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82: The ESOP Professionals’ Mentoring Program

In this first episode of Season 3 of The EO Podcast, Bret Keisling presents a simple — but not easy — proposal to grow the employee ownership sandbox: create an ESOP professionals mentor program.

You'll also hear a highlight of Rob Zicaro's Podcast Food for Thought from The ESOP Mini-cast Episode 50.


Episode 82 Transcript

Intro: 00:01 Are you a passionate employee owner or advocate? Would you like to share your passion on The EO Podcast and ESOP Mini-cast? We're looking for correspondents to help us share the great stories of employee owners and their companies in one- to four-minute long segments that can be recorded remotely over the internet or the telephone. If you're interested in drop us a line, you'll hear contact information at the end of this episode.

Bret Keisling: 00:29 Welcome to The EO Podcast, where we amplify and celebrate all forms of employee ownership. Hello friends. Thanks for listening. I'm Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. When I return to Denver in late September, The KEISOP Group offices and podcast studio will be complete. Meanwhile, as I record this, I'm back in Central Pennsylvania, recording in the back room of Your Place Restaurant in Mechanicsburg, PA. My friends here have tried to give me a quiet space to record, but if you hear noise in the background, it's probably folks coming in for the best strombolis in the whole world. So I'll try and minimize the disruptions, but I appreciate Your Place for giving me a place to record.

Bret Keisling: 01:11 As our regular listeners know, I'm devoted to growing the employee ownership sandbox. Since 2012 I've been a professional advisor in the ESOP space. My first start was in 2009 which began two and a half years as an employee owner of a 100% ESOP prior to the start of Capital Trustees. I've been fortunate enough to work with some of the most talented professional ESOP advisors in the country and I've been lucky enough to spend many, many hours talking to many other great advisors for The ESOP Podcasts and ESOP mini-casts. I love professional advisors. As our listeners know, I also love the professional advocacy organizations. I'm a strong supporter and believer in NCEO and The ESOP Association, and if you're in the ESOP space, I recommend you join both organizations, but at the very least one or the other that suit your needs better. And if you listened to The ESOP Mini-cast 50 from last Friday, I also recommend supporting any organizations that advocate in your own state.

Bret Keisling: 02:10 I love that the organizations are regularly selling out and setting record-breaking attendance at national and state and regional conferences. Clearly, there's hunger for programming among employee owners in their companies and, as always, I'm reminded that we're selling out and setting attendance records, while the organizations only serve about 15 to 20% of ESOP companies and only a very tiny fraction of the 10 to 14 million employee owners at ESOP companies. When it comes to conferences, the ranks of professional advisors is stretched pretty thin. This undoubtedly causes a strain on the organizations' abilities to schedule more conferences. The problem is exacerbated by most professionals feeling they need to be at each and every conference in order to not miss opportunities to be in front of the ESOP companies and employee owners who go to the conferences. I understand the thought process, and Lord knows I thought that way as a trustee, I was afraid, my partner and I were afraid, to miss any conferences.

Bret Keisling: 03:09 There's also another interesting reality that I've noticed in the last couple of years. I know a number of talented professionals such as lawyers and valuation advisors and trustees who attend regional and national conferences, are really dedicated to ESOPs and employee ownership but haven't really found traction breaking into ESOP transactions. They're caught in a cycle, not unique to ESOP world ,where they can't get into transactions 'cause they don't have experience and of course they therefore don't get the experience they need to be able to do transactions. I have a simple proposal to address all of this. When you hear it, just remember I said it was simple - I didn't say it was easy! But before I go any further, let's take a break for a minute. On Friday's Mini-cast, Episode 50, we introduced a new feature, Rob Zicaro's Podcast Food for Thought. For more about Rob, check out Episode 50 of The ESOP Mini-cast or his songwriting website, RobZMusic. It's all one word, R, O, B, Z Here's last week's podcast, food for thought.

Rob Zicaro: 04:13 Hi, my name is Rob Zicaro. Today's Food for Thought: Is there a healthy balance between ownership, rights and responsibilities within your organization's culture? And again, this is another fundamental principle that I think is very important. When people are talking about ownership, being an employee owned company, oftentimes there's a really large focus on ownership rights and maybe not as much on the responsibility side of the equation. Or, depending on where you are in the organization, you may be leaning more towards responsibilities as opposed to rights, but it's important to have a healthy balance between the two. So for example, if someone as an owner feels they have a right to financial information, there's a corresponding responsibility to know when to keep that information confidential and also how to act on that information to further the financial interest of the company that you own. So that's some of the basic things that I find from my experience in ownership is that there is a conflict sometimes between rights and responsibilities. And the key is to get that balance just right. So it's kind of like a pendulum. It balances each other out on each side of the equation.

