Today we’re sharing insight from guest blogger Ray Korson, Client Executive at Gibson. We hope you enjoy Ray’s perspective on the GESOP.
On December 9th, 2014, I celebrated my 6-month work anniversary at Gibson and was welcomed as one of four new employee-owners. You may ask, “How is this possible?” and “What does this mean after only 6 months?”
Gibson formed its Employee Stock Ownership Program (ESOP) in 2010 as a benefit to attract and retain great talent, strengthen its employee engagement culture, and facilitate ownership succession and perpetuation. As such, it extends an ownership stake to all eligible employees who join our team.
What Exactly Is An ESOP Anyway?
In short, an ESOP is a defined contribution plan that empowers employees with an ownership stake in the company by allocating corporate shares to all eligible employees. The ESOP operates as a trust which purchases new and existing shares from the company with a loan and allocates these shares to employees as the loan is paid off. Shares allocated to employees are vested over time, encouraging employees to stay with the company. Eventually, the shares are re-purchased by the company at fair market value when employees retire or leave the company.
There are two major benefits the ESOP affords for both the company and its employees:
Financial Security
An ESOP creates wealth and increased compensation for employee-owners through:
- Matched 401(k) contributions
- Profit-sharing
- Dividends
- Forfeitures of Shares
- Increases in Stock Value
In fact, Gibson employee-owners’ 401(k) contributions are matched up to 5% of overall compensation. To demonstrate the impact of this retirement savings plan, Gibson created a retirement calculator that allows employees to estimate the amount in their retirement account at age 65 after considering variables such as existing account balances, 401(k) contribution percentages, salary increases, and stock value performance. Though it is an estimate, the calculator is a powerful tool to illustrate the real benefit an ESOP brings to a retirement savings plan.
Ownership Mentality
Though the financial benefit an ESOP affords its shareholders is attractive enough, the more intangible (but no less substantive) value is the ownership mentality imparted to each and every employee. The financial incentive is inherently linked to the company’s performance; therefore employee’s interests become aligned with those of the company, creating greater buy-in and responsibility throughout every level of the organization.
Every employee, regardless of their role in the organization, checks the company’s profitability pulse. They become interested in growing revenue. And they look to cut costs and eliminate waste whenever possible.
At Gibson, the agency created what is known as the Agency Wellness Index. At any one given point, this gives employees a snapshot of the agency’s performance based on criteria used by the same firm that evaluates Gibson’s stock value on an annual basis. This sort of transparency fosters a greater sense of ownership for employee-owners as they have the chance to review the same sort of information that company executives grapple with on a daily basis.
I once had a boss who told me, “You have it within you to become an owner. In any job you take, you are empowered with the tools and the resources necessary to master your corner of the business as if you are its sole proprietor. Become an owner and you will increase your job satisfaction overnight.”
An ESOP is not a cure-all solution for a company seeking greater workforce engagement and a more collaborative culture. It won’t necessary create an ownership mentality for existing employees, but it may attract and retain employees who want to be empowered and inspired in their workplace.
Even before I officially became an owner, I still thought of myself as an “owner,” someone who holds himself accountable and is proud of his work. I am so happy to I work for an organization that encourages and promotes real ownership.
This content was written and shared by Ray Korson.
Ray is a Client Executive in the Employee Benefits Practice at Gibson. He helps employers with their workforce initiatives. This includes analyzing, developing, and implementing employee healthcare and benefit strategies.
Prior to joining Gibson in 2014, Ray worked as a Business Sales and Service Consultant at Frontier Communications Corporation. He was responsible for client advocacy and relationship management. Ray continued his education at the University of Notre Dame’s Mendoza College of Business, earning his Master’s degree in May 2014.
Connect with Ray on LinkedIn and Twitter.
