National tional Ce Center ter for Emplo ployee ee Own wner ership ship Suzanne Cromlish, Ph.D., MBA, MHA Ohio io Emplo ployee ee Case Western Reserve University Owner nership ship Ce Cente ter cromlish@sxu.edu The e ESOP SOP As Asso sociation ciation
US ECONOMY - GLOBALIZATION & OUTSOURCING CREATING WEALTH INEQUALITY US is Number 1 in the Developed World for Wealth Inequality CEO OF TOP 10% OF US OWNS WALMART 85% OF ALL GLOBAL MAKES WEALTH $12,000.00 HOUR TOP 1% TO TOP 1% OWN 75% OF 99% 99% ALL PUBLICLY TRADED STOCK
CO CORPORA PORATIO IONS NS PURCHASE RCHASE CO COMPET MPETIT ITIO ION BECOM OME E TOO OO BIG G TO FAIL AF AFTER MA MANAGEMEN GEMENT T ERRO RRORS RS REQUIRE UIRE GO GOVERN VERNMENT MENT BAI AILOU LOUTS TS
B O P A R R D O D O U F C D T I I R E O C N T O R S
D I S I S S E R T A T R T A T I O N I O N T T I T L T L E: EMP MPOWE WERING ING TH THE 99%.. ....O ..ONE NE ESO SOP AT A T A TI TIME ME ! A MI MIXED ME METH THOD ODS S ST STUDY Y OF OF E EMP MPLOYEE YEE OWN WNED COM OMPANY NY (E (ESO SOP) ) ACQ CQUI UISIT SITIO IONS NS ESO SOP = E = EMP MPLOYE YEE E ST STOCK OCK OWN WNERSHIP RSHIP PLAN
90 9000 00 ES ESOPs Ps in in US US – 13 13 Mil Milli lion n Emplo loyee ees s - $1 $1.5 Tr 5 Tril illi lion n in in A Ass ssets HIGHER GHER WAGES GES SUSTAI AINABLE ABLE & SOUN OUND RESID IDE E NEAR AR THE E OPERA PERATIO ION ENVI VIRO RONME NMENT NTAL AL DECI CISI SIONS NS IN THE E SAME AME CO COMMUN MMUNIT ITY BUILD UILD CO COMMU MMUNIT NITY Y WEAL EALTH TH
E S O P S O Ps s L E L E S S S W E A L T H A L T H I N I N E Q U A L I A L I T T Y Receptionist employed for years at a salary of $10.00 hour retired with $3 ½ million Employee with $40K annual salary forced to leave employment early due to his wife’s medical condition - ESOP retirement account had 10 yrs. salary - without the ESOP, he would have had nothing Lay workers with annual salaries of less than $40K are able to retire at 55 yrs. of age with a million dollars
IN USA: SA: 7 TH H LARGEST ARGEST PRIV RIVATE TE CO COMP MPANY ANY MOST ST PROFI ROFITABLE ABLE GROCER ROCER LAR ARGEST GEST ESOP SOP IN N AM AMERICA ERICA
NET MA MARGIN RGINS S IN 20 2014 14 PUBLIX LIX 5. 5.6% 6% WAL AL-MAR MART T 3. 3.8% 8% ALL AL L OTHER HER CO COMP MPETI ETITORS TORS 3.8 3.8% KROGER GER 1. 1.6% 6% WHOLE HOLE FOODS ODS 3. 3.9% 9%
1000 HR HRS S OR 1 YEAR 1000 00 HO HOURS URS OR R ONE NE YEAR AR EMPLO MPLOYMENT YMENT 8.5 % TOTAL PAY IN COMPANY STOCK
PRO ROMOTE MOTE FROM ROM WITHIN THIN CHA CHARTS TS POSTED STED IN N ST STORES RES DEFINE EFINE AD ADVANCEM ANCEMENT ENT PRO ROCESS CESS
EVE VERY 13 13 WEEKS EKS 20% % QUAR ARTERL TERLY Y CO COMP MPANY ANY PROFI ROFITS TS DEPOSITED IN POOL…20% IS PAID TO TO EMPLO PLOYEES YEES IN CA CASH SH
H O W M A N Y E S O P S A R E I N ……. TH THE CO COUNTY TY THE S TH STATE TE O OF F C CHI HICA CAGO GO OF I F ILL LLINOIS INOIS
T H E T H E S S T T A T E O A T E OF F I L L L I N O I S O I S Ap Appr proximate ximately: y: 500 ESO SOPs Ps 99% Pr % Privatel ately y Owned ed Avera erage e 250 Emp mplo loyees ees ESO SOP P 1 15 yr yrs. in in Pla lace ce Avera erage e 61% Em % Emplo loyee ee-Owned Owned 35% r % repor ort t 100% % Emp mplo loyee ee Owner ersh ship ip
TH THE T TOP P 1 100 E ESOPs SOPs I IN T THE HE U US S I IN I ILL LLINOIS INOIS NAME ME LOCA CATIO ION NUMBER MBER ENTERPRISE TERPRISE TYP YPE OF EMPLO LOYEE YEES AMSTE STEAD AD INDU NDUSTR STRIES IES CHIC ICAGO GO 16,80 ,800 INDUST DUSTRY Y COMPO MPONEN NENTS TS KEHE E DISTRI STRIBUTORS UTORS ROMEO RO EOVIL ILLE 4,00 000 FOOD OD DISTR STRIB IBUT UTOR ORS HOLLI LIST STER, ER, INC. LIBE BERTYV TYVIL ILLE LE 2,40 400 MEDIC ICAL AL SUPP PPLI LIES ES S & C ELECT ECTRIC RIC CHIC ICAGO 1,70 700 ELECT CTRIC RICAL AL EQUI UIPMENT PMENT MARTIN TIN & BAYLEY EY, INC CAMI MI 1,5 ,500 00 CONVEN NVENIENC IENCE E STOR ORES ES HOLD LDEN EN INDU DUSTRI STRIES DEERFIEL RFIELD 1,31 310 MANUF NUFACT CTURING RING CCMS CMSI I HOLDI OLDINGS DANV NVIL ILLE LE 1,18 180 THIR IRD D PARTY TY ADMIN INISTR ISTRATIO TION
ESOPs Ps SA SAVE VE BI BILLIO LLIONS NS IN UNEMPLO EMPLOYMEN YMENT T W WORKERS ORKERS CO COMP MPENSA ENSATIO ION
