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119: Where is EO? Pt 2. ESOPs

Woman with read headphones holds a chalkboard with a sign reading "Where?"; Title reads: "Where is EO? Pt. 2 ESOPs"

Bret Keisling continues the discussion about how EO is missing from public discourse, how ESOPs are losing ground despite many positives, and why the NCEO, The ESOP Association, and ESCA should work together.

You can read the Nation Center for Employee Ownership's September 2020 post "Employee Ownership by the Numbers," which we reference in this episode, here.


Episode 119 Transcript

Bitsy McCann: 00:03 Welcome to The EO Podcast, where we amplify and celebrate all forms of employee ownership.

Bret Keisling: 00:12 Hello, my friends. Thanks for listening. My name is Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. Today, I'm going to bring you Part Two of our multi-part series, "Where is EO?"

Bret Keisling: 00:26 Last week in Episode 118, I laid out what I believe is a significant problem for the growth of employee ownership. EO is pretty much absent from all of the important discussions of the day, even though EO is an obvious solution to many of the very questions being addressed in our country, such as social justice, economic justice, strengthening our communities, and perpetuating strong tax revenue in the municipalities and states that employee owned companies call home.

Bret Keisling: 00:55 Certainly I wish the EO community had allowed the active voice in today's discussions because I truly believe that the more robust employee ownership is the better our society will be. I understand that's a very lofty statement, but I also know plenty of passionate EO advocates who believe it too. And yet again, EO is missing from the discussion.

Bret Keisling: 01:18 Related to our lack of presence on national discussions is EO's complete absence as consumers. According to NCEO, as of 2018, there were approximately 14 million active or retired ESOP participants. That's a lot of consumer spending of which the EO community doesn't benefit at all.

Bret Keisling: 01:40 You'll be able to follow along today, even if you haven't listened to Episode 118, but for context, you may want to listen to that episode before this one. Also today I'll make references to things I've talked about or guests on previous episodes. Normally, when I do that, I'll tell you which episode I'm referring to, but today I'll just make general references. However, you confined Episode 118 from last week and all of our more than 200 archived episodes at

Bret Keisling: 02:12 After I completed last week's episode, I decided to devote an episode to the current state of ESOP world as I see it. I'm going to break this down into three segments. First, I'm going to amplify and celebrate a number of the really positive things going on in the ESOP community right now. Second, I'm going to share some hard data to give you a factual look at where ESOPs are and where we've come from. Finally, I'll share my thoughts on what the ESOP community can, should, and must do in order to help EO find its voice in the public discussion.

Bret Keisling: 02:43 Let me begin by reiterating my love for ESOPs. From 2009 to 2012, I was President and CEO of a 50 employee 100% ESOP. In 2012, my partner and I formed Capital Trustees, which is a boutique ESOP trustee firm. In 2017, I started The ESOP Podcast through Capital Trustees and in the summer of 2019, I sold my interest in Cap Trustees to my partner to launch The KEISOP Group to focus full time on spreading the word about ESOPs and employee ownership generally. I love ESOPs!

Bret Keisling: 03:19 So let me amplify and celebrate ESOPs for a moment. By all accounts, the ESOP community is robust. The major organizations, NCEO and The ESOP Association, have enjoyed record or sold-out attendance at all of their conferences for the last two or three years. During the pandemic, they have switched to virtual conferences and a lot of webinars, et cetera. And lord knows everyone, including me, can't wait until it's safe for all of us to go to in-person conferences again. ESCA, which is devoted to S-corporation ESOPs seems very active sharing relevant news from Washington, DC and highlights when their member companies make the news. A number of state centers for employee ownership, often called EOCs for Employee Ownership Center are opening in a number of States and those who've been open for a year or two are finding their legs. Many of the state centers are affiliated with EOX run by Steve Storkan, who appeared on a previous podcast.

Bret Keisling: 04:19 If you go on social media, you'll find many practitioners and EO advocates regularly sharing about the advantages of employee ownership for shareholders and communities. It appears that at least some of the caution that brought ESOP transactions pretty much to a standstill during the early part of the pandemic is easing. And there's every reason to think that the ESOP pipeline will fill up again once we all get through the pandemic. It's worth noting, certainly, that in September, 2020 The ESOP Association announced the grand opening of their new Washington headquarters, which by all accounts is a pretty amazing facility with all of the modern technology you'd expect.

Bret Keisling: 04:57 This is all very exciting and positive and perhaps in a typical episode I'd conclude now, having amplified and celebrated various aspects of the ESOP world. But now I want to share some facts with you that might surprise you. Just this month, in September, 2020, NCEO published a web article called "ESOPs [correction, Employee Ownership] by the Numbers." We'll include a link to this post in our show notes. In 2018, the most recent year that data is available, 279 new ESOPs were formed, which added approximately 37,000 new employee owners. As of 2018. There are approximately 6,416 ESOP plans in the United States. Because some ESOPs buy or acquire other ESOPs or have multiple plans for some reason, the total number of companies with ESOP plans is 6,266. In 2014, according to NCEO, there were 6,717 ESOPs. 2018: 6,416. That's a drop of almost 5% in the four years. And it happened during the time period where our major associations were beginning to see record growth, et cetera.

