SHARE THE WEALTH

COULD AN EM­PLOYEE SHARE OWN­ER­SHIP PLAN WORK? BUSI­NESS OWN­ERS AL­WAYS SAY EM­PLOY­EES ARE THEIR BIG­GEST AS­SET. EM­PLOYEE OWN­ER­SHIP IS ONE WAY TO PROVE IT

Alberta Venture - - The Money Book -

It wasn’t sup­posed to work for Banff Cari­bou Prop­er­ties. The prin­ci­pal owner of the lodg­ing and hos­pi­tal­ity com­pany, whose suite of 18 ho­tels are nes­tled in Canada’s old­est national park, wanted to keep the com­pany lo­cally owned, and needed a suc­ces­sion strat­egy, too. An em­ployee share own­er­ship plan, or ESOP, could work – in the­ory. But there were twin chal­lenges: this was around the 2008 re­ces­sion, and Banff is home to a tran­si­tory work­force. An ESOP, which al­lows em­ploy­ees to ac­quire eq­uity in a com­pany, seemed like a long shot for solv­ing Banff Cari­bou’s prob­lems. Would young, fleet­ing em­ploy­ees be swayed by in­vest­ments that only pay off in the long term? And dur­ing a re­ces­sion, to boot?

“This kind of work­force just didn’t fit the pro­file of a typ­i­cal ESOP com­pany,” says Gord Loze­man, pres­i­dent and CEO of Banff Cari­bou Prop­er­ties. “I mean, most of our team is fo­cused more on to­mor­row’s ski con­di­tions than they are on in­vest­ing for their fu­ture.” But, re­mark­ably, the gam­bit worked. “We forged ahead any­way, and a lot of these same young em­ploy­ees are now own­ers,” he adds. His work­force of 900 has about 150 share­hold­ers – which Loze­man says is re­mark­able for the ser­vice in­dus­try – and own­er­ship shares have boosted the com­pany’s brand cred­i­bil­ity and “fos­tered an in­creased level of pro­fes­sion­al­ism.” It might be hard to quan­tify an ESOP’s im­pact on the bot­tom line, but that’s pre­cisely be­cause its ben­e­fits tran­scend the bal­ance sheet. Own­ing shares in one’s com­pany can be a nest egg for re­tire­ment; it can cre­ate a ded­i­cated, sta­ble work­force; and it can bring the team to­gether in tough times.

Stock op­tions, of course, are noth­ing new, but the ex­am­ple of Banff Cari­bou Prop­er­ties il­lu­mi­nates their in­creas­ing pop­u­lar­ity across a widen­ing range of sec­tors. They come in dif­fer­ent sizes, too, fall­ing un­der the ban­ner of terms like “stock pur­chase plan” or “eq­uity com­pen­sa­tion,” and vary­ing from com­pany to com­pany. Dan Oh­ler, em­ployee own­er­ship spe­cial­ist at ESOP Builders, says “ev­ery ESOP I’ve seen has been unique. It has to fit with the needs of the own­er­ship group, and they have to be 120 per cent be­hind it.” ESOP Builders helps com­pa­nies de­ter­mine the fea­si­bil­ity and ­im­ple­men­ta­tion of em­ployee own­er­ship, and while Oh­ler admits the model is not right for ev­ery busi­ness – it could be cost-­pro­hib­i­tive for small busi­nesses with mea­gre prof­its, and it’s nearly im­pos­si­ble with­out a prior sense of camaraderie – there are enough op­tions to make it work even in com­pa­nies like Banff Cari­bou.

Some com­pa­nies of­fer ESOPs to all em­ploy­ees while oth­ers just to some, and there are “eq­uity value unit plans,” which have the same form but dif­fer­ent le­gal re­quire­ments from stock op­tions. And, of course, public com­pa­nies can of­fer com­mon stock. So com­pa­nies that are luke­warm to the idea might be able to find their own sweet spot, which can solve prob­lems unique to their busi­ness model or cor­po­rate cul­ture. It’s a worth­while search, es­pe­cially in an age where more and more peo­ple feel less and less se­cure about their long-term em­ploy­ment and re­tire­ment op­tions. Oh­ler re­calls a book­keeper at an en­gi­neer­ing firm who, after the com­pany was sold, re­tired with a $700,000 cheque. “In Al­berta, re­silience is one of the big­gest chal­lenges fac­ing busi­nesses,” Oh­ler says. “By hav­ing a more en­gaged work­force, it al­lows the em­ploy­ees to be more in­volved in al­ter­na­tives that can help turn the busi­ness around.”

“THIS KIND OF WORK­FORCE JUST DIDN’T FIT THE PRO­FILE OF A TYP­I­CAL ESOP COM­PANY. WE FORGED AHEAD ANY­WAY, AND A LOT OF THESE SAME YOUNG EM­PLOY­EES ARE NOW OWN­ERS.” – Gord Loze­man, CEO, Banff Cari­bou Prop­er­ties

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