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124: Michael Keeling - EO Past and Future

Bret Keisling is joined by Michael Keeling, former long-time head of The ESOP Association, who shares his EO “A-Ha Moment," the best way to influence elected officials, understanding EO legislation, and so much more.


Episode 124 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. I'm very pleased to bring you this long form conversation with Michael Keeling, who as you most likely know spent almost 30 years as the head of The ESOP Association. Michael previously appeared on Episode 24 of our podcast, which we've re-aired several times as part of our Summer School. Recently, Michael was on Episode 105 of the ESOP Mini-cast sharing about the origins of Employee Ownership Month. You can find those episodes as well as all of our archives at or wherever you get your podcasts.

Bret Keisling: 00:58 We're going to cover a lot of ground in this episode, and it does run a little long. If you don't have time to listen in one sitting, this will be a great episode to pause and get back to when you can. As you'll hear, in addition to his encyclopedic knowledge of the history of employee ownership, Michael has strong ideas about how to move EO forward in today's environment.

Bret Keisling: 01:23 Michael's conversation caused me to rethink some of the things I've been saying and doing for the last four years on the podcast. Michael is going to explain why the vast majority of us, myself included, vastly overstate the number of ESOP employee owners. Hint: The real number we should care about is closer to 3 million. He'll also explain what is a significantly more effective way to get elected officials to pay attention to employee ownership. To my surprise, it isn't congressional office visits.

Bret Keisling: 01:53 Earlier this fall, I shared my EO "A-ha Moment." That moment of clarity, when I realized just how important and impactful employee ownership can be. We'll start the conversation with Michael Keeling sharing his "A-ha Moments."

Michael Keeling: 02:12 Number one, I worked for a congressperson throughout the seventies, basically. When ERISA was passed -- '74 - '75 they worked on it -- and he was on the tax committee, which had jurisdiction over all the retirement savings laws. His name was Jake Pickle. That was Lyndon Johnson's district. He was actually a strong protégé of Lyndon Johnson. And I don't mind telling you, and I saw some of this Bret, even through the nineties that among the house staff leaders of the tax committees, and then there's a body called the Joint Committee on Taxation with the experts in tax law, they very, very cynical about Employee Stock Ownership Plan as just something that [Senator] Russell Long came up with. And given that Russell was so powerful and that the Senate always had to do what Russell wanted, it snuck into the law. After the early versions of ERISA would have outlawed the Kelso plan, as they were called in those days.

Michael Keeling: 03:24 And so, you know, my boss wasn't fighting it, no one in the House fought it, because you didn't want to get cross purposes with Russell, because then when you went to a conference on a big tax bill, you didn't want Russell to at least be helpful or nice to you in terms of what you were for.

Michael Keeling: 03:41 In 1980, my boss, Jake Pickle had one of his few competitive races for reelection. By the early eighties, the Republican party was beginning to have a lot of those old Southern Democrat types when it was all Democrats, those Southern Democrats were more at home with Republicans, and that was beginning to grow. You began to see it with George Bush senior, you know, winning a congressional seat, et cetera, et cetera. Well, Pickle had a competitive race, frankly, one of his best opponents that I've ever thought about in those years and even after, that was young, articulate, Republican. Pickle was obsessed, like most politicians, with not getting defeated and he would campaign like crazy. And usually on Monday morning when he was back in the office after campaigning Friday, Saturday, and even Sunday, as Chief of Staff, I would always go into his office first thing in the morning, and like many Southern Democrats, he would ramble. He just kind of blah-blah-blah then there'd come another topic, blah, blah, blah, blah, blah. And I'm sitting there. I was frankly, a decent, good staffer. I'd listen. I wouldn't interrupt him, all right? [Laughter.].

Michael Keeling: 05:04 And he's going on and all of a sudden he says, you know, I visited Hart Graphics on Friday. And I knew it was a major printing company there in Austin. And I said, yes. And he said, they got one of those things. They got that thing that Russell talks about all the time.

Michael Keeling: 05:28 And again, me being a smart aleck young staffer, I said, oh, Mr. Pickle, you mean that they have an ESOP, an Employee Stock Ownership Plan. And he said, yeah, they got one of those. Then he said, in a tone of voice differently. Yeah, they got one of those -- you know, Russell's on to something. And from that day forward, until he retired in 1994, he was a solid vote for every pro ESOP provision that Russell Long ever brought to the conference with the House Tax Committee. So truthfully, that was my biggest "A-Ha Moment" to be honest about it.

Michael Keeling: 06:14 I had a secondary one later on, related to visits I had with companies, et cetera. But really the second one that I had came more in -- this is a true story -- I don't know if you recall, there was an -- and he's still alive by the way -- there was a Senator John Danforth from Missouri.