S U C S U C C E S S S F U L E F U L E S O P s S O P s PRO ROGRESSIVE GRESSIVE MAN ANAGEMENT GEMENT IMPLEMENT PLEMENTATIO TION Open Book Management Strategies Open Door Communication Policies Employee Engagement & Participation ENHANCE PRODUCTIVITY IMPROVE PROFITABILITY Emplo loyees es ar are Perso sonal nally y & Fin inan ancial ially y Empowered ed to im improve e perf rforman ance ce of the he compan pany
70% % AM AMERICANS ERICANS Own wnin ing g a sh share e in in th the e workplace kplace Work rker ers s sh shar are e in in su succ ccesses esses Supp Su ppor ort t Emplo ployee ee Owner nership ship
? WHY HY ARE RE TH THERE RE NOT T MORE RE ESO SOPs Ps ? ? ? ? ? ? ? ? ? ? ? HOW HO W CAN AN THE THERE RE BE BE MO MORE RE ESOP SOP ? ? ? ? ? ? PARTIC TICIPANTS ANTS ? ? ? ? ? ? 1. Employees purchase the company from a retiring owner - more prevalent 2. Existing ESOPs companies acquire other companies & roll them into their ESOP – limited studies WHA HAT T C CAN AN W WE E L LEARN ARN A ABO BOUT UT E ESOP SOP ? ? ? A ? ? ? ACQUISIT QUISITIO IONS NS ? ? ? ? ? ?
R E S E A R C H Q U E S T I O N ? ? ? How Do ESOPs Accomplish Successful Acquisitions ? ? ? What, if any, Organizational Behavior Patterns are Associated with this Process ? ? ?
Empowering the 99%...One ESOP At A Time! RESEARCH GOAL: As ESOP organizations complete successful acquisitions, Employee Ownership participants increase, thereby creating a positive impact upon our current US economic situation of wealth inequality.
? ? ? A C Q U I ? ? ? A C Q U I S I S I T I T I O O N S ? ? ? N S ? ? ? Dramati ticall cally y In Incr creasi sing g since ce 2005 B E N E N E F I F I T S: T S: Ac Accelerate elerate Exp xpansi ansion on Competiti Co etitive Ad Advanta antage Expand and Produc uct t Li Line nes Est stab ablish lished ed Cu Cust stomer mer Bas ase New w Techn hnolo logy gy Syn ynerg ergies ies Diversi sificatio fication Geograp aphi hic c Expans ansio ion Expand anded ed Ma Mark rket et Sha hare
M & M & A A E C O C O N O M I O M I C C P E R S S P E C T I E C T I V E V E S 20 2016 16 TOP 10 NATIONS – WITHDRAWN DEALS 2016 RECORD YEAR – $ 4.7 TRILLION WORTH OF DEALS ANNOUNCED Doubled from 2015 with large transaction failures Total Value of withdrawn, rejected, or expired offers at highest level since 2007 US – top of list for withdrawn deals Failed deals – set new records 47% failed or appeared to not be worth the dea l (Dealogic Research Institute NYC, 2016)
? ? ? W H Y ? ? ? 3 M A I N F A I L U R E R E A S O N S – Straub (2006) 1. Acquiring Company (AC) – chooses incorrect target company from strategic mgmt. perspective – similar markets & production operations, complement AC with market & purchasing power 2. Target Company (TC) – poorly integrated from organizational behavior perspective – usually represented by acquisition experience, relative size AC to TC, & cultural compatibility 3. AC – Overestimates value of TC – from financial perspective represented by acquisition premium, bidding, & due diligence processes
Tr Transac ansactio tion n Ad Advisor isors Stu Studied died 1600 600 Co Companies panies from om Diver erse se Industrie dustries Re Reco commend mmend 5 St Step ep Model del for r Su Succ ccessf essful ul Ac Acqu quisitions isitions 1. Accountability Sharing – business units, execs., & BOD 2. Commitment to Due Diligence – sophisticated view of target company resources 3. Cultural Integration – design & implement repeatable model to optimize momentum 4. Comprehend Emotional Reactions – excitement & optimism vs. fear of uncertainty 5. Post-Acquisition Reinvestment
M I X E D M E T H O D S P R O J E C T D E S I G N PHASE 1 Qualitative – 30 INTERVIEWS - ESOP Executives with Acquisition Experience – Open, Axial Coding & Emerging Themes PHASE 2 – Quantitative – 3700 Internet Surveys Members of ESOP Associations – 86 respondents – Data Analyzation Phase 1 & 2 are Self-Reported PHASE 3 – Qualitative – 25 Interviews – ESOP & Non-ESOP Consultants with Acquisition Experience – 3 rd Party Viewpoint
R E R E S U S U L T L T S & S & F I N F I N D I D I N N G S G S
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