Thursday, March 28, 2024 Mar 28, 2024
72° F Dallas, TX
Advertisement
Business

CRE Opinion: Bridging the Gap to Build the Enterprise

An employee stock ownership plan can accelerate a company when everyone, as an employee-owner, sees a dollar earned, a dollar spent, or a dollar saved in the same way.
By |
Image

MorrisBob_CorganOwning a company takes a lot of work. Many of us still here today saw how C. Jack Corgan came to work every day with relentless drive and tremendous efforts to keep the ship afloat and move the thing forward. To recognize contribution and promote growth, he instituted a culture of sharing ownership with senior leaders in the firm, who then brought their own drive and effort to build the firm beyond what Jack could have done alone. This past year Corgan’s leadership team took that to the next level, asking ourselves, “Are many more of us, even deeper into our ranks, ready to think like owners and act like owners?” The answer was yes, and in response we placed a significant portion of the company’s ownership in a new employee stock ownership plan (ESOP) for all our employees.

How and why an ESOP works is complicated. The associated tax benefits exist because our government wants to encourage businesses to share profit with all employees instead of just a few. For some companies, an ESOP is necessary to handle an immediate ownership transition, but that wasn’t our issue.  For Corgan, one catalyst to ESOP was the firm’s tremendous growth. We doubled in size over the past five years, making our legacy culture of sharing ownership in a now much larger firm more logistically complex. A second catalyst became the view of future leadership transitions as the company continued to grow, and those transitions become more impactful financially with each succeeding generation. Further, as a growing C corporation, federal income taxes were also growing each year with dollars taxed at a high corporate rate that cannot be used for growth or compensation of our talent. An ESOP provides us a vehicle to share ownership and its rewards with all our people, eliminates some of the business complexities tied to ownership issues in a professional services firm, and makes ongoing future leadership transitions more affordable to the firm and beneficial to our shareholders.

All that said, the most important benefit of an ESOP is alignment—the organic synergies when senior leaders and staff share values. It accelerates the enterprise when everyone, as an employee-owner, sees a dollar earned, a dollar spent, or a dollar saved in the same way—when good for the company’s bottom line is good for theirs also.  There are statistics that point to an increase in growth rates of ESOP companies vs. comparable non-ESOP companies. A study has shown staff in ESOP companies held on three times the retirement assets in employee programs than those in comparable non-ESOP companies. Today, millennials are concerned to what extent Social Security will be there for them, or not. For them and all our employees, our ESOP provides a brighter picture for both their today and their tomorrow.

Putting an ESOP in place is legally and financially complex, but the greatest challenges are in communication. In an empowering culture like ours, people are connected and want to do good things for others. Still, senior leaders need to understand why sharing their ownership is not just a good feeling and good for their people, but also benefits them and their own careers. Staff can also be skeptical, not understanding how it works or whether it holds a hidden price for them not yet revealed. It requires a lot of communication by senior leadership, over and over, and at all different levels in the organization. We have to all sincerely believe that in our business there is little value in what we can accomplish alone, and great value in what we can accomplish as a team. We have to believe the ESOP is an investment by senior team leaders in their people, in hopes of a long-term return greater than they would otherwise not see without it. Our people need to believe an ESOP is not a gift, but rather the potential for reward that will be realized if they bring the drive and effort to make their firm successful, or squandered if they do not.

While this is all good for us, it’s also good for our clients. This shared ownership aligns all of us in the firm with our enterprise objectives of creating jobs and making profit. When we succeed in this, our clients benefit, because in our business these objectives can only be achieved through a shared commitment by all employees to customer responsiveness, quality work, maintaining integrity, and earning trust.

Bob Morris is the president and CEO of Corgan.

Related Articles

Image
Arts & Entertainment

Here’s Who Is Coming to Dallas This Weekend: March 28-31

It's going to be a gorgeous weekend. Pencil in some live music in between those egg hunts and brunches.
Image
Arts & Entertainment

Arlington Museum of Art Debuts Two Must-See Nature-Inspired Additions

The chill of the Arctic Circle and a futuristic digital archive mark the grand opening of the Arlington Museum of Art’s new location.
By Brett Grega
Image
Arts & Entertainment

An Award-Winning SXSW Short Gave a Dallas Filmmaker an Outlet for Her Grief

Sara Nimeh balances humor and poignancy in a coming-of-age drama inspired by her childhood memories.
By Todd Jorgenson
Advertisement