ESOP Education Series

ESOP companies have more moving parts than other companies.

 

Like all companies, they need a board of directors and managers, but they also need a plan trustee to make sure the plan is operated for the interests of plan participants to act as the shareholder of record, and a plan administrator to make sure the plan runs properly. Some companies also have ESOP Communications committees (that's us!)

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Responsibilities:

• Hires, fires, and sets pay for CEO and sometimes other officers

• Reviews overall strategic course for the company

• Responds to offers to purchase the company

• Approves financial audits and budgets of company

• Individual committees may review personnel policy, corporate culture, or other issues
   

Who Performs Function?

• Members voted onto the board by shareholders, including the ESOP trustee

• Members usually include the CEO and often other managers; and may include one or more outside directors chosen for the ability to contribute to board deliberations.  Ours includes two outside representatives geared to add experience in early esop company best practices.

Responsibilities:

• Makes decisions about strategy, finance, culture, and other business issues

• Oversees day-to-day operations of the company

• Hires, fires, and sets pay levels for employees
   

Who Performs Function?

• Chief executive officer

• Chief financial officer

• Vice President

• Engineer or Record

• Department Manager

• Service Manager

Responsibilities:

• Makes sure ESOP is operated for the exclusive benefit of plan participants (that's you!) as required by the Employee Retirement Income Security Act (ERISA) and plan documents

• Acts as the official shareholder for all the shares in the ESOP and votes the shares on all shareholder issues (trustee may make decisions independently or at the direction of an ESOP committee or, in some cases, ESOP participants)

• Review the valuation of ESOP shares to make sure the ESOP acquires shares at a fair value

• Assures plan administration is performed properly

• Works with management and the board to make sure corporate assets are not used in an irresponsible manner

• Represents the interests of the plan in the case of a serious acquisition offer

• Represents the interests of the plan in the case of plan termination
   

Who Performs Function?

• Selected by the board of directors

• May be an independent professional ESOP trustee. Ours is Neil Brozen, with Ventura ESOP.

Responsibilities:

• Oversees all plan operations, including allocation, vesting, distributions, dividend payments, etc.

• Issues report to plan participants

• Issues report to federal agencies
   

Who Performs Function?

• Professional independent plan administration firm. This is Principal for us.

• Company HR department works with the administration firm to oversee plan operations

Responsibilities:

• Communicates how the ESOP works

• Organizes events and celebrations

• In some companies, oversees programs for employee involvement in work-level decisions
   

Who Performs Function?

• Usually primarily composed of nonmanagement employees

• Members may be elected, appointed, or volunteer