Bret Keisling: 05:37 Thanks, Rob. All right, let's get back to my simple -- not easy -- proposal for expanding ESOP professional ranks. It'd be great if there was an ESOP professional mentor program where lawyers, valuation advisors and trustees can get experience by participating as observers in an ESOP transaction. Here's how it would work: When a transaction's coming together, one of the lawyers, valuation advisors, or trustees would agree to allow a professional to act as an observer on the transaction. Of course, the selling shareholders, the company management would all have to agree observers would have to sign nondisclosure agreements, and although they could participate in all aspects of the transaction process, it'd be understood that they're not incurring fiduciary liability or professional liability in any way. It's not "the decider" as President Bush used to say. Now, if you're an ESOP professional, you're probably wondering why on earth you'd want to bring another professional who could one day be a competitor into your part of the sandbox.

Bret Keisling: 06:39 I understand the concern, but I suggest you actually grow your part of the sandbox rapidly. Here's why. As the professionals get experience, they're now able to talk credibly in their communities about ESOP transactions. In other words, they're going to go out and grow the sandbox generally and their own place in the sandbox by translating their practical experience into new transactions. So let's say for example, there's a valuation advisor in the Midwest. They bring a valuation advisor from New England to observe a transaction. With a couple of transactions under their belts, the New England firm will start touting the benefits of employee ownership and ESOPs and put them in a better position to develop new ESOP transactions. And as is often the case when a new transaction comes along, advisors are needed on both the company and trustee side.

Bret Keisling: 07:24 So in this example, if a valuation advisor in New England develops a new ESOP transaction, they're likely to be the company advisor. Who do you think they're going to include in the list of referrals of valuation advisors for the trustee side? I suggest it would be the same professional advisors who brought them into observe deals. In addition to growing their own practices - again, what I call growing their own part of the sandbox - the advantage to the mentors is that they'll expand their networks of professional advisors to work with. An underlying concern of many ESOP related court opinions and settlement agreements refer to the amount of concentration of professional advisors working with each other. By broadening the number of professional voices that ESOP advisors expose themselves to in transactions, they have a better sense of what current norms and best practices are. And by expanding their network of folks that are involved in, they're going to satisfy some of the concerns expressed in the court opinions and settlement agreements.

Bret Keisling: 08:24 Now, it would certainly be really cool if based solely upon this podcast, suddenly a mentor program just appeared. But let's face it, it's not going to happen. So here's where the ESOP organizations come into play. And I'm referring to any organization that maintains a directory of ESOP professionals, including, obviously, The ESOP Association and the NCEO. Participation standards could be created and if a professional advisor participates as a mentor in one transaction per quarter, just as an example, they'd be designated in all of the organization membership directories as a professional mentor. There are even ways that other ESOP professional advisors can help, such as the culture communications and governmental leadership folks, the third party administrators, and the people who provide other services to ESOP companies such as S investment advisors, et cetera. These advisors are regularly called on to recommend lawyers, trustees, and valuation advisors to ESOP companies. When making referrals, they could reference when the referral is part of the mentor program, or for that matter to decide only to make referrals to those firms who serve as mentors.

Bret Keisling: 09:27 That would be a great way to encourage the program. I know what you're thinking. As amazing as the ESOP professional mentor program sounds, it doesn't address the current advisors need to appear at every ESOP conference offered everywhere. You're right. Expanding these ranks doesn't address that issue, but we're going to have to save that for another podcast.

Bret Keisling: 09:52 We'd love to hear from you about today's episode or anything related to employee ownership. There are a number of ways to contact us, but first it will help if you remember my name is Bret with one "T". You can email me at that's B, R, E, T at KEISOP, K, E, I, S, O, P dot com, or find me on LinkedIn at Bret Keisling or on Twitter at E, O, Underscore, B, R, E, T. You can also find The KEISOP Group on Facebook. Finally, the standard disclaimers apply to this podcast.

Bret Keisling: 10:23 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. This podcast is produced by The KEISOP Group thanks to our production team, including Third Circle, Inc and BitsyPlus Design. Archival podcast segments were edited and produced by Brian Keisling. The original theme music is composed by Max Keisling, and I'm Bret Keisling. Thanks for listening and have a great day.


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