Employee-Owned Firms Get Boost From Beyster
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BY NATASHA LEE
Staff Writer
Over the last 10 years, the offering of stock options and equity incentives by companies to their employees has been on the rise, according to Ron Bernstein, vice president and CFO of the Beyster Institute for Entrepreneurial Employee Ownership.
The local nonprofit organization works with the private and public sector to develop and implement employee-ownership and equity compensation plans.
The organization targets small- to medium-size companies that have anywhere between 20 to 200 employees and works with 100 companies a year.
The institute was named after J. Robert Beyster, CEO and chairman of SAIC, a local high-tech company and one of the largest employee-owned firms in the country.
The dot-com boom, and most recently the highly publicized Enron case, have prompted many businesses to consider employee ownership as an option, Bernstein said.
For one, employee ownership offers employees a significant incentive.
“Stock gives employees incentives on how to work harder and smarter to where the employees are thinking and acting like owners,” he said
Employees are all working toward a common goal , to make the company as successful and profitable as possible, because each employee gains the opportunity to benefit from independent wealth, Bernstein said.
Companies that offer employee ownership also benefit.
Using equity options helps businesses to save in lieu of offering cash compensation, and it allows them to recruit and retain high-level workers to their organization, he said.
Besides, “it’s the fair thing to do, companies should share you work hard and you share the rewards,” he said.
Headquartered in San Diego with an office in Washington, D.C., the institute offers nationwide annual conferences, workshops, computer resources and publications on how to create the right employee ownership plan.
Last year, the Beyster Institute conducted more than 151 one-on-one personal and customized consulting sessions.
The typical consultation fee averages about $4,000 and implementation time takes from two to six months.
The institute works with all industries, but primarily deals with manufacturing, retail and engineering. Many clients are established businesses that have been in operation for several years, with the occasional interest from start-up businesses.
The biggest challenge companies face when they choose the route of employee ownership is determining the amount of stock appropriate for an individual employee, said Martin Staubus, director of consulting.
“Most people are familiar with employee ownership, but not with specifics. People are always hoping for some sort of chart that has all the answers, but there isn’t a standard option,” Staubus said.
While there are stock averages, he said, this doesn’t always work when factors such as hiring more employees requires a company to change its plan to suit the growth.
Staubus works with companies to consider their options and help create an ideal compensation package.
Companies can choose from six to seven options such as stock purchase plans, bonuses, loans, 401(k) profit sharing, and ESOP , Employee Stock Ownership Plans , which allow employees to purchase stock as a group from original owners who may be transitioning out of their positions.
We help them find a combination of vehicles that best suits them,” he said.
Jeff Young, president of ATA Engineering, a local engineering consulting firm, said his company chose to incorporate employee ownership after the company divided to form two distinct businesses in April 2000.
Originally a division of Structural Dynamics Research Corp., an Ohio-based engineering firm, ATA decided to continue on as a consulting firm while Structural Dynamics went on to become a software company.
With 28 employees left after the spilt, the next question became, who owns the business?
“We knew how to sell and execute services but had never put together a corporate infrastructure, that became our goal,” Young said.
After working with Beyster, Young said ATA chose to offer annual stock options to its employees and continue to use the institute for follow-up consultations and resources.
Employee reaction has been positive and aggressive, he said.
“The employees are anxious to be a part of this company and are always looking for ways to increase ownership and put pressure on management,” he said.
But just putting stock in someone’s hand is not enough. Companies have to make sure that employees know the direction the company is going.
Educating the employee is the most important factor to having successful employee ownership, Staubus said.
Companies need to make sure employees know the value of their stock and the mechanics of the process of establishing employee ownership, he said.
“Employees can contribute better when they understand the dynamic,” Staubus said.
