In a given year, disengagement in the workplace can cost American businesses as much as $500 billion. This is why many companies have put a lot of effort into keeping their staff motivated. They have done this by not only paying their workers competitive wages but also giving them an actual ownership interest in the business that they work for. One of the most popular ways to structure an employee-owned company is through an Employee Stock Ownership Plan (ESOP).
Why Employee-Owned Companies Are Successful
As an article published by the Employee Ownership Foundation explains, "Employee-owners have a different attitude about their company, their job, and their responsibilities that make them work more effectively and increases the likelihood that their company will be successful. Fundamentally, employee-owners are more accountable for their job performance and their fellow workers' job performance simply because they have a common stake in the success of their company."
An ESOP is usually a trust fund set up by an employer that owns shares in the business for the benefit of its employees. Below, we will take a look at six companies that are significantly owned by their past and present employees.
- An Employee Stock Ownership Plan (ESOP) gives workers an ownership interest in the company that employs them.
- The largest employee-owned company in the United States is Publix Super Markets, which employs over 200,000 workers.
- Other notable examples of employee-owned companies include Penmac Staffing, WinCo Foods, and Brookshire Brothers.
- It's believed ESOP programs motivate employees to take more accountability over their work and improve their performance because they have a stake in the company.
Publix Super Markets
With 1,237 store locations and more than 200,000 employees, Publix Super Markets is the country's largest employee-owned company. In 2018, Publix reported retail sales of more than $36 billion as well as a net profit of $2.4 billion. This makes the company the eighth-largest privately held company in the United States at the time of this writing, according to Forbes Magazine.
Founded in 1930 by George W. Jenkins, the company slowly grew into the most profitable supermarket chain in the nation. All Publix workers, regardless of their position in the company, receive 8.5% of their annual salary in the form of company stock after they have been with the company for more than 12 months and put in more than 1,000 hours of work. In its 2019 list of the "100 Best Companies to Work For," Fortune magazine ranked Publix number 12.
Penmac Staffing is a temp agency that helps connect job seekers with employers. The company was founded in 1988 in Springfield, Missouri by Patti Penny, who originally started the company with the goal of finding temporary employees for the company that employed her husband. Over the years, the company grew from a single small office to 32 branch offices located in eight states. They now serve over 1,200 business clients. According to the National Center for Employee Ownership (NCEO), Penmac is the country's second-largest employee-owned company with 27,850 employees as of July 2019.
In the NCEO's 2019 ranking of employee-owned companies in the United States, Brookshire Brothers tied with Burns & McDonnell Engineering and Janus Global Operations as the 15th-largest company. Brookshire Brothers owns multiple grocery stores, gas stations, and convenience stores throughout the states of Texas and Louisiana, and currently employs more than 7,000 people.
Originally named Waremart, WinCo Foods started in 1967 in Boise, Idaho as a warehouse-style grocery store. Focusing on low prices, the company continued to grow and opened new stores primarily in the Pacific Northwest. The company has 126 employee-owned grocery stores and employs 18,000 workers.
Employees are able to participate in WinCo's ESOP after working at least 500 hours in their first six months. In order to continue their participation, they must work at least 1,000 hours per year. A unique aspect of WinCo's ESOP is that contributions come from the company and not the employee.
WinCo's ESOP stock values have averaged an annual 18% compounded return per year since 1986. This means a company contribution of $5,000 worth of stock in 1986 would now be worth about $860,000.
Robert W. Baird & Co.
Robert W. Baird & Co. is another well-established company in the world of finance that is an employee-owned organization. Baird invests in lower to middle-market companies that operate in a wide range of industries, although they tend to focus primarily on the healthcare, industrial solutions, and technology sectors. Baird invests in companies at various stages of growth, including those in the idea phase all the way to those companies with $150 million in revenues. In addition to engaging in private equity financing, Baird provides wealth management and investment banking services to both individuals and companies.
Recology is a San Francisco-based waste management company that employs 4,100 people. The company has 45 locations that provide trash removal and recycling services to 110,000 commercial customers and 725,000 residential customers in Washington, California, and Oregon. Recology is a 100% employee-owned company and began its ESOP program in 1986. To be eligible, employees must work a minimum of 1,000 hours in a 12-month period. Their plan offers employees a 401(k) plan plus a supplemental retirement plan.
The Bottom Line
The existence of an employee ownership program in an organization is a great way to keep staff members motivated, and also keep their interest centered around the overall success of the business. There are many corporations in America that are either wholly or mostly owned by their employees. These corporations are known as employee-owned companies, and they use various programs such as the Employee Stock Ownership Plan (ESOP) to give their workers the opportunity to gradually purchase shares in the company during the duration of their employment.
Today, Publix Super Markets is the largest employee-owned company operating in America. The family of Publix's founder collectively own 20% of the company, while the remaining 80% is owned by past and present employees. Some successful companies that are 100% employee-owned include WinCo Foods, Recology, and Penmac Staffing.