Rolling Out Your ESOP: What to Say, When, and HowAlex Moss and Matt Hancock
This chapter addresses how to introduce an ESOP to your company, from the initial announcement through follow-up activities. This “roll-out” process takes place over 12 to 18 months. It should seek to help employees understand your ownership transition, to enhance trust, and to build a shared commitment to making employee ownership and the company successful.
Reactions to an ESOP are often mixed. ESOPs seem strange to many employees. There is a natural tendency to distrust the goals, process, and details of ESOP communications, especially given the technical complexity of ESOP rules. At the same time, many employees may feel excited about the potential benefits of being owners. They may have differing expectations about what ownership ought to mean, reflecting their personal assumptions, some of which may be consistent with your company’s goals and some of which may not. The thoughtful develop-ment of a clear messaging and communication plan will help your company establish a strong start to being employee-owned.
While it is easy to focus on the “event” of the initial announcement, an effective rollout is a longer-term process of educating your employees about two related but distinct concepts:
1. The ESOP as a retirement benefit; and
2. integrating employee ownership into your firm’s culture.
If your only goal for the ESOP is simply to provide an additional retirement benefit and to provide an exit strategy for owners, then
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your communications can be relatively simple and could be integrated into existing benefits training. However, most companies want more from their ESOPs. They want integrate employee ownership into their culture, and improve the company’s performance. There is extensive re-search1 that shows firms can see significant performance improvements when they combine shared ownership (the ESOP) with opportunities for employees to understand how the company works and participate meaningfully in improving the business (an “ownership culture”).
In this chapter, we suggest beginning the rollout process with a leadership planning meeting to identify core messages, to determine as a team how you want to integrate the ESOP and employee owner-ship into your culture, and to plan for the initial announcement (or “kickoff” meeting), follow-on training, and other activities, including the establishment of an employee-owner committee. We then suggest a series of broad steps to help you think about and plan for the first 12 to 18 months of your ESOP rollout, with an eye toward supporting the creation of an ownership culture.
The basic steps we outline here are:
Step 1: Leadership planning to clarify ownership goals and strate-gies;
Step 2: Initial companywide kickoff meeting;
Step 3: Employee-owner committee setup, training, development, and planning;
Step 4: Detailed ownership and/or business training; and
Step 5: Monitoring, evaluating, and refocusing.
Each step includes some combination of meetings, discussions, and documents, in both print and electronic formats. Examples of these documents are included elsewhere in this book and can also be found on the NCEO website at www.nceo.org and from your professional advisors.
Of course each company’s rollout plan will differ. We have outlined five steps, though in practice your company may not take the steps in this exact order, or the steps may overlap. The important thing is for
1. See https://www.nceo.org/main/research-surveys.php.
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senior leadership to be deliberate about planning these activities, so that they can lay the foundation for employee ownership to enhance your firm’s culture and performance.
Finally, a note of caution: a successful rollout can lay important groundwork for improving company performance. However, rollout communications alone are not sufficient to achieve the serious per-formance benefits we term “building a high-performance ownership culture.”2
Step 1. Where Are We Going and What Do We Need? Leadership Planning MeetingIf you’re reading this and have just completed an ESOP transaction, you might be asking, “do we really need another meeting?” As they say, you only get one chance to make a first impression. So, yes, this might be the right time for another meeting. Unlike the technical process of establishing and funding your ESOP, this leadership meeting starts with the big-picture questions of “why ESOP?” and “what does employee ownership mean for us going forward?” These are the questions that should ground all of your rollout activities. It’s helpful to include the selling shareholder(s) in the planning, since it is often their vision and legacy that drove the decision to implement the ESOP.
In addition to deciding on major rollout activities, the goals of the planning meeting might include defining your company’s ESOP and ownership goals in relation to your strategic plan, identifying desired “ownership behaviors” that support the ownership goals, determining what the company needs to do to encourage and support these owner-ship behaviors, and delegating authority to an appropriate individual or group within the firm to design a detailed implementation plan and timeline. These goals can be accomplished in one or more meetings. Sometimes leaders seek the assistance of an outside facilitator with ESOP expertise to assist in the planning. An agenda for the leadership planning meeting may include:
2. The process for developing a high-performance ownership culture is described in detail in Virginia J. Vanderslice and Alexander P. Moss, “Getting Your Company Ready for an ESOP: the Ownership Culture Perspective,” available online at www.praxiscg.com/thought-leadership.
