What is an ESOP? And why are we thinking about this?

By James Nicolle

Boost is 100 percent owned by its owner and CEO Nathan Donaldson. The company is soon to turn 20 years old and Nathan who admittedly is known for running his company in a different way than most, has decided the best owners of Boost would be its own team. The worker bees at Boost. All of us. And he’s not just offering up a portion of the business as shares for us, he wants to carve up the entire business, and we the team at Boost will own it. All of it.

This model is called Employee Share Ownership Plans (ESOP) and in overseas markets they are becoming more and more common.

Businesses are structuring themselves in a way which gives ownership stakes and control of the company to its employees. Normally the goal behind this is to have a highly engaged workforce, empowering everyone to be part of decision making and be responsible for the success of the organisation.

In New Zealand, we’ve seen a common practice in businesses to see a small slice of the company (e.g. up to 10 percent) shared as an incentive scheme or part of a remuneration package. What we will be doing is creating a 100 percent employee ownership, meaning that the staff will each own a slice of the business, and be engaged in the decisions, direction and success of the company.

We are not aware of any NZ businesses that are 100 percent employee owned. We know of a bunch of these overseas who are, or have been ESOPs. New Belgium Brewing, one of the USA’s biggest and most successful craft beer breweries based out of Fort-Collins, Colorado, was 100 percent employee owned from 2013 – 2019. Recently the employees made the collective decision to sell the business to Kirin Holdings Company, a Japanese brewing company with global reach. This sale meant that all 700+ employee owners were able to secure $100,000 each as part of the deal, and because this was a collective decision, was arguably a popular decision amongst staff given the sale was given the green light to go ahead.

There are over 7,000 ESOPs in the United States alone. See www.nceo.org – the National Centre for Employee Ownership. There are also many ESOPs based in the UK, across a number of different industries and of varying sizes.

Nathan, our CEO and current owner of Boost visited New Belgium Brewing back in 2014. Key takeaways from his visit included:

Employee engagement was clearly much higher than other companies, even within companies in the WorldBlu family – an operating model we follow

They had a Board representing the interests of the stakeholders (employees), plus an employee relations function to liaise with the business and the owners

It’s not unusual for a business to run their own health insurance for staff, but they went a step further and had a full time doctor with their own office on campus so that staff could easily consult the on-site doctor as required.

This visit really opened up Nathan’s eyes to the potential around employee ownership and the benefits it could bring to Boost. And so over the last few years, Nathan has spent time figuring out how he will implement the model at Boost.

Some of the key advantages of ESOPs include:

  • Staff tend to be more engaged in the success of the business
  • ESOP’s retain their staff for longer periods of time (3-4x)
  • Because they’re run in an open way, employee owned businesses tend to have a strong commitment to corporate social responsibility and involvement with the communities they operate in.
  • Independent research suggests that a combination of shared ownership and employee participation delivers superior business performance.
  • Studies have shown that ESOP-owned companies become more productive and profitable than comparable firms in the same industry that are not ESOP-owned.

But aside from Nathan thinking it’s a good idea, why is Boost exploring to become an ESOP?

We are attempting to provide a sustainable approach to building a better business, so that the culture that we have developed survives Nathan as the owner.  It would be easy for Nathan to simply sell the business when he is ready to retire, but under new ownership there would be no guarantee that the culture we have formed over the last 20 years would continue to thrive and grow. 

Having invested in creating a culture that provides a meaningful place to work, we want to see that live past Nathan’s tenure as owner of Boost, and he firmly believes becoming an ESOP gives that culture the best chance of survival.

We think it is a human right to have meaningful and enjoyable work, and this is how we can ensure it continues.

Our team and company are on a journey. We want our workplace to be the best it can be, and our view of becoming an ESOP as a step in that journey, rather than the final destination. We are striving to build a more human workplace, with staff who are even more engaged with the business goals and performance.

While it is early days, we are gathering more data about creating an ESOP in New Zealand and exploring how we can reap the benefits for our team here to become proud employee owners and continue to drive the business forward for years to come.

Nathan with Rebecca and Ruka

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