An ESOP is generally going to be better than sale to venture capital. That said for folks considering this I’d recommend conversion to a worker coop, since then employees both own the business and make decisions for the business.
My wife’s company got bought out by an ESOP company. When she explained it to me, the whole thing sounded like a scam. I’m not qualified to explain it but it sounds like the stock never vests until you retire so no one has any control outside of the incompetent execs who run the thing.
My first ESOP vested 100% on day 1, we also had a 401k with matching, with a discretionary amount added from the company depending on how well the company did that year (never saw less than 10% of my salary in the years I was there). If/when you leave the company, you’re payed out within 3 years.
For my second ESOP it was a 3 year vesting schedule, no 401k matching and no discretionary amount (though ESOP contribution was ~10% of salary, depending on company performance). If/when you leave the company, you’re payed out starting at year 6, over a period of a few years (can’t remember exactly).
I say all this to demonstrate that these things can be set up very differently while all still being an ESOP generally.
Yeah, and basically my point was that ESOP doesn’t mean you can’t fuck over the employees. I’m sure some versions of it are really good, but until no versions of it suck, it’s hard to say it’s necessarily better.
It certainly is a step in the right direction, but it still allows some really shitty structures.
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An ESOP is generally going to be better than sale to venture capital. That said for folks considering this I’d recommend conversion to a worker coop, since then employees both own the business and make decisions for the business.
My wife’s company got bought out by an ESOP company. When she explained it to me, the whole thing sounded like a scam. I’m not qualified to explain it but it sounds like the stock never vests until you retire so no one has any control outside of the incompetent execs who run the thing.
deleted by creator
That’s not necessarily a feature of ESOP.
My first ESOP vested 100% on day 1, we also had a 401k with matching, with a discretionary amount added from the company depending on how well the company did that year (never saw less than 10% of my salary in the years I was there). If/when you leave the company, you’re payed out within 3 years.
For my second ESOP it was a 3 year vesting schedule, no 401k matching and no discretionary amount (though ESOP contribution was ~10% of salary, depending on company performance). If/when you leave the company, you’re payed out starting at year 6, over a period of a few years (can’t remember exactly).
I say all this to demonstrate that these things can be set up very differently while all still being an ESOP generally.
Yeah, and basically my point was that ESOP doesn’t mean you can’t fuck over the employees. I’m sure some versions of it are really good, but until no versions of it suck, it’s hard to say it’s necessarily better.
It certainly is a step in the right direction, but it still allows some really shitty structures.
That said, good post and good examples.