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Let’s Have a Chat
An effective way to connect leaders and employees with the vision of the selling shareholder(s), in an authentic way, is through a “fire-side chat.” In a fireside chat, someone (preferably from outside of your company, like a board member or trusted advisor) interviews the seller(s) about their history and vision for employee ownership. Following the interview, participants have a chance to ask ques-tions and react to the conversation as a group.
Done toward the beginning of the meeting, this can be a great way to set the tone for the rollout planning process. This same activity can also be used during follow-on education activities, as a way to help connect employees to the vision of the selling shareholder(s) or senior leaders.
1. Meeting goals
2. Fireside chat
3. Identifying key ESOP messages (“Why ESOP?” and “What were the alternatives?”)
4. How might employee ownership change or enhance our culture?
5. Identifying “ownership behaviors”
6. Initial announcement planning
7. Establishing priorities for the next 12 to 18 months
8. Assigning additional planning and implementation responsibility to select individuals and/or groups.
Another reason to consider conducting this type of planning meet-ing early on is that ESOP ownership may also be a time of transition for the firm’s senior team. Leaders may be thinking about what it means to take up collective responsibility for the company’s success, for example in the case of a founder transitioning out. The leadership planning meeting can contribute to building greater trust, communication, and cohesiveness among executives as they explore what it means to lead in an ownership setting. (Of course, this is the start to a larger discus-
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sion about creating an ownership culture vision, linked to improving the business, and this topic is reviewed in detail elsewhere.3)
Step 2. Announcing the ESOP: The Initial Kickoff Meeting and EducationHow do we announce the creation of the ESOP to our employees? And how do we begin to educate them on this concept of employee owner-ship as it relates to our culture? This starts with the kick-off meeting and initial education. Of course, the specific structure, type of activities, and content will vary from company to company and should reflect your culture and your company’s personality. What follows is an outline of the typical elements of the kickoff. Announcing the ESOP in-person can be powerful, but since it may not be feasible if a company has multiple locations or remote staff, we include ideas for announcing remotely. The sequence of messaging can be similar to an in-person meeting. The initial announcement is generally followed by in-depth education on the ESOP, in the announcement meeting itself, or as follow-up small group sessions or webinars.
Purpose
The general purposes of the initial kickoff meeting are to set the con-text—why an ownership transition in the first place? why an ESOP?—to explain the ESOP at an overview level, and to reinforce a general sense of where the company is headed and how the ESOP is a critical part of the plan to get there.
It is okay if employees do not fully understand or applaud the an-nouncement: often they can be somewhat stunned to hear the news and may be fearful at first about what it might mean for them. It is important not to expect an immediate acceptance of the ESOP or to be too disappointed if a standing ovation fails to materialize. The kickoff is the beginning of the communications process and it will take some time for the concept of employee ownership to sink in. The point of the
3. See, for example, Virginia J. Vanderslice, “Harnessing the Power of Ownership Passions: Creating a Shared Ownership Vision,” available at www.praxiscg.com/thought-leadership.
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kickoff meeting is to make the announcement, have fun, and to set up future communications activities.
Timing
The kickoff meeting is most commonly held after the ESOP has been established and has purchased stock. Occasionally, this meeting is con-ducted before the actual completion of the ESOP transaction, either as a way to solicit employee input or because of a long-established practice of transparency. In rare cases, employees are given the opportunity to redirect other retirement funds into the ESOP, and these meetings become part of the required legal disclosure required in the investment process. These, however, are exceptions.
The initial ESOP announcement is ideally made to all employees at the same time. In larger, multisite companies, this may be done via consecutive onsite meetings or by video conference. While it is ideal to announce in-person, that approach may not always work. Companies may use written announcement emails coupled with a prerecorded video, or conduct a live conference call to announce the change when staff are in multiple locations. If this is the case, it can be nice to pair the announcement with a physical gift for employees: pies at every loca-tion or a small giveaway to mark the transition. Whatever the logistics, the point is to get the same message out to everyone at as close to the same time as possible.
