Ownership: ESOPs Motivate
You might think that employee stock ownership plans are most appropriate for large companies or are best used as succession tools for the aging founders of small concerns. Bruce Pinsky, CEO of Packaging Consultants, in New Bedford, Mass., begs to differ. When his partner died suddenly, in 1989, Pinsky persuaded the estate to sell the deceased's shares to a newly created ESOP -- an option that was financially beneficial to the heirs, and one that Pinsky thought would rally his six grief-stricken employees and "put our future in our own hands." He retained 51% of the stock; the rest was to be paid out to employees over a period of 20 years or more.
Now, more than six years later, Pinsky is sold on the motivational effects of his ESOP. "A lot of younger CEOs aren't fully aware that it can get lonely running a business," says the 40-year-old CEO. "You're vulnerable to employees' coming and going and hurting your ability to grow." The ESOP ties employees to the company and encourages them to "work and live their lives as if they were owners." Since 1990, sales have grown 125%, and Pinksy's current staff of 11 have accumulated significant wealth as their stock has appreciated in value. Sure, Pinsky gave up equity, but, he stresses, "if it were just me against the world, trying to manage people conventionally, we never would have achieved that growth."
For more on ESOPs, see Employee Ownership for Small Businesses (National Center for Employee Ownership, 510-272-9461, 1995, $25).* * *
DONNA FENN | Inc.com Contributing Editor
Donna Fenn is the author of Upstarts! How GenY Entrepreneurs Are Rocking the World of Business and 8 Ways You Can Profit From Their Success, an exploration of the ways Gen Y is changing the entrepreneurial landscape.