Can employees own a company? Like at Stewart’s, yes they can
MALTA - Want to be your own boss?
You can if your company has an employee stock ownership plan, or ESOP.
Stewart's Shops has become the poster child for ESOPs in the Capital Region. The convenience store chain, with is headquartered in Saratoga County, and has its own ESOP, which Stewart's uses as its main retirement plan offering to its employees.
Some have even become so-called Stewart's millionaires, perhaps one of the best unexpected employee recruitment tools ever, as they have seen their retirement accounts increase in value to more than $1 million as employees earn stock as a percentage of their pay each year.
As of 2023, there were 174 people in the Stewart's millionaire's club. Not bad for a company that grew out of a Saratoga County dairy farm owned by the Dake family dating back to World War 1.
"That makes me so proud," Gary Dake, president of Stewart's Shops said in a phone interview this week. "It feels so good to see that success."
Of course an ESOP is a strange concept to most people. But think of a company that has its stock listed on the New York Stock Exchange or the Nasdaq stock market. Those companies, like IBM, GlobalFoundries or General Electric for instance, have stock that the public can buy or sell.
ESOPs have company stock as well, although it's only available to workers or the founding family that started the business.
Dake points out that his family started a profit-sharing program in the 1970s that evolved into the current ESOP plan. And Gary Dake, except for his dad Bill, who serves as chairman of the company board of directors, is the only remaining Dake family member to be involved in the business.
Because of that, the Dakes have set up a plan to sell the family's remaining stock back to the ESOP over the next 20 years or so, depending on the economy and other economic factors. The Dake family will hold control of the company board until they own less than 20 percent of the company. Their holdings are currently about 60 percent of the company, so the transition will take time.
"It will be nice and gradual," Gary Dake said.
At the end of 2023, according to IRS tax records, there were nearly 5,000 participants in the Stewart's Shops ESOP, which valued Stewart's Shops stock at nearly $800 million. Each share was valued at roughly $551. That's not bad, considering shares of Amazon are currently trading at $191.
According to the National Center for Employee Ownership, a nonprofit that tracks employee-owned stock plans, there are 252 ESOPs in New York state covering 72,045 workers.
In the past few years, there have been several local ESOPs started, including at Rifenburg Construction in Troy and at Kitware, the Saratoga Springs software developer.
Brian Goldstein is an attorney at Jackson Lewis, an employment and labor law firm in Albany. Goldstein focuses his practice on ESOPs and is working on closing two different ESOP deals in the coming months.
"ESOPs are more popular than ever," Goldstein said.
That's because they give business owners the type of "liquidity event" they need since almost all of their wealth is tied up in the business when it is time for them to retire.
An ESOP also helps with succession planning for a family business, and it ties a company's employees directly to the success of the company since they become owners early on.
"It's a win, win, win," Goldstein said.
Gary Dake, the president of Stewart's, notes that the Dake family probably would make more money if it were to sell say to a bigger competitor like Circle K.
But a company like that or a private equity firm might not keep up the charitable work that Stewart's does or keep as many employees. An ESOP makes sure that the employees maintain the company culture and philanthropy. That's more important to the Dakes, they say, than making the most money possible.
"We'll be fine," Gary Dake said.
This story was originally published September 28, 2024, 8:45 AM.
