ESOP: Why One Major Company Decided to Give Employees Control
As soon as Bob Whalen became owner, he gave away his company—to the employees, that is.
Whalen is profiled in the upcoming US Builders Review Winter II edition and his counter intuitive approach to ownership of HB McClure Company, an HVAC services contractor headquartered in Harrisburg, Pennsylvania, isn’t at all unusual. HB McClure, like a growing number of construction companies, is an ESOP, or employee owned stock ownership plan.
ESOPs are a method of corporate governance in which employees are shareholders of the company they work for. They help decide the direction of the company and benefit when the company does well, just like any stockholder, giving them incentive to work harder and stick around.
For Whalen, and any larger employer, there are practical reasons for becoming an ESOP: making employees shareholders is cheaper than a traditional buyout.
But he also believed that by putting the company in the hands of employees, HB McClure would thrive through a happier, more dedicated workforce.
It worked. Since Whalen took the reins eight years ago, HB McClure jumped from 200 to 500 employees. Its stock grew by 50 percent each year. “I’ve always believed in teamwork,” he says in the story. “If you get everybody working towards the same goal you can accomplish unbelievable things.”
“I’ve always believed in teamwork. If you get everybody working towards the same goal you can accomplish unbelievable things.” – Bob Whalen, President at HB McClure Company
Whalen is not alone in succeeding through an ESOP. The National Center for Employee Ownership (NCEO) estimated in 2015 that there are 7,000 ESOPs in America, a growing number of them in construction. Taking into account other forms of employee ownership, eight percent U.S. corporate equity is controlled by employees, NCEO claims.
What’s more, the organization’s list of top 100 ESOPs included eight companies that are purely in construction, including the number two company, CH2M Hill, an international engineering firm.
Preliminary research from Case Western Reserve University in Cleveland, Ohio, suggests ESOPs might be more effective at acquiring other companies because they encourage communication and transparency. HB McClure is early proof: it acquired 11 companies in 8 years.
But my interest in this story goes beyond validating an idea that is, after all, accepted. Rather, I have a personal stake.
US Builders Review is becoming an equity sharing business, which, similar to an ESOP, empowers employees by sharing profits and so creating a better work space.
And so magazine staffers are joining the very builders they write about in a simple chorus: “let the good times roll!”
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