Bret Keisling: 06:20 Let's go back a little further. Perhaps you've heard of Louis O. Kelso. He's considered the founder of ESOPs, pretty much. Not only did he create the first ESOP in the United States, sell Congress on the power of ESOPs, but he's literally written the books on ESOPs. In 1986, he and his wife, Patricia Kelso, published "Democracy and Economic Power: Extending the ESOP Revolution through Binary Economics." Now, I have the 1991 edition, and I want to read you a quote from that: "ESOPs are now in use by more than 11,000 corporations, including some of the largest. More than 11 million ESOP employee participants are on their way to becoming capital workers. In the aggregate, they own over $50 billion of capital assets." That was Louis Kelso in 1991.

Bret Keisling: 07:21 So now we contrast the loss of approximately 400 ESOPs between 2014 and 2018 and we put in the context that we're only half of where we were in 1991. Our organizations are robust and busy, but it's not through the growth of employee ownership. By the way, I also would like to point out that the 6,400 ESOPs in 2018, that NCEO referenced, held total assets of over $1.4 trillion. Now we compare that to Kelso, and he was at 50 billion. So now number of ESOPs have dropped about 45%. Number of employee owners themselves have dropped maybe 5%. Assets have increased 300%.

Bret Keisling: 08:15 Ultimately, it shows that there's an awful lot of money to be made in ESOPs -- and I did that for seven years, I'm not begrudging it at all. I came across public information; in 2018, Michael Keeling's last year as CEO of The ESOP Association, they had revenues of $18 million. I assume it's gone up a little bit, if you set aside the pandemic, in the last year or two -- as it should. I only reference that because folks, there's big money in ESOPs and yet we're stumbling. We're not really growing.

Bret Keisling: 08:50 Now, there are probably four different podcasts I could go into right now based on that information but I want to stay focused on the topic of this multi-part series, which is EO missing from the public discussion. EO, just missing in action during this very serious time in American history.

Bret Keisling: 09:10 So we know that ESOPs are doing well. There's a lot to amplify and celebrate. We've taken a look at the data and found that even though things are good and there's a lot of activity and money flowing, et cetera, in terms of raw numbers, we're not doing that great. Earlier I said, I was going to mention a couple of things that ESOP world and the major organizations can, should, and must do to grow the employee ownership sandbox. And it comes down to communication, cooperation, and less competition.

Bret Keisling: 09:44 We covered on previous podcasts in 2019, I happened to be at NCEO during their May [correction: April] 2019 conference in Pittsburgh, Pennsylvania, if I remember correctly. I happened to be standing with a couple of NCEO staff members when Jim Bonham, who is the CEO of The ESOP Association, and had only been on the job maybe five or six months, tweeted congratulations and good luck to NCEO. The staff of NCEO was so excited to have that acknowledgement that shout out from Jim Bonham, it meant a lot.

Bret Keisling: 10:18 So the following month I was in Washington, D.C. At The ESOP Association conference, and Jim was kind enough to come on the Mini-cast and he also did, a few months later, a couple of the main podcasts as well -- but he came on the Mini-cast and we chatted for a minute or two about ESOP Association and NCEO cooperation and how much it meant that he had heard from them and Jim spoke very eloquently about the need for communication and cooperation between the organizations.

Bret Keisling: 10:46 Now, I don't know what, if any, discussions there were between the main organizations and I have no doubt that Jim was sincere when he said that to me, and no doubt that NCEO staff was sincerely pleased with Jim reaching out to them. But here's what I haven't seen in the last 15 months. I haven't seen any announcement from the major organizations together. I haven't seen any initiatives for the betterment of ESOPs generally where there's legislation The ESOP Association may reach out to their members through social media or whatever, and announce things. NCEO may do the same. ESCA does the same. But there's absolutely no cooperation or coordination between the organizations. I think that's a major part of why EO is missing from the political and consumer discussions right now.

Bret Keisling: 11:41 Imagine our organizations came together and for example, sponsored candidates nights in each of the states or in federal races. What if the organizations came and announced that there were certain public policy initiatives important to EO and they marshaled all of their members to engage government officials. There are so many different areas where the organizations could come together and work together and those of us who were involved in employee ownership, and you know, this is true, it often comes up, whether you're an NCEO person or an ESOP Association, specifically or predominantly, and the absurd thing about it is that almost all of the great practitioners, at least, are equally or heavily involved with both organizations. Same thing with employee owned companies. We are supporting both organizations; start working together.

Bret Keisling: 12:40 There is so much growth, so much communication, so much opportunity, but we need a voice and we need leadership and it's not going to be one organization or the other, kind of, being the champion. That's where I alluded to less competition. Figure out ways you can work together and do so.

Bret Keisling: 13:01 Next week, I want to talk about what EO as a whole ESOPs, co-ops, and collectives need to do to come together and take really active steps to make sure that in the future, in future elections, in future times of national disunity, that EO has a very important voice at the table. I hope you'll join me next week as we kind of wrap up this multi-part series.

Bret Keisling: 13:33 Folks, thank you so much for joining me today. We are going through an awful lot in this country together. It's how we're going to get through it -- together! Take care of yourselves and be good to the ones around you. This is Bret Keisling, thanks for listening.

Bitsy McCann: 13:51 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling.

Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.

A note on the transcript: This transcript was produced by Temi, an automated transcription service. While it has been reviewed by The ESOP Podcast, we can not guarantee the accuracy of the transcription. Please refer to the original audio when citing sources.


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