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Spring, 2005
The Fruits -- And Perils -- Of ESOP Restructuring Many employee stock ownership plan (ESOP) companies enjoy superior growth in addition to the benefits outlined in "Money for Growth" (Fall 2004). Research by the National Center for Employee Ownership indicates that companies who embrace broad-based employee ownership, such as ESOPs, grow 2.3% faster than similar companies that do not. Earlier research by the NCEO suggests that companies that use an ESOP together with an open-book policy and collaborative management grow 8% faster than other similar companies. This is consistent with our experience at ICA Group, a not-for-profit that supports broad-based employee ownership. I would add one caution to business owners contemplating selling their shares to an ESOP. Some serious conflicts of interest can arise when former owners become ESOP trustees and vote the ESOP shares. The trustee is compelled by law to represent the interests of the employee owners. It is not hard to see how an individual who is also managing the company and who may have personal guarantees outstanding on the ESOP loan may encounter conflicts! It is important to consider these issues, with the benefit of appropriate professional advice, in the early stages of structuring an ESOP. Rob Wilson, CFA Senior Consultant, ICA Group Brookline, Mass. Congratulations on "Money for Growth" (Fall 2004). It's a terrific little primer on practical refinancing and structuring options for the midlife small companies that make up my client base. Henceforth my standard recommendations will include "Get a subscription to SmallBiz." John Kelly Cogninet Management Services Palm Harbor, Fla. 
BW MALL
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