Bret Keisling: 06:40 Sure. Absolutely.

Michael Keeling: 06:40 And he was on the tax committee with Russell. And I was, the ESOP PAC would give money to our friends, et cetera, et cetera. And I don't know, what Senator's PAC I was at, it was at a hotel and I'm standing at the little buffet line, you know, where you can get a glass of wine or some, you know, a cookie or a piece of cake or whatever. And standing next to me is none other than Senator John Danforth. And, you know, they put a name tag on you and everything you go to, and they wouldn't know who Michael Keeling was, but underneath it says ESOP Association. And he sees that and John Danforth says, you know what? ESOPs. Russell Long has been brilliant. And one of the most important things in the world that I've ever learned is respecting Russell for that ESOP proposal. That was kind of my that's like 80 -- that's like '89 - '90, something like that. And that just solidified my thing.

Michael Keeling: 07:44 And I'm going to give you a third, because I like the Danforth, but here's the third. When I, it's a fluke, I leave the Hill and I become, you know, my people don't like me to say this -- I become a member of the swamp. I'm a lobbyist, lawyer/lobbyist, Bret. And it was a fluke that The ESOP Association became one of my first clients. It was about a move in the Senate, Bret, to mandate that all ESOPs private and public have full voting pass through. And the promoters of that, of course, those who were down on ESOPs not being real ownership because the employees didn't control electing the board did not control, you know, those things that you vote on in a company. And so I'd go to a board meeting, executive committee meeting of The ESOP Association. I had Bret keep in mind, represented other trade associations in many similar situations where there was something being proposed in the law that, you know, upset their business.

Michael Keeling: 08:58 Some were in the oil and gas world, somewhere in the off shore commerce world, a few were in estate tax issues. I can, you know, I can go on. But The ESOP Association -- I had been in meetings of association leadership prior to going to these. So the meeting begins. There's eight people there. Dick Mendelson was [there] by the way [cf. Michael Keeling's story in Mini-cast 105]. And at that stage, they're nitpicking this, what about this? What about this? What about this word? What about that? What about? And I'm sitting there saying to myself, Bret, you know, I been there done that. These people just care about their own company. They just care about some little specific provision that's being proposed, the detail. Me, as their lobby lawyer, am going to have to explain that, get it to the point where their position has supporters on the Hill when they vote on the bill.

Michael Keeling: 09:57 So I sit there by somewhere after an hour or two, you know what they're saying? They're saying, why doesn't the rest of the country get it? Why doesn't the United States understand how wonderful broad based employee ownership is? They were talking big picture, Bret! They were talking about the goodness, the strength of our economy, the strength of the free enterprise system. And that broad based ownership was a solution to a lot of the problems of income inequality. And I had never heard people in an association group leadership move from the details of pending legislation to the big picture. And I said to myself, Michael, this is different. This is different. These people are different. They have a vision about what they're doing. They care about the state of our nation. And from that day forward, Bret, I was heavy duty in working for them as a lawyer. And I think it led to their hiring me to be the Chief Staff Officer eight or nine years later. So that was an "A-ha Moment."

Bret Keisling: 11:14 You have always, to my knowledge and I was a member of The ESOP Association for 12 years while you led it, that it was, I'm going to say apolitical. That you've done a great job of saying we've got friends on the right, we've got friends on the left. So for example, Michael, and we'll talk at the end of the segment about what you're doing now and your website. But as you're starting to add stuff to your website, you do have a blog post highlighting the differences between President Trump and Vice-president Biden on what their different policies would do to affect employee ownership. So can you share a little bit, and this isn't, we don't do endorsements. We don't that sort of thing, but can you draw some contrast between the two?

Michael Keeling: 12:00 I, you know, in a way, if you read the introduction to the blog and I know you have make it clear, I am not expressing an opinion about the two men, the two candidates I'm just giving what I know about what they may or may not be aware of, of employee ownership. And I don't mind saying I could have said that back in 2016, I could have said that back in 2012, 2008, 2004, because we have not had, but one president -- and I make that very clear my blog -- who was openly, strongly and made a difference in the laws applying the ESOPs and that was Ronald Reagan.

Michael Keeling: 12:45 And you ask yourself, how come? Well, it's like a lot of things, politicians, believe it or not are human beings like the rest of us, Ronald Reagan, like a lot of politicians had a little core group of people that were his friends that he knew, blah, blah, blah, blah, before he became an elected official.

