2017-05-11 / Editorial

Encourage economic growth through employee ownership

Legislative Lowdown
by Rep. Martin Grohman

Recently I had the chance to have dinner with Wick Johnson, long-time owner of Kennebec Technologies in Augusta. This is a company with about 65 employees that Wick has owned since 1984. They do precision machining for the aerospace industry. They make parts of airplanes, including the brakes. So these are mission critical machined parts and they know what they’re doing. He’s created incredible value there, was ready for a transition, and wanted his employees to participate in his success. As a way for Wick to retire and for employees current and future to participate in the company’s growth, he created an Employee Stock Ownership Plan, selling the company to his employees.

What’s an Employee Stock Ownership Plan? It is a like a stock offering for employees only. It requires no funding from employees, yet it allows companies to remain locally owned while giving employees a direct and meaningful stake in the performance of the business. The Employee Stock Ownership Plan is a way to reward people for their hard work, and owners and founders for taking real risk and becoming successful. Plus, many Employee Stock Ownership Plan companies report their employees are very engaged in the company’s financial success and growth, since it affects the value of their ownership directly. Several well-known Maine companies are Employee Stock Ownership Plan, including Moody’s Collision Centers, Cianbro, Johnny’s Selected Seeds and Landry & French Construction.

However, Employee Stock Ownership Plan conversion is not for everyone. Companies should have at least 20 employees to be able to absorb the transactional costs; have enough of a history of stability and consistent profitability to borrow money to fund the transaction and still run the company; and have a culture open to sharing ownership.

What’s the alternative for the next Wick Johnson? If he or she sells the company on the open market, often the buyer will not keep the company intact. They will take jobs out of the state, eliminate the company’s name and close the doors. Instead, an Employee Stock Ownership Plan is a way to keep the legacy and the culture of the company in place. The result is a company that is a corporate citizen, rather than one that is closed and consolidated, and a company that is invested here in Maine and looking to grow. Because I think those are excellent goals, I have introduced legislation that will expand the number and types of Maine companies that have the opportunity to convert to employee stock ownership. If you know of a company considering Employee Stock Ownership Plan conversion, put them in touch with me, as I may be able to help.

Rep. Martin Grohman (D-Biddeford) is serving his second term in the Maine Legislature. Outside the legislature, he is chairman of the Solid Waste Commission in Biddeford, and the owner of a small company called Hellocycle which does alkaline battery recycling by mail. Grohman especially supports business growth and entrepreneurship. Sign up for updates at www.growmaine.me or facebook.com/repgrohman.

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