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
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."
Cogninet Management Services
Palm Harbor, Fla.