company was a critical move taken by Kansas City-based based Burns & McDonnell to keep the firm from being purchased by a German company in 1986. Employees took out a loan allowing them to buy the company from Armco Steel.
Since becoming an ESOP company, Burns & McDonnell has seen annual revenue increase from $41 million to $2.68 billion.
“This program gives the owner of the company the opportunity to provide loyal employees the ability to reap the rewards they have earned,” said Denny Smith, CFO of Burns & McDonnell. “Instead of selling out-of-state or going public, they can turn the reins over to good Missouri employees.”
Tony Kempf, vice president at Garney Construction, a 55-year-old employee-owned Kansas City contractor, can also point to the advantages of ESOPs.
“We have seen this model create a culture of success, a culture where everybody wants to help each other and do more, where everyone is part of the same program and part of the success.” Kempf said.
Two other states, Iowa and Nebraska, have passed similar legislation. Alabama, Pennsylvania and New Jersey have explored similar bills, but the legislation has not passed the legislature. Ohio, Colorado, Vermont and California have established funding for technical assistance offices dedicated to helping companies transition to the ESOP model.
Gov. Nixon has until July 14 to sign or veto the bill.
For more information on this legislation, contact Tracy King, vice president of governmental affairs, at email@example.com, or by phone at 573.634.3511.