Attendees
Typically, all employees attend this meeting, not just those who have already met the requirements to become ESOP participants.4 The benefit of this is that all employees have the opportunity to learn about what
4. The most common exception is in unionized companies in which labor and management choose not to bargain for ESOP participation by union members. These employees generally do not attend this or any other ESOP meetings, but certainly union members may be invited or at least permitted to attend. Sometimes the union leadership prefers this so that their members understand the issues; sometimes they prefer that their members do not attend, so that members stay focused on the package of benefits that has been negotiated.
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the ESOP is, how it works, and what the eligibility requirements are. However, if some employee groups will permanently be excluded, it may be best to meet with these groups separately to explain why other employees are participating in the ESOP, and how employee ownership may still benefit them in terms of stability and continuity of the company.
Many companies find it helpful to conduct the meeting in the eve-ning or on a weekend. This makes the meeting a special event, and it adds to the sense that this is something special. This permits spouses and partners to attend. Because partners are often willing to ask clari-fying questions, they can become an important source of independent support for the ESOP and speed the process of creating a positive buzz. However, inviting spouses increases the scale of the meeting and limits the times that the meeting may be held. For this reason, some companies may prefer to focus on delivering the message only to employees at first.
Building Relationships
When employee-owners know, trust, and respect one another, they can work more effectively across functions to achieve higher performance, which ultimately drives share value.
Why not take advantage of having everyone in the room during the announcement to do some relationship-building?
While you could do trust falls, an easy and safe way to get every-one warmed up and connected is through “Rapid Connections.” In Rapid Connections, employees who don’t know each other pair up. The facilitator announces a question (“What job did you have before you came here?” “What’s one thing you did in high school that your parents don’t know about?” are two good ones), and each pair has one minute to share their answers. At the end of the minute, employees find a new partner and the facilitator an-nounces a new question. You can do as many rounds as you like.
Meeting Format
There are many possible formats for these meetings, including a simple meeting with one or more speeches by senior leaders; a dinner meet-ing that may also function as an annual company meeting (or annual
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employee appreciation dinner); or an informal weekend meeting that includes a business meeting agenda during a larger event.
For example, one company rented a hotel for its meeting and invited employees and spouses to attend. Everyone knew that the new president was a racing fan. They created a “track” from room to room by laying down black landscape cloth and taping stripes down the middle with masking tape. After a few introductory remarks in a large conference room, employees divided into groups and traveled down the “ownership road,” moving from room to room. In each room, a different manager or outside ESOP advisor explained an aspect of the ESOP for five to 10 minutes, and then the group moved on to the next station on the road. This entire exercise lasted a couple of hours, with pit stops along the way and a company dinner at the end.
Another company held a “piece of the pie” party at lunchtime. They frequently hold all-employee meetings in the cafeteria, and they adapted one of these meetings for the formal ESOP announcement. One side of the room was lined with tables containing many different kinds of pies. Everyone got a piece before sitting down to hear from company leader-ship and to meet several of the outside ESOP advisors, who explained their roles and what to expect over the coming months. One lucky advisor received his pie the old-fashioned way—in the face—although this is not generally recommended.
Seasonal themes are common. The ESOP kickoff may be integrated into a holiday party in the late fall or early winter; a beach- or Mardi Gras-themed event in the late winter and spring; or a picnic, barbecue, or river cruise. Of course, October is “Employee Ownership Month” within the national ESOP community, and some companies choose to coordinate their kickoff meetings with these events. In most cases, the timing of the ESOP transaction sets the basic time frame, and the meeting follows soon after with a theme and format that depends on the time of year and your company’s style.
It can be helpful to follow patterns that are already familiar to em-ployees when introducing the ESOP. If you hold regular all-employee meetings in a certain way, consider following a similar format for this meeting. The message is: “Yes, something new is happening, but we’re not giving up on what got us here in the first place. The ESOP is a new tool to support the kind of business that we’ve always aspired to be.”
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Do not delve too deeply into the technical details of the ESOP and the transaction in the kickoff meeting; rather, keep the focus on the big-ger picture. This meeting is just an introduction to the ESOP concept. More details will come later.
Later in this chapter is a sample agenda that can serve as a starting point for this initial meeting and follow-up education.
The Maximum Suspense Kickoff
The employees at NCC Automated Systems knew something big was happening. Each had received an invitation for them and their spouses to a Friday afternoon, all-hands meeting in the form of a puzzle piece.
Some guessed the company was being sold, or that they were all getting a trip to the Bahamas.
After a short cocktail hour and schmoozing, company President and selling shareholder Kevin Mauger took the stage and began to discuss the history of the company, his appreciation for his em-ployees’ hard work and commitment, and steps he was taking to prepare the company for future growth by giving each employee a stake in ownership through an ESOP.
When employees put the puzzle pieces together, they revealed the new company logo, which now included the words “an em-ployee-owned company.”
View the video online: https://youtu.be/uwJEiqtti8E
Step 3. Who Carries the Ball? Setting Up Your Employee-Owner CommitteeMany companies choose to empower a group of employee-owners with the responsibility for the rest of the ESOP rollout activities. (We are specifically referring here to management-established communications and advisory committees, as opposed to ESOP fiduciary committees that provide direction to ESOP trustees.5) Because the term “ESOP
5. This distinction, the general operation of these committees, and how to set up a successful committee are described in detail in other publications. See The ESOP Committee Guide, 3rd ed. (Oakland, CA: NCEO, 2011).
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committee” is used to describe both fiduciary committees and com-munication- and culture-related committees, we will use the term “employee-owner committee” in this chapter. Many companies also find a term like “employee-owner” or “employee ownership” commit-tee helpful in reinforcing the committee’s role in promoting ownership culture, and not just the ESOP as a benefit.
Employee-owner committees are a clear, visible symbol of employee involvement, an essential element in turning the ESOP opportunity into enhanced company performance. Done right, the committee provides new leadership opportunities, a chance for members to learn new skills, and a way to connect more employees to the larger purpose of shared ownership. By creating the committee during the initial planning phase, senior leadership can say with confidence that future ESOP activities have not yet been fully fleshed out, but that a team of employees has been assigned to complete this task. The employee-owner committee can then get to work on its targeted activities with senior leaders sup-porting their efforts. Through deliberate planning up front, leaders can create the committee charter and assign a management liaison to ensure the committee has ample autonomy and works in alignment with the senior team’s goals.
The committee’s job is to continue the ESOP communications rollout for the first year and for the longer term. To ensure success, committee members ideally should receive training in the ESOP and employee ownership; best practices among other ESOP committees; and the fundamentals of meeting planning, facilitation, and problem-solving so they can function effectively as a team. Committee members will also benefit from attending employee ownership conferences.
The committee can brainstorm activities that it might undertake, set priorities, and then develop a schedule for activities during the first 12 to 18 months of the ESOP. These activities frequently include internal ownership events, such as ESOP meetings, orientations, and training; external events, such as conferences, and visits to and from other ESOP companies; and printed materials such as newsletters, FAQ lists, and resources. The employee-owner committee may also develop the ESOP and business trainings outlined below.
This all requires planning, budgeting resources (mostly time, some money), and monitoring and evaluating the activities and performance
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of the committee, all of which are discussed in other publications referenced earlier. The activities of the employee-owner committee evolve over time and the description here may not fit if your committee is already more mature, but this is its common role in managing the initial rollout process.
Step 4. Laying the Foundation: ESOPs and Basic Business EducationIf your ESOP goals include enhanced employee motivation and im-provements to the bottom line, one of the most important steps in your rollout strategy will be providing detailed employee education about the ESOP and how it is linked to the performance of the busi-ness as a whole.
Assuming that you have conducted an ESOP kickoff meeting along the lines described in step 2, employees will be familiar with its basic terms. However, few will take the initiative to develop a more meaning-ful understanding on their own, and most will still be very confused about the goals, rules, and opportunities of employee ownership. Thus, a more detailed ESOP and basic business education initiative follows.
The ESOP portion of this training follows the same general outline as the ESOP kickoff meeting described above. This time around, you will provide more detail, supporting documentation, and engage em-ployees in learning and remembering more. Companies have used many models and formats, ranging from simple PowerPoint presentations, to interactive role-play exercises, to webinars.
The content and process will depend on the goals that you set in your leadership planning process. If your ESOP is designed only as an add-on benefit plan, your education goals will focus on teaching employees the basic ESOP account rules. If your ESOP is designed also to engage employees in improving your business now that they own a piece of it, your education goals may also include business and financial literacy (“how do we make money as a company?”) and continuous improvement (“what can we do as owners to improve performance?”).
Whatever the content, effective training should be concrete, relate directly to attendees’ personal experience, be interactive, and provide information attendees can use immediately. This learning is most suc-
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cessful when conducted in smaller groups (8 to 15 employees), each group representing a cross-section of the work force. Training sessions should be long enough to cover real content, but not so long that em-ployees lose focus.
By the end of this process, employee-owners will have participated in a series of structured educational activities that provide details not only about how the ESOP works but also about how this relates to your business success and what you want them to do to help your business achieve its goals. This is not a one-shot process; it is the beginning of an ongoing effort to establish a foundation of knowledge, some clear momentum, and expectations for the future. To build on this initial focus on the ESOP and on financial literacy, ongoing training programs can also include communication and interpersonal skills that will help employee-owners more effectively work together to solve business problems (active listening, feedback, and asking questions are a great place to start).
Try This: Valuation Game
Rather than telling your employees how the valuation works, why not ask them?
Put participants onto teams, and “give” each team $10 million. Ask them to spend 5 minutes making a list of all the information they would want to know about a company before they invested their $10 million. You’ll be surprised at how close they get to the actual valuation drivers.
Workshop leaders can then help relate what the teams thought of to the actual valuation methodologies. If employee-owners generate the ideas themselves, they’ll be much more likely to see the connection between their efforts, company performance, and share value.
Step 5. Lather, Rinse, Repeat: Ongoing Monitoring and ImplementationThe essential ingredients of any project plan are “scope, schedule, and budget,” and your ESOP rollout will live and die by these measurements.
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In an ideal world, a clear review process would evaluate the whole of the ESOP rollout plan against the original desired outcomes, budgeted resources, and delivery schedule, and then would help you plan future activities based on work that had not yet been completed and new is-sues that had arisen.
In practice, many firms conduct ESOP activities piece by piece, and evaluation is difficult because they have not clearly defined precisely what they want in the first place. Once again, this is not necessarily a bad thing. Many companies simply prefer to follow their hunches. Still, the planning framework gives a clear outline for the basic steps and the order in which they might be conducted. Another reason to consider chartering an employee-owner committee as part of the initial plan-ning phase is that this team can assist with ongoing monitoring and evaluation.
This chapter suggests frameworks, formats, and outlines with the goal of providing tools for you to use in designing and implementing your own ESOP rollout process. These activities may be conducted right after your ESOP is established (or earlier, if it fits your company), or they may be added to the mix over time as you become aware that one or another element seems to be missing.
It is important to reemphasize the underlying purposes: to build trust in the concept of ownership and to align everyone’s expectations so that ownership contributes to the success of your company. The recommendations included here are designed to contribute directly to these outcomes. However, any implementation activities that accom-plish these underlying goals will ultimately contribute to a successful ESOP, even if you do not follow the literal form and content of our recommendations here.
Finally, at some point what was originally an ESOP rollout natu-rally evolves into the normal day-to-day management of the ESOP as an ongoing fact of life in your company. The systems, structures, skills, and habits formed during the rollout will provide residual benefits long after the initial activities have been completed. The rollout process itself sets the stage and frames employees’ expectations for what ownership means to the future success of your company and to your employee-owners personally.
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Appendix: Sample Agenda for Initial Kickoff Meeting and EducationThe following is an agenda template that we often start with, first in summary form and then with details for each agenda item. This is only a starting point, and not a recommendation that you should follow this precise outline.
Summary
1. History, vision, and purpose
2. ESOP overview
3. Video or ESOP company speaker
4. Next steps
5. Conclusion
6. Open discussion/Q&A
7. Written support materials
8. Immediate follow-up
Warmup Activity/Icebreaker
Take advantage of the fact that all your employees are together to do an activity, like Rapid Connections (described above), that builds re-lationships.
Details
1. History, Vision, and Purpose
The meeting generally begins with the president, CEO, selling share-holder, or another recognized leader making an announcement and providing a brief framework. The announcement consists simply of telling attendees what is happening. This should be framed around a
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brief review of how the company was founded and how it has grown. The point is to set up the discussion to follow.
The rest of this first agenda item provides the framework for telling a story about “why.” Generally, this involves explaining that ownership of the company has to change at some point in time, that the owners have recognized this for some time, that they did (or did not) consider selling the company to an outside party, and that they want to ensure that this inevitable process happens in a healthy, planned way that supports the long-term success and independence of the business. Again, the specific message is unique to each company. The important point is to start with a “from the heart” message by one or more of the selling shareholders about what you are doing and why, and how this is designed to protect and benefit the long-term future of your company and its employees.
Whoever speaks first should not delve into the specifics of the ESOP, because this first piece should be more emotional and philosophi-cal—on a grander scale than the technical discussions that can follow. However, the person should summarize the remainder of the agenda for this meeting, and introduce the other speakers.
It’s important not to “sell” the ESOP at this point. Explain it, make its benefits to other owners and the company clear, and communicate that stock can go up and down. Employees appreciate this candid approach.
This first agenda item may require 10 to 20 minutes—more than “Hi and welcome,” but less than “The Complete Rise and Fall of Our Company, Inc.”
2. ESOP Overview
Employees need to hear ESOP basics. This presentation can be made by a different person, so that there is a change of voice and focus in shifting to the details. A few alternatives:
• Some companies prefer to use a simple PowerPoint slide pre-sentation delivered by a senior leader.
• Some prefer to invite one or more of their ESOP advisors to explain. Outsiders can bring credibility and allay any concerns that the ESOP is some plan that the selling shareholders devised on their own. This works particularly well if these advisors are both interested in talking with employees directly and are skilled
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at breaking down the complex language of ESOPs and ERISA into something approaching “plain English.”
• Some use speakers from the major trade associations. Outside experts bring credibility and can put this particular ESOP into context relative to other employee-owned companies locally and around the country.
3. Video or Speaker from Another Local ESOP Company
Some companies include videos showing stories of other ESOP compa-nies; many are available on the NCEO website esopinfo.org. A longer documentary, “We the Owners,” is also available. Alternatively, if you know another local ESOP company whose leadership has a similar approach to yours, inviting them to speak for a few minutes can be beneficial. Both of these activities reinforce the notion that your com-pany is not doing something odd, but rather is following an emerging American tradition of sharing ownership broadly with employees, which in turn echoes some of our most cherished national values and ideals.
The most common videos are less than five minutes long. Speakers from other companies can tell quick versions of their stories in this same time frame, but you will need to provide extra time for Q&A about the speaker’s company and ESOP if you choose this route.
4. Next Steps
What is said here depends on where you are in your ESOP implementa-tion process. If you happen to be following the exact outline presented in this chapter, this part of the kickoff meeting agenda would just sum-marize the remaining steps 2–5 and provide general time frames for completing each one. This item generally requires no more than 5 to 10 minutes.
5. Conclusion: Where Our Business Is Headed and How This Helps
It often works well if this portion is presented by a member of the senior leadership team, perhaps the selling shareholder if she/he will remain in control, or the new president if your ESOP involves a transition in
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management as well as ownership. This agenda item provides a brief review of the general outlook for the company going forward. The underlying message is “we believe it’s a good thing to be an owner of this business.” This may include a brief review of both recent successes and challenges on the horizon and may conclude with a “call to action” that frames ownership as a challenge to employees to remain focused on building a business that they can be proud of owning.
This section doesn’t need to be long—five to ten minutes—but it is important to end on a strategic note.
6. Open Discussion/Q&A
Although it is important to give employees an opportunity to ask questions, do not be surprised if there are not many. Most employees will have no questions yet—some will be a bit overwhelmed and not quite sure what to ask, others will just be ready to switch gears and do something else. To encourage employees to ask questions without fear of looking stupid, you could ask them to hand in written questions or have them discuss in small groups what they heard and what they do and don’t understand, and then select their group’s top two or three questions to read out in turn.
Even if all goes well, you will have a few skeptics, though they may or may not be willing to ask tough questions at this point. A few other employees will be supportive but will have detailed questions that you may or may not want to answer at this early stage. In addressing all ques-tions, consistently emphasize the purpose of pursuing the ESOP in the first place and assure employees that much more detailed information will follow in the coming weeks and months.
This final agenda item may require anywhere from five minutes to half an hour. Some companies prefer to allot a specific time, and others prefer to keep going as long as there are still questions. This often de-pends on whether food or other parts of the meeting agenda are waiting.
7. Hand Out Supporting Written Documentation
Many companies give employees a document to take home and review for future reference. Various written explanations of ESOPs are avail-able. The NCEO publishes an introductory booklet on ESOPs. Some
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companies prefer to prepare their own customized “20 questions about ESOPs” in advance so that they have a document ready to hand out at the end of the kickoff meeting.6 This is different from the summary plan description (SPD), the legally required summary of the ESOP plan document. The SPD may be ready to distribute at this point, but often it has not yet been produced and thus will be distributed later in the rollout process.
It is also important to translate this type of informal Q&A docu-ment into the most common languages used by your employees. Some companies use their own translators, while others use commercial translation services arranged through their ESOP advisors or on their own. However, the translators must have a basic familiarity with ERISA and ownership concepts. Have a bilingual person in your company who understands or has been trained on how the ESOP works to handle these issues. Make sure to edit any translated material before distribution to avoid potentially serious misunderstandings. The chapter in this book on engaging ELL employees goes into depth on this topic.
8. Immediate Follow-Up to the Kickoff Meeting
As a follow-up, companies often conduct in-depth education, Q&A meetings, brown bag lunches, or some other form of meeting within the week or two after the kickoff meeting. This gives employees time to think about what they heard, to read any materials that you handed out at the kickoff meeting, and to discuss their questions and concerns among themselves and at home before they formulate their own ques-tions. This creates some visible short-term momentum and addresses any early misconceptions that your employees may have.
Building on these meetings, you may then proceed to various forms of information sharing, such as phone or email hotlines and physical or intranet bulletin boards. Have some place where employees can post their questions. The employee-owner committee commonly arranges these activities (see step 3).
6. The process of summarizing the basic concepts in plain language is itself a learning experience for whoever takes it on. Some companies, therefore, delay distributing their own documents until their employee-owner committees or other internal ESOP experts have time to develop them carefully.
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Topics for the follow-up meeting can include:
• Basic ESOP “facts and figures.” Illustrate the background landscape of employee ownership and explain where your ESOP fits into the bigger picture of employee ownership.
• Review of the ESOP deal. Tell who bought what from whom and for how much, where the stock is now (partially allocated, part in suspense account, depending on your specifics), and how shares will get into employees’ accounts over time as future contributions, loan payments, and allocations are made. This explains the ESOP as a whole, but at this point does not explain how it affects individual participants.
• Summary of the ESOP rules. Include initial eligibility, allocations, vesting, and distributions to show how the larger transaction re-sults in shares going into and coming out of accounts of individual participants.
• Valuation. Explain what factors drive stock value, both in the exter-nal market and internally at your company; the stock price history to date; and the outlook for the future. This addresses the question of what the shares will be worth.
• Ownership behaviors. Describe what individual participants can do to try to get the value up, or answer the question, “Now that you’re an owner, what do we want you to do?”
• Governance and decision-making in the ESOP. Explain what changes and what does not change, at the shareholder level, at the board level, and at the various operational management levels. Governance in ESOP companies is a big issue. Typically, not much will change from a purely legal perspective. For the purposes of this particular meeting, the point is that “ownership is about how we can work together to build a better company.”
Companies and others in the ESOP community have developed interactive games and role-plays that can help you teach these topics in a fun, engaging way. The best places to “steal” great ideas are at local and national conferences sponsored by the NCEO and the ESOP Association.
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It is important not to let the follow-up education be too focused on the details of ERISA and ESOP rules. You do not need and should not expect anyone to master the details at this point. Rather, the purpose is to give attendees a sense of what’s happening and why, to build trust in the goals and the process, and to create interest and readiness to learn through future educational initiatives. And of course: have fun!
