At The Douglas Company, we’re proudly 100% employee-owned. But, when we tell people that aren’t familiar with the concept, they often have a lot of questions. They wonder how employees “own” their company. Is everyone in charge? How does employee-ownership work?
We think being an employee-owned company is a huge advantage to both our employees and our business. As we enter October – Employee Ownership Month – we want to spread the word about the way we do business and the benefits that come with it.
Jump to a section:
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- What is Employee Ownership?
- The Douglas Company: An ESOP Success Story
- Understanding ESOPs
- The Advantages of Employee Stock Ownership for Employees
- The Advantages of Employee Stock Ownership for Business
- How Common is Employee Ownership?
- Why Employee Ownership Matters in Today’s Workplace
- Frequently Asked Questions about Employee Ownership
- Interested in working at a 100% Employee-Owned Company?
What is Employee Ownership?
Employee-ownership, at its core, means that no single person or family is the majority shareholder of company stock. Rather, the stock is allocated among the employees. There are a variety of different paths to employee ownership. Those include Employee Stock Ownership Plans, Equity Compensation Plans, Worker Cooperatives, and more. Then under each of those categories, every company does something a little bit different.
Some companies have partial employee ownership, and others like The Douglas Company are 100% Employee-Owned. This means that the employees hold all the shares, effectively owning the entire company.
Now this doesn’t mean that employees can just run around firing their bosses, or anyone else for that matter. The corporate structure and management roles of an employee-owned company reflect those of most workplaces. For example, when The Douglas Company transitioned into becoming an ESOP in 2021, our leadership and organization stayed constant.
Overall, being an employee-owned organization is a benefit for employees at every level of the company. From the very top to the bottom, employees have the same stock ownership opportunities and could potentially receive a big payout upon retirement.
The Douglas Company: An ESOP Success Story
The Douglas Company was founded in 1976 by Bruce Douglas in the bustling suburbs of Toledo, Ohio. As we grew, we became industry leaders in the Senior Living and Multifamily markets and expanded by opening a second office in sunny Orlando, Florida. By 2000, then-President Peter Douglas bought out Bruce, completing the first ownership succession in The Douglas Company history.
In 2019, after nearly two decades, we were on the verge of another ownership succession. It was at this time that our leadership team decided the best way forward was a company where all employees were shareholders, rather than having an individual shareholder. Over several months, our Executive Committee dove headfirst into research – speaking with individuals from more than 25 different ESOP Companies. Fast-forward to mid-2020, an external group of key professionals was created to help facilitate a smooth transition for the company. On December 31st of 2020, our Employee Ownership Stock Program was established and the first distribution of shares occurred with the company being sold to the employees.
When surveyed in April 2021, 100% of The Douglas Company employees said that the ESOP impacted their long term desire to stay with the company. Over 97% said that it impacted their desire to do a better job. These days, our ‘share price’ is evaluated annually by a third-party evaluation company. Because of this structure, every employee stands to gain from the success of the company.
Understanding the Employee Stock Ownership Program
At The Douglas Company, being 100% employee-owned means that 100% of our company shares are part of an Employee Stock Ownership Plan – or an ESOP. Our ESOP is a long-term, wealth-building plan. It holds the company’s stock and provides employees with benefits when they retire or leave the company
But how does that work? Let’s break it down.
The Employee Stock Ownership Program is a separate program from the company itself. It’s a trust that holds all our stock certificates. Those stock certificates are then granted to eligible employees annually, at no cost. As those shares grow in value, their associated benefits grow in the employees account.
It’s very similar to owning a stock for a publicly-traded company, except in this case you don’t have to pay for it and you can help increase its value with your hard work. However, unlike a stock from a publicly-traded company, when you’re part of an ESOP, you can’t just sell your shares. Only active employees are able to participate, hence the E in ESOP. The only way to ‘cash in’ on your employee stock is to leave the company.
Your ESOP account grows as you stay with the company. As your tenure and career expand, so does the value of your ESOP account. Our employees benefit from the growth of the company, and whatever we make goes back to our associates. At The Douglas Company, our net income doesn’t go to a small group of owners; it comes back and is shared amongst the associates that made it happen.
The Advantages of Employee Stock Ownership for Employees
There are many benefits of being an ESOP for employees. First and foremost, it’s an additional wealth-building tool. It costs employees nothing, but could be the source of potentially large payout at retirement.
Beyond finances, the most significant benefit we’ve seen has been the onset of what we call our “Owner Mindset”. When employees are directly invested in the financial success of the company, they are more engaged and motivated. The working environment is supportive and collaborative. Our partners strive to make decisions for the betterment of the company. They continuously learn and grow for both ourselves and our team.
“Working for an ESOP pushes me to work harder every day. It ensures everyone here is in alignment towards a common goal of being successful for our company and for each other” Andrew Sokol, project estimator and employee owner
Employee ownership is also catalyst for innovation – driving new ideas, improving processes, and enhancing client satisfaction. This culture of innovation has allowed us to stay ahead in the competitive construction industry, while continuing to deliver exceptional results.
The Advantages of Employee Stock Ownership for Business
Culturally, having an Employee Stock Ownership Plan can have incredible benefits. The ownership mindset motivates us to provide the best service to our clients and hit our goals, while holding ourselves and each other accountable.
As a business, long-term sustainability is a benefit of an Employee Stock Ownership Plan. When every employee is an owner, we don’t have to worry about figuring out corporate succession or being bought out by a third-party. Additionally, the corporate advantage to sponsoring an ESOP is exemption from corporate federal income taxes.
How Common is Employee Ownership?
In 2021, the most recent year for which data is available, there were 6,533 Employee Stock Ownership Programs in the United States, with assets totaling over $2.1 trillion and 14.6 million participants. ESOPs exist across a variety of industries. The industries with the largest amount of employee ownership stock programs include construction (like The Douglas Company!), manufacturing, real estate, and professional science and technological services. In 2023, the NCEO released “The Employee Ownership 100”, their list of America’s 100 largest employee-owned businesses. To qualify for the list, companies had to be more than 50% employee-owned; most on the list are 100%. They include:
- Supermarkets: Publix Super Markets, Winco Foods, Houchen Industries, Brookshire Grocery Company, etc.
- Manufacturing: W.L. Gore & Associates, Challenge Manufacturing Company, Krueger International, Inc., Hypertherm, etc.
- Architecture: HDR, Inc., Burns & McDonnell Engineering, Gensler, HNTB, etc.
- Healthcare: EmpRes Healthcare Management, Millers Health Systems, Bridges Health, Symbria, etc.
Why Employee Ownership Matters in Today’s Workplace
In today’s workplace, employee ownership is becoming increasingly relevant. As businesses seek to attract and retain top talent, fostering a sense of ownership and accountability can be a significant differentiator. Employee ownership also aligns with broader trends towards corporate social responsibility and ethical business practices, reinforcing the importance of creating a positive impact on both employees and the community.
Frequently Asked Questions about The Douglas Company’s Employee Stock Ownership Program
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How do Employees Become Eligible to Receive Shares?
While every employee-owned company does things a little bit differently, Douglas Company employees become eligible for participation in the ESOP once the following three criteria are met:
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- Be at least age 21
- Work at The Douglas Company for one calendar year.
- Work at least 1,000 hours during that calendar year.
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What is the purpose of an ESOP?
We have it for five important reasons:
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- To share the company’s long-term success with all employees
- To create an ownership succession plan
- To build our culture, while retaining and attracting the best employees
- To maintain our company’s independence and local ownership
- To provide you with a long-term, wealth-building benefit
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How are allocations made?
Allocations are made based on total salary of each individual. Our available ESOP stock is allocated at the end of the fiscal year.
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Can non-employees participate in the ESOP?
Nope! Only our active employees are allowed to participate in our ESOP, hence the E. We believe that the successes of the company should be received by the associates actively working towards it.
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What happens to shares when employees leave the company?
When an employee-owner decides to leave the company, the company purchases their shares. Those shares then return to the pool of stock, to be allocated at the end of the next fiscal year.
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How does vesting affect my ESOP account?
Vesting is ownership of your ESOP account. While vesting schedules are very common in Employee Ownership Stock Programs, every company is a little bit different. Being fully vested or 100% vested means the value of your ESOP account is completely yours if you leave the company. At The Douglas Company, you become 100% vested over a five year period. Our vesting schedule is as follows:
1 year – 20%
2 years – 40%
3 years – 60%
4 years – 80%
5 years – 100%
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How is an Employee Stock Ownership Program Different than a 401K?
ESOPs and 401ks are both long-term wealth-building opportunities. Both retirement plans have vesting schedules for their balances. But an ESOP functions a little differently in that it’s entirely funded by the company with no paycheck deductions from the employee for ESOP benefits. Further, the contributions are based on company performance. The financial benefits of an ESOP create a purposeful environment for employees and promotes collaboration and dedication among employees.
Interested in working at a 100% Employee-Owned Company?
We love our ESOP and we think you will too. Explore our careers by clicking here.
For more information about The Douglas Company and our journey as an employee-owned Toledo construction company and general contractor, visit our website or contact us directly.
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Savannah Sokol |
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