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
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