▶ 0:16:08Chair Cassidy: The senate committee on health, education, labor, and pensions will please come to order. Strengthening american's retirement system is a bipartisan priority, republicans and democrats, we all agree that every worker deserves the ability to retire with dignity and security. Congress has made great progress in improving through retirement 2.0 but there's more. 86% of americans think that congress needs to focus more upon retirement.
▶ 0:16:41Chair Cassidy: One way to enhance our retirement system is, I like to say, give the worker the power. Making sure that they have financial security after finishing his/her career. A place where we expand opportunity for employee ownership is through supporting employee stock ownership plans. Retirement plans in which a company's employees collectively own stock.
▶ 0:17:06Chair Cassidy: About 11 million employees participate, including 39 thousand people in louisiana. I have somebody representing them on the panel. The louisiana who retired from then received a total sum of over 575 million dollars in payout plans in 2023.
▶ 0:17:26Chair Cassidy: An esop model is pro-worker, family, and business resulting in higher employee satisfaction, lower turnover, greater financial success putting more money directly into a worker's pocket. I'm proud of this. Louisiana senators, representatives, led the effort to create them when congress passed orissa.
▶ 0:17:57Chair Cassidy: One of our witnesses is the guy who was hustling when he was 22 years old to get cosponsors on both sides of the hill. We have that history today. We will hear from acadian companies from lafayette, louisiana giving first-hand testimony on aesop's empowering louisiana workers creating economic growth.
▶ 0:18:18Chair Cassidy: While they are proven to help workers succeed, outdated federal law makes it difficult for companies to implement the model without being in legal jeopardy. Congress required the employees benefit employee to develop clear regulations making it easier for esop to sell stock to their employees. It sounds like a joke.
▶ 0:18:44Chair Cassidy: 51 years later they have failed to put into place any rules on this issue despite repeated bipartisan requests from the committee and 51 years later they still have not done it. Additionally the erisa advisory council advising the department of labor on regulating employee benefit plans doesn't have esop representation.
▶ 0:19:09Chair Cassidy: Workers who are owner should have a seat at the table in shaping policies that affect the combination of a worker and owner. I am committed to enacting a pro-worker, pro-family agenda helping american succeed in their career and afterwards, which is why this committee is leading multiple efforts to strengthen esop's.
▶ 0:19:35Chair Cassidy: Senators marshall and cain leading legislation to clarify federal law insuring the esop's can share sales of -- shares of their company without frivolous lawsuits. I introduced two pieces of pro-worker legislation to better support esop's, the employee of your ship ownership act authorizes esop to provide generous and diversified benefits by permitting esop's to contribute into 401(k) plans without exceeding contribution limits.
▶ 0:20:01Chair Cassidy: As a result, the employees will save more money for retirement and can invest more in their employers' stock. The employer/employee representation act would add two more esop board members to the advisory council giving esop owners and workers representation to advocate for policies to improve their lives. I look forward to discussing these bills. Thank you for being here to highlight the power of esop's in creating a better life for workers and their families.
▶ 0:20:31Sen. Sanders: Thank, Mr. chairman at for holding this important hearing. One of the beautiful things about representing vermont as we have some of the best employee-owned companies in the country and I'm proud of that fact. I've met with employee-owned companies in vermont and I've never seen employees who take more pride in the work that they do from senior executives all the way down to the cashier and store clerk.
▶ 0:21:01Sen. Sanders: In a few moments I am delighted that we will hear from one of those companies, the king arthur baking company -- baking company in norwich, vermont. King arthur is not only an enormously successful baking company. What makes it so special is that it is directly owned by its employees, not some multibillionaire on wall street. Brock barton is one of our witnesses. Thank you so much for being here today. Mr.
▶ 0:21:31Sen. Sanders: Chairman, at a time when the gap between the very rich and everyone else in our country's growing wider, when millions of americans are falling further and further behind, when corporate america has outsourced millions of decent paying jobs overseas, and when the economy continues to struggle to create jobs that pay livable wage with good benefits, we need to expand the economic models that broadly benefit the middle class, not just the 1%.
▶ 0:22:00Sen. Sanders: I strongly believe that employee ownership is one of those models which has enormous economic potential and the potential to improve the lives of millions of workers. Mr. chairman, when employees own their own companies, when they work for themselves, when they are involved in the decision-making process rather than just being a cog in a machine, they are no longer just punching a time clock.
▶ 0:22:28Sen. Sanders: Unlike