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Photo: PAUL BUCKOWSKI, Albany Times Union
Senator Kirsten Gillibrand, at podium, is surrounded by employees of Schenectady Steel Company and elected officials, on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to announce her bipartisan legislation, the Main Street Employee Ownership Act, which would support small businesses that invest in their workers and communities by transitioning to an Employee Stock Ownership Plan (ESOP) or a cooperative (co-op). Schenectady Steel Company is an early adopter of the Employee Stock Ownership Plan. (Paul Buckowski/Times Union)
lessSenator Kirsten Gillibrand, at podium, is surrounded by employees of Schenectady Steel Company and elected officials, on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to
... more
Senator Kirsten Gillibrand greets employees at Schenectady Steel Company on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to announce her bipartisan legislation, the Main Street Employee Ownership Act, which would support small businesses that invest in their workers and communities by transitioning to an Employee Stock Ownership Plan (ESOP) or a cooperative (co-op). Schenectady Steel Company is an early adopter of the Employee Stock Ownership Plan. (Paul Buckowski/Times Union)
lessSenator Kirsten Gillibrand greets employees at Schenectady Steel Company on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to announce her bipartisan legislation, the Main
... more
Claudio Zullo, president of Schenectady Steel Company, talks about his company as Senator Kirsten Gillibrand looks on at Schenectady Steel Company on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to announce her bipartisan legislation, the Main Street Employee Ownership Act, which would support small businesses that invest in their workers and communities by transitioning to an Employee Stock Ownership Plan (ESOP) or a cooperative (co-op). Schenectady Steel Company is an early adopter of the Employee Stock Ownership Plan. (Paul Buckowski/Times Union)
lessClaudio Zullo, president of Schenectady Steel Company, talks about his company as Senator Kirsten Gillibrand looks on at Schenectady Steel Company on Monday, April 30, 2018, in Rotterdam, N.Y. Senator
... more
Employees of Schenectady Steel Company look on as Senator Kirsten Gillibrand addresses those gathered at Schenectady Steel Company on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to announce her bipartisan legislation, the Main Street Employee Ownership Act, which would support small businesses that invest in their workers and communities by transitioning to an Employee Stock Ownership Plan (ESOP) or a cooperative (co-op). Schenectady Steel Company is an early adopter of the Employee Stock Ownership Plan. (Paul Buckowski/Times Union)
lessEmployees of Schenectady Steel Company look on as Senator Kirsten Gillibrand addresses those gathered at Schenectady Steel Company on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the
... more
Senator Kirsten Gillibrand, at podium, is surrounded by employees of Schenectady Steel Company and elected officials, on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to announce her bipartisan legislation, the Main Street Employee Ownership Act, which would support small businesses that invest in their workers and communities by transitioning to an Employee Stock Ownership Plan (ESOP) or a cooperative (co-op). Schenectady Steel Company is an early adopter of the Employee Stock Ownership Plan. (Paul Buckowski/Times Union)
lessSenator Kirsten Gillibrand, at podium, is surrounded by employees of Schenectady Steel Company and elected officials, on Monday, April 30, 2018, in Rotterdam, N.Y. Senator Gillibrand was at the company to
... more
Gillibrand backs employee ownership plans during Rotterdam visit
Rotterdam
Carl Estill has worked at Schenectady Steel Co. for 38 years, and has two nest eggs for his golden years. One, a union pension through the Teamsters, is not doing very well, and is currently worth about half of what he had counted on.
But as a part owner of the 94-year-old steel company, along with all of his other fellow workers, Estill has another plan tied to the value of the company stock. And that one is doing quite well indeed.
On Monday, U.S. Senator Kirsten Gillibrand paid a visit to the shop floor there, urging that there need to be more people like Carl Estill in the American economy, and that the government ought to help promote a five-decade-old program called "employee stock ownership plans," or ESOPs.
Gillibrand said the ESOP is one way to address a looming retirement of Baby Boomer business owners, who might otherwise sell their business to outsiders or close it. Under an ESOP, the program can borrow cash against the value of the company, which is used to compensate the owner for the value of the company, and the company then repays any loans and sustains the business for the continued benefit of its worker-owners.
"Employee-owned businesses have a strong track record of better pay and retirement benefits, and a commitment to creating local jobs," said Gillibrand. She said her bill would provide $500 million in support for ESOP programs through the Small Business Administration. The bill also has GOP support in both the House and Senate.
In Ohio, the state created an office to help promote ESOPs. Since then, it has been done at 92 companies, for a total of more than 15,000 jobs.
Currently, about 10.5 million workers — or about 10 percent of the labor force — own part or all of their companies through an ESOP. Currently, the average ESOP assets are about $124,000 per worker, according to Douglas Kruse, a business professor at Rutgers University who studies the issue.
"There has been tremendous growth in our ESOP," said Estill, a driver for Schenectady Steel, which has done fabrication for the Schenectady casino and other construction projects in the Capital Region. Under an ESOP, workers at a company gradually accrue shares in the enterprise, and when they leave, redeem those shares for cash, so the shares can then be reallocated to incoming workers.
"People tend to stay here," said Estill. The cash-outs can be in the mid- to high-five figures, based on the worker's tenure. There is no employee contribution toward the program. Workers vest into the program after five years and are fully vested after six years.
John Phelps, the former owner of Schenectady Steel, was one of first businessmen to take advantage of the ESOP program in 1975, a year after it had been created by Congress as a way to benefit workers. Phelps transferred part of the company to the ESOP and a decade later, took the company into 100 percent employee ownership.
One of those workers was his own son, Steve, who started working there as a laborer in 1974, and just retired in 2016 after three decades as the shop foreman.
"This program is unbelievable," he said. "Everyone is on board, because they know this is their company. These are their welding machines. These are their cranes. And if something isn't right, that costs them."
Because of that concern, workers have an eye toward resolving problems quickly, said Phelps. "If a new hire isn't working out, you will hear about that right away," he said.
Claudio Zullo, president of the company, started working there part-time in college, and returned later. His father and brother also worked there. Currently, the company ESOP includes 48 workers, from Zullo on down.
"Under the ESOP, everyone has the same opportunity," said Zullo. "This encourages employee retention and provides everyone with a stake in the company's continued success."
https://www.timesunion.com/business/article/Gillibrand-backs-employee-ownership-plans-during-12875713.php