Michael Keeling: 13:07 And one of those men was named [Earle] Jorgensen. I do not tell the story well, this is general Bret. Jorgensen, like a lot of successful business people that given my age, I know a lot of them went to school with them, met them in my career, created kind of a little bitty conglomerate. Jorgensen had a printing company. He had a car dealership, he had this, he had that, none of them super big, but along the line, and I don't know the details well, he got into having the Kelso law firm and Lou Kelso, the father of the modern ESOP model, have him sell his company as an exiting shareholder to an ESOP. One of them, by the way, still exists in Fresno, California. Thus, this Jorgensen man obviously was a player or a, you know, someone that Ronald Reagan knew before he becomes the governor. And so he's in his little...

Michael Keeling: 14:17 So Ronald Reagan, because of his friendship, that may be too strong a word, but that's my impression I have, his interaction with Mr. Jorgensen. He learned about what it was Lou Kelso was preaching, which was, this was a way to have a better, stronger, more fair, more equitable economy. And it was neither, you know, big government controlling business, nor was it a handful controlling. It was something to benefit all the people. And I just felt like that Jorgensen back in the fifties or something, 1950s educated and maybe Reagan met Kelso -- I can't say that some of our older friends out in California probably retired might know, and that I think made Ronald Reagan knee jerk for what Russell Long wanted to do.

Michael Keeling: 15:14 We have incidents -- and I'm writing my very next blog on this topic, Bret -- that it was Ronald Reagan who stopped, stopped the career people, the political appointee people at the Department of Treasury, trying to kill ESOPs.

Michael Keeling: 15:35 The complaint about ESOPs -- and you always have to understand what your critics say before you can address their concerns -- three big things are against ESOPs. Number one, it's a bad retirement plan because it's not diversified. Number two, it's a waste of taxpayer's money. There's only a few people, you know, get involved with it. Number three is not real employee ownership because of the way the employees quote don't control who is CEO and who's on the board. And so you had, when Russell got the '81 law that became part of the '84 tax law called DefRA [the Deficit Reduction Act of 1984] as did by the Senate Finance Committee. I am the then director of The ESOP Association -- or the staff man named Louie Grenadis we go over to Treasury and we visit with the Assistant Deputy Secretary of Treasury, which is the key man developing the administration's proposal on the details.

Michael Keeling: 16:38 And Reagan had preached pro ESOP messages on his radio show and there were transcripts that Louie had. And when we said, we want you to -- what's the Treasury position on the Senate Finance Committee when they go to meet with the House and decide... and the man says we're against it. We're against what Russell wants to do for the ESOPs. And Louie started throwing on a table -- he had a nice office that man had -- throwing on the table transcripts of radio shows and remarks President Reagan had made before he became president. And the man in charge in the meeting on the... "I got another appointment coming up." And we leave.

Michael Keeling: 17:28 The next thing we know a man named Don Regan was the Secretary of Treasury. He was the boss of the man that Louie and I were meeting with, okay? Russell Long and his top tax person advisor on ESOPs, a man named Jeff Gates, meet with Don Regan in the Secretary of Treasury's office. And Russell goes, oh, why are you here? And Regan says, hey, I'm with you. The President's with you. We're far in the ESOPs and we're with you a hundred percent. Don't worry.

Michael Keeling: 18:02 And so that's the only man, and it made a difference in the conference committee, by the way, when the administration said they were for the Senate version that had the pro ESOP bills.

Michael Keeling: 18:15 Other than President Reagan you don't have a president, you don't have any president since Reagan that's had a knife out for ESOPs directly. Closest comes was Obama's proposal to do away with deductible dividends, 404 (k) of the law, which was added by DefRA. And candidly, Bret, that does benefit mainly public companies. That's one of the ways that Obama administration justified it because they implied that public companies have very small ESOP/KSOPs. And that's an important factor into how much employee ownership there is an American and I talk about that all the time.

Michael Keeling: 18:57 There's very little real employee ownership in America among companies where it's a significant owner of a company. They're private companies. And we talk about 15 million Americans, or employee owners -- Bret, 12 or so million work in Fortune 500 companies, international corporations, and the ESOP's just a supplemental plan. Only 3 million work in the companies that us ESOP people --The ESOP Association, ESCA, the NCEO -- private companies where it's been an exiting shareholder. And so all the presidents have in essence not fought ESOPs because of the people on the Hill, like the Jake Pickles of the world and the John Danforths of the world, the Max... I can go on and on. They're literally hundreds of men and women in Congress that've been supportive of ESOPs in the last 30, 40 years. It's not worth the time of an administration to go after ESOPs directly.

Michael Keeling: 19:58 I see there's a posting by one of our professionals that Biden's going to hurt the ESOPs. Well, it's kind of an unintended consequence of his doing away with stepped-up in basis in terms of a 1042 seller never really paying any cap gains tax on sales to the ESOP because his heirs or whatever get a stepped up in basis. Biden wants to do a stepped up basis across the board, but it's been painted by posting that, you know, we got to -- Hey, that'd be the kind of thing, The ESOP Association and people agents, or whatever they want to go up to the Hill and say to our pals on the tax committees exempt the ESOPs from the stepped up basis restriction. If you want to do the Biden bill and you might even go to Biden and he might say, no, we'll take that out.

Michael Keeling: 20:45 Because in my blog I talk about, you know, Trump was obviously is aware of ESOPs. He had this man, I think Stevenson in my blog, driver for Big G Express. He's giving him a little key chain honor. He was honoring truck drivers during the early pandemic deal, because it's tough being a truck driver in the pandemic!

Bret Keisling: 21:08 That's actually just to let you know, it's Stephen Richardson and I happen to have covered that on one of my Mini-casts [Mini-cast 79] including the President's remarks and Mr. Richardson's. But yeah, great story and great -- we got employee ownership mentioned in the Rose Garden!

Michael Keeling: 21:24 So obviously, President Trump did not know that Big G was an ESOP company, but Stephen promoted it. I mean, it was such a focus of his little remarks he made for four or five minutes, you know what I mean? He got on it right away. Doesn't surprise me. I've been in Big G Express, I know the kind of world they live in. And when it came time for President Trump to give him the key he says, oh, you're in an ESOP, you must be rich too. That's all he said.

Michael Keeling: 21:55 You had other presidents after Reagan specifically on the record, both Obama and Clinton, oddly George Junior, President Bush number two. He was a classmate and I call him George Junior. They didn't say, don't have, but they both said specifically when asked, what is your position on ESOPs in an open session, one in Chicago with Clinton one with Obama down in Richmond and they said the same thing: When they work, they work really well. So they had that caveat in there.

Michael Keeling: 22:35 And I don't mind saying, I've visited 596 ESOP companies in my career. There is no question out of the 596, Bret, some were not companies that you'd be proud of. The vast majority were. In the real world, nothing's perfect. You can't expect every ESOP, but the overwhelming evidence is proven by it, wonderful research by our friends at Rutgers and others academic centers. The majority are providing excellent retirement benefits are letting the employees feel empowered, are listening to their voice, are having them feel that where they work is special.

Michael Keeling: 23:23 And so I suspect that the professionals at the Treasury or the policy people, or whatever, kind of in briefing, President Clinton and briefing President Obama, both men into detail, by the way, they didn't get involved with things unless they dug into it would say, well, Mr. President, Senator Long's this, or, you know, Senator Baucus is doing this and then it became Brough and the [inaudible] and everything. And they would say, you know, some ESOPs are just a rip off. They charge too much to let the guy leave and leave tax-free blah, blah, blah. He's ripping off the employees, et cetera. And that's why they would say because in their own experience, they had probably run into ESOP companies in their state, in their district. I don't mind saying, I want to speculate with you, Bret, just speculate. Senator Obama as a state Senator represented part of Chicago in which there was a significant number of United Airlines flight attendants who lived in his Senate district. And as you know, Bret, the United story, particularly as portrayed in the media, did not turn out to be a happy story. And you may also know Bret, the flight attendants voted against doing the ESOP. It was really driven by the pilots and the machinist union went along barely, but the flight attendants unit union people voted no. And I think that, you know, Senator Obama as a state Senator, and as a US Senator may have run into those people in his district, you know, in an open session or whatever -- I'm speculating, of course.

Bret Keisling: 25:14 There were a couple of key points that you made, Michael. First of all it's not fair for any legislation and I shouldn't say it's not fair. It's not quite accurate if legislation is geared towards a very big issue, you know, 401ks and happens to have, you know, an effect on ESOPs that's not the same thing as being anti-ESOP, you know? So, so to your point about the Biden tax plan, and again, we're not endorsing anybody, but in, in clarity to suggest the Biden tax plan is anti-ESOP. Nah, there's something we might like better -- and it does speak to if we can truly mobilize the ESOP community to influence Congress, then that would obviously make a difference as well. And, and you can shape out the ESOP stuff.

Michael Keeling: 26:11 That's the kind of provision that is third, second, fourth level of interpretation of an impact of a provision recommended that has nothing to do with ESOPs. As you know, as an attorney, step-up in basis is an inheritance issue. And it's been something that the so-called liberals in Congress have recommended for years, but there's so few in Congress that would say, yes, I want to hurt ESOPs. I think that with just a little bit of effort doing the right kind of advocacy work, if they pick up that Biden proposal in that particular area, and it's just a little bitty area of a bigger proposal, I think the ESOP people could protect the 1042 seller who then passes along, you know, the assets gained by the sale of his or her stock, still getting a step-up in basis. You follow me? I think that that's the kind of thing by the way, Bret, I dealt with issues like that all the time. Often I wouldn't even mention them in the newsletter because they were so easy to fix, to be honest about it.

Bret Keisling: 27:26 Michael, the other thing that I do just want to stress the point and you know, you've talked about this quite a bit at conferences and whatnot, and I'm going to use this language you haven't. But when I, I first got involved in my first ESOP transaction in 2008, and that led to me being the CEO of an employee owned company for a couple of years. And then I started the trustee business with my partner who still owns Cap Trustees in 2012. And we were just starting at what I'm going to refer to as the end of the Wild West for ESOP transactions. And I realized that that's a little bit of a, of an over-simplification, especially talking to you, but the example that I would give as a trustee, it was not unusual in 2012, 2013 for advisors to call up the trustee or potential trustee, call me up or my partner and say, hey, we'd like to use you for a transaction. Here's the lawyer you're going to use. Here's the valuation advisor you're going to use. And essentially it was the selling shareholders advisors kind of putting together the transaction.

Bret Keisling: 28:32 Now, and I understand that, you know, nobody likes a settlement agreements because they apply to everybody. But from some of the seminal settlement agreements in the last six, seven, eight years, the fact of the matter is the transactions if done properly by trained professionals. And I have always said, you want to figure out step one, if somebody is an active professional, are they active in either The ESOP Association or NCEO? And as you know, most of the really, really good ones are involved in both. So you want to make sure they're good, but I think that partly, what we need to do is be very clear. People can look at the nineties and the early aughts and say, wow, there were difficult transactions, but those are really few and far between now, particularly if you're in the established ESOP. So, so I just kind of want to knock down as you would do that one objection that Congress people or whoever, you know, they're not safe, they're, they're sneaky. We've really come a long way. Would you agree?

Michael Keeling: 29:42 I would agree with that and I would add this all right. There's no question that the aggressive behavior during the Obama administration, by the DoL [Department of Labor] being led by someone who came off the staff of the House Labor Committee, which was the original ERISA area that basically outlawed any retirement plan having more than 10% stock in a retirement savings plan and that not really being fixed until the last minute in the conference committee, I felt, you know, went overboard. But the thing that bothered me the most, as opposed to my now about the -- I'll agree with you before I'm finished -- is they produce the theory, and they've had one or two district judges agree, I don't think they've had a circuit court agree, if you buy a house for a hundred thousand dollars with an $80,000 mortgage, the equity value of that house is $20,000 the day you go to settlement. They basically said that that kind of economic thinking would not apply to an employee ownership transaction because it was not in the best interest of employees to acquire anything with debt, because it reduced the value of the shares below what their fair market value was.

Michael Keeling: 31:17 I'm happy to say that under the current administration, the DoL has walked away from that. And thus, they're not suing a lot of decent ESOP transactions, as well as some of the bad ones. They brought some lawsuits against, those that you and I kind of raise our eyebrows about along the lines you're talking. So it's a funny thing to say on the one hand, what the DoL was doing in the late two thousands through 2012, '14 was overreach in some theories of their law. The settlements are not that bad off. I do know. I always disliked the DoL putting out a statement as soon as they're a statement in essence, implying that they want a hundred percent, you know, and I know, Bret, a settlement is a compromise between both parties and not a one technically wins! It's a settlement. It's an agreement. It's not the law.

Michael Keeling: 32:17 But the settlements are good guidance to do the things you're saying. And I'm somewhat like you five, ten years after I saw the original, oh, the ESOP market value has to be what it is that it's so far -- forget about that you calculate in some of the debt. And so that's kind of going away, I think a little bit in these settlements and I'm happy to see that. And I agree with you. I think in the back in the eighties and the nineties, there was a little bit too much flimflamming going along. But having said that, Bret, I still ran into companies done in that era that they were done for the right reasons. And the leadership was on board a hundred percent to the concept of employee ownership. We can get into this someday, but you know what, I think one of the big barriers, and I've experienced this with friends who are, you know, classmates with in college, early associates who created successful companies were at an age where they're exiting and they reject doing an ESOP after considering it. And you know what I think? They're the kind of people that the success of the company was all about me. I'm the man it's because of me! It's a psychological barrier and that's a tough, tough thing to come to grips with. If someone thinks I can deal and get a better price, I don't have to listen to these trustees and the fiduciaries. I'm a big man. I took over other companies. I grew a company. I'm a deal maker. Well, they don't do an ESOP after looking into it because they get told by a good lawyer, now you have to, you know, except what an outside independent appraiser says.

Bret Keisling: 34:10 So let's if we can, Michael, and coincidentally, we are airing this episode on Election Day, although we're recording it about 10 days prior, very broadly, what sort of legislative efforts would you like to see regarding employee ownership? And, as a follow-up, is there something we can do differently? You always did a great job -- and The ESOP Associations still does it although obviously [Washington] DC's conference was canceled for the pandemic -- of marshaling our troops to go to Congress and always have great results as soon as you turn the employee owners loose on the congressional offices. Is there more that we can do? So first of all, what legislative stuff you would like to see, and then secondarily, is there more we can do to engage the rank and file employee owners to help make these legislative achievements take place? So I asked you two long questions, but legislatively, what would you like to see come up? Or what do you think we need?

Michael Keeling: 35:08 I'm going to be short on that one. And I'm going to say something a little bit contradictory on your second one, perhaps, because I feel strongly about it.

Michael Keeling: 35:15 On the first one to me, the legislative package we have is very, very attractive in the context of the S corporations, which of course is reinforcing where we see ESOPs to begin with -- tend to be smaller companies, mid-size companies. Yes, there's some big S's, but that's not the typical S. Literally, as, you know, if they're a hundred percent ESOP they pay no federal corporate taxes. End of story. And even the individuals don't pay until they get the dough, after they retire or, sadly die, or become disabled.

Michael Keeling: 35:53 So given that incentive is incredible, you could say, oh, well, why don't we do the same thing or do something similar for the C corporations. And as you know, you can get into the interest on the debt to do the ESOP, along with the value of the contribution to service the debt. You know, you can kind of for a short period of time, ten years, five years, fifteen years kind of erase the corporation's tax you know, tax liability. They're very, very powerful.

Michael Keeling: 36:26 Here is the thing that I would love to see. And I don't have a good answer. I have a suggestion though. I would love to see in, and this has been floated, by the way, recently in different members' bills, right? Ron Johnson has it in his, and he of course has Tammy Baldwin as a co-sponsor. The big thing I always went by -- have a Republican and have a Democrat as your main sponsors -- is to create an office to promote employee ownership. And I would like to see it in the Commerce Department. I did a summer job once for the Economic Development Administration. Seems to me, that's where you talk about how you help build and help the American private sector economy do better.

Michael Keeling: 37:17 I'd love to see an Office of Employee Ownership at the federal level to be a kind of a voice against those folks over to IRS and the DoL that are heavy still into this criticism they're bad retirement savings plans and a little bit into the criticism that they're ripping off the employees when they sell the company for the price. But as you said, Bret, were being addressed by some of the settlements that we've seen.

Bret Keisling: 37:44 Michael, Jennifer Briggs has been on the podcast and as part of Employee Ownership Month, I celebrated Colorado. And you may be aware that Governor Polis actually just created an Office of Employee Ownership to focus on employee ownership. He has set a goal for 20 new employee owned transactions in Colorado's fiscal year. And I don't, you can comment, but I'm not sure I'm aware of any jurisdiction that has that Office of Employee Ownership. And I've never seen a government official give a goal for employee ownership. I think those are great developments to see how they go.

Michael Keeling: 38:24 Two things. And one's kind of a weird, a bit of a history one after the passage of DefRA in 1984, there were eight offices in eight different states that their main mission, including New York state, by the way, was to promote employee ownership. They were not as open and significant as Governor Polis, you know, announcement and press conference. And he was a big fan when he was on the Hill, by the way, we interacted with his office on making sure that the S law got to stand by itself and he was good, you know, I met him a couple of times, but to continue... After you saw the enthusiasm begin to wane a bit and you saw, particularly, the tax credit for contributions to ESOPs disappear, which was being used quite frankly, by big large companies that were just using their line of credit that, you know, make a contribution, tell the bank, give us a break on the interest on our line of credit, because some of it went to an ESOP, but to continue there became only two. Two. And I think eventually one and that was the Ohio Center. The Ohio Center is the only one that survived.

Michael Keeling: 39:47 Now, I'm going to tell you something, you'll find fascinating. Very few people know. He ended up being very vilified because of a statement he made that I would have to agree was a bad statement, but your Indiana. One Richard Mourdock was the VP of an ESOP company in Southern Indiana. They were members of the association. I met Richard when he was in that position. He was such a fan of employee ownership because it was so successful. And he'd tell stories about average pay employees coming up with ideas that improve the performance of the company. And he's elected Treasurer, as you know, of Indiana. He actually had, in my opinion, the only good system to encourage ESOPs of any state I ever saw.

Michael Keeling: 40:45 Like many states, Indiana allows the Treasurer up to a certain amount of money to deposit state money in any bank, and I think the number in Indiana was $25,000 or $50,000. He put a condition, Indiana would deposit money in your bank if you were making an ESOP loan.

Michael Keeling: 41:08 And that was so effective. It caused about 10 or 15 ESOP companies get created in Indiana because the lender was promoting that they do an ESOP. Now, were they done well valued well? I don't know. That's the kind of thing you see incentive-wise at a local level. Many states may not have a law like Indiana does that's let the Treasurer put state money in any bank they want to, you follow me. Now, above that amount there was a huge regulations that the State Treasurer had to go through before he put any money. And of course the big banks got the big deposits, et cetera, but you know, regional banks and small local banks, they jumped at doing an ESOP loan because they knew they'd get money, you know, from the State Treasurer, that would help their capital assets.

Michael Keeling: 41:57 So those are the kinds of specific things that you can see, you know, a state do. And I think that the Polis idea that X number is a goal is, is encouraging to see.

Michael Keeling: 42:07 Most of the states -- I did a lot of work with the New York thing, even before I took the ESOP job when I was just lobbying for them. They were doing a lot of educational work because as you know, governments, state governments, Small Business Administrations do a lot of interaction. You know, the SCORE program that's supported by the small business. So I would be more than pleased to see each state do their own thing, but I think it'd be powerful if you had a national office that would either help the states, you know, get involved with funding or helping you know, the study that you do, the feasibility study, you know what I mean -- the initial step that can we afford to do this. I think would be a very positive thing and would cause more of the politicians to be aware.

Michael Keeling: 42:56 That's my response about the state thing and the federal thing and why I put that way. I, you can tweak tax law 'til you're blue in the face. You know tax law. Any time you run into the thing like the Vice-president Biden. Sometimes it's so complex that the smaller provisions aren't known.

Michael Keeling: 43:14 Now I have a lot of views about how do we expand support for ESOPs and that's where I may be contradicting something you said. [Laughter.]

Bret Keisling: 43:26 Please -- and I was actually going to circle back because I brought you off on this different part, but I had said engaging more of the employee owners. And I'm very interested, Michael, because in my mind that's kind of a natural idea. So I'm very interested that, that you would have something that is a bit contrary to that. So give me your thoughts on it.

Michael Keeling: 43:46 You use phrases about visiting employees in Washington, DC, and I will tell you that is not as effective. It doesn't even come close to having the employees interact with an elected official in the place of the company, in the town city, where they live. Let me tell you, and I don't come about that based on a personal... I worked on the Hill for nearly 10 years. There are so many people lined up from the district -- and our main city was Austin, Texas. It's not like we were next door -- to see the Congressman. He couldn't sit them all his schedule. And even the ones that he did fit in, it was very perfunctory. Where my boss, Jake Pickle flipped on ESOPs, where another guy who explained why Peter Roskam of Illinois, the John Danforth of the world -- I can go on. It was their experience back home.

Michael Keeling: 44:53 As Russell Long used to say, when that Congressperson/Senator is in Washington, DC, they are on their territory. They are the leader. They are the boss person. But when they're out in the district in a company walking around on the shop floor, talking to employees, et cetera, et cetera, guess who the boss is? The voter! Not the member of Congress. So I think it's extreme. Yes. I love to see them come to Washington DC. You know why? Because it helps their ego. It makes the employee owner more excited. But if you want to really make a difference, have that time spent with getting that member of Congress out to your company.

Michael Keeling: 45:40 And I'll share a story from Peter Roskam, who sadly was defeated in the '18 election. Peter Roskam was a great fan of ESOPs good member, he's on Ways and Means, well-liked. And he spoke to our PAC thing. And unlike my boss, Jake Pickle, who just told the story about Hart Graphics and it turned him to be pro ESOP from that day forward, he didn't really get into why.

Michael Keeling: 46:06 But Peter Roskam stood up -- and I've heard this over and over. When I visited an ESOP company, it was different. Heard many a Congressman say that. But he went forward and explained why. And it makes sense. He said, when I go to a regular company and a man's working a machine or a woman's at her secretary's desk, or she's working an engineering project. So this nonsense what the media says, they don't yell at me and fuss at me and call me a crook and no good. He says, they shake my hand and say, Congressman, nice to meet you. Glad you could come visit us. And he said, they'll turn around and go back to work. He said that when I visited an ESOP company and I come up to a man that's running a machine or two or three of them, and I introduced myself, he says, they just don't say, thank you for coming. They tell me what they do. And they describe it in a way as to why it's important to the company. Why, what they do is part and parcel of the company's success.

Michael Keeling: 47:08 So my view of it is that company, employee owners, visiting with Congressman, but prioritize it being done back in the district because your influence is in the district, not sitting in some congressional office with the member's staff running around and he can see you for 30 minutes and then he's got to see somebody else. So that's my point about visiting the Congress. I liked that doing it in DC because it advances their own ego and they think it's important. But really the win? Talk to them as the voter back home, not as the visitor in Washington, DC.

Michael Keeling: 47:49 Do both, do both! [Laughter.]

Bret Keisling: 47:51 When you talk about it being good for the employee owner's ego going to Washington, there's nothing negative about that. They feel more involved in the process. They have met their Congressperson. It does get -- and I guess the point that I was making is it always seemed after DC, at least, you know, you would send letters out, circulated about changes in terms of sponsorship and that sort of thing. And we certainly always seem to see an uptick in, in congressional sponsorship in the weeks or months following employee ownership. So in terms of, it's not feeding the ego in any negative way, you're just saying you want to hit a home run and hey, we can combine things. If you go to your congressional office invite them to your company while you're there, you know, and say, hey, come back and do that.

Michael Keeling: 48:43 They would love to do it, particularly if they're in a competitive district. Because as Russell Long used to say the voters and they in essence are, you know, they got their hand out when they're in the district, the visitor has their hand up. But I agree with you that, yeah, you do the DC visit, but I don't want people to think that the DC visit is the end all and the be all it takes work back home.

Bret Keisling: 49:07 That's an excellent point.

Bret Keisling: 49:08 I do want to talk a little bit in the couple of years not quite two years since you've retired from The ESOP Association and you now consult, you have a new website, we'll include a link on our show notes, but it's J M K hyphen The bottom line is you are a thought leader. You are writing about employee ownership. You -- and look we all try to do blogs and don't get to them as quick as we can -- you do have the comparison between Biden and Trump that I recommend. But you and I also share and I mentioned Jen Briggs earlier, and this is true as well, Fifty by Fifty and Karen Kahn do a great job of putting out newsletters, where they assemble different voices from employee ownership. And if I'm not mistaken, you were one of the ones, as Jen and I were, included when New Belgium, for example, sold and talking about the effects of that.

Bret Keisling: 50:03 So you're very involved in the issues that are still important to you, but you're bringing that lifetime experience. And you were hesitant to mention this because you're not here to promote yourself, but I am you are available for consulting. You do have, you know, your time can be retained. And I just want to say, Michael, and even in this conversation, this isn't me having a look back with and -- forgive the phrases, I'm not that much younger than you -- but you know, one of the old timers, you are still heavily engaged in the system. And I hope people who hear this podcast, whether it's other advocacy organizations, people who are interested in policy, that kind of thing, you have a lot to offer. So I'm really hoping that people will check out your website, reach out to you and keep doing what you're doing, which is just a vibrant part of creating and sustaining employee ownership. So I'm grateful to you, sir.

Michael Keeling: 51:04 And I'm grateful to you, Bret, for two reasons, one for what you just said, but two -- do not, and I, and I know you don't in your heart, do not underestimate the fact that you've got this podcast going. It's the only thing I've ever seen in the employee ownership world that's been more than just two or three or four little efforts, and then a little disappointment about, oh not enough listened or, oh I didn't see the result. What you're doing, Bret. I know there'll be ups and downs and one program better than the other today -- you're doing good. You're doing good for a good cause. And I thank you for it and I appreciate your taking the time to visit with me.

Bret Keisling: 51:46 I appreciate what you said, Michael. And it's kind of funny because I started the podcast kind of sneaking around The ESOP Association talking to people. And you - I don't think it's fair to say and I've, I've always loved this. I don't think back in the early days, I didn't know what I was doing. So I don't know that you knew what I was doing, but here's what, you knew, I've never said a bad word about employee ownership. I have never said a bad word, you know, and that's not to say we can't be constructive and talk about faults and that kind of thing. But what you grasped from day one is that I am just here spreading the word, and it's not even my words. I'm so lucky to have people like you to talk to! Thanks for everything you're doing and I hope folks will check out your website.

Michael Keeling: 52:29 Yeah, you bet. Bye-bye.

Bret Keisling: 52:31 That will bring today's episode to a close. Special, thanks to Michael Keeling, both for appearing on this episode and for his lifetime of growing the EO sandbox. If you'd like to support our work, there's a simple way you can do so. And it won't cost you a penny, please consider subscribing to the podcast. And we really do appreciate the likes of the podcast and retweets. When we promote an episode as this episode is airing on election day 2020, I just like to close with the observation that employee ownership works best when everyone works together for common goals. I have no doubt. The same is true of the United States of America. Thank you so much for listening. This is Bret. Keisling, have a great day.

Bitsy McCann: 53:17 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, and I'm Bitsy McCann.

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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