From Bob’s Desk: Explaining Elm’s Employee Stock Ownership Plan

By Bob Bacon

“I’m all for progress; it’s change I don’t like.” — Mark Twain

Pat Reinhardt, the lead outside director of Elm, gave me a book a few years ago as I began shifting some of my stock to leaders. It was the, “Companies We Keep,” and it reviews some companies that have become owned by coworkers in various forms. But what stuck with me was how these companies benefitted their employees, clients and communities. I have always felt that Elm Electrical, Inc. is a company that should be kept! Not kept by me, but kept going and growing in some evolving ownership form. Our company is special and does much for many.

Keeping Elm going and growing into the future is a challenging project. The last part of the Elm 3.0 plan was how can I retire, sell my ownership stake and ensure the company has the financial strength to keep investing in the company as I have? Our financial strength is a big part of who we are, how we keep our commitments, and how we fund our evolution. For me, it was a must-have part of the planning.

After much analysis and consideration, we have determined that an Employee Stock Ownership Plan (ESOP) is the perfect form of ownership for Elm 3.0. What happens in an ESOP is the company gives part of its earnings to a trust that buys company stock from the current shareholders. Since ESOP’s have tax benefits, there is money to buy the stock and invest in the company. Turns out there are several companies you may know that are ESOPs, like Notch Mechanical, Kelly-Fradet Lumber, Consigli Construction and Cianbro, to name a few.

Over the next few weeks as the transition goes on, we will finalize more details and highlights of the benefits to you. Right now, regulatory requirements are being wrapped up and all the needed steps are underway. I will keep you updated as things move ahead, but rest assured Elm will be as secure as ever in the years ahead.

Once completed, Elm will continue to run as it has. I will still be the president and there will still be a board of directors looking after me. As far as day-to-day operations, nothing will change. What will change is most of us and our coworkers will now be part of an ESOP. Your pay won’t be affected, but you will have an additional benefit. Think of it as a savings plan — every year your plan will accumulate stock and as Elm grows and prospers the value will hopefully increase as your holdings grow.

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.” — Charles Darwin

If you’re looking for more details on what an ESOP is and how it works, this may be helpful: