Throwback Thursday: ESOP in the 1980s
A feature article from 1988 examines the idea of employee ownership.
The Oct. 3, 1988 issue of National Home Center News, the forerunner of HBSDealer, examined the concept of Employee Stock Ownership Plans in the home center business. Here’s how the editors from more than 30 years ago teed up the topic:
“ESOPs allow employees to own part of the company they work for. While some companies are loathe to allow this, a growing number see the benefits of giving their workers a stake in how they company performs.”
The article included coverage of Hinckley Lumber of Hyannis, Mass. At the time of the article, 105 of the company’s 168 workers were part of the ESOP plan, giving credibility to the company slogan: “We mind our own business.”
Here’s how Hinckley’s president Fred Wheldon described the benefits of an ESOP structure: “It improves employee motivation. Most of them feel they have a part in the company. Ownership makes them think a little bit more when dealing with customers or about throwing the material around.”
Another ESOP proponent was Fred Held form Elliott’s Hardware. Held said private stock had risen 134% from 1976 to 1988.
The article also included an ESOP primer: “Basically, ESOPs are funded by corporations that set aside up to 25% of the cost of payroll into a trust fund. The fund is invested in company stock for qualified employees who share eventually on a prorated basis. In return, the company’s ESOP contribution is tax deductible.”
Some drawbacks mentioned in the article: There’s no diversification in the fund — it’s tied to the earnings performance of one company. Also, the administrative burden is high.
HBSDealer’s Throwback Thursday is sponsored by Schaffer Associates, a national management consulting firm specializing in executive search and organizational strategies for the hardware, home improvement, building materials, and consumer products industries. As the premier management consulting firm serving the industry, we help build organizations and leadership teams that foster corporate growth and success well into the future. Contact us at SchafferAssociates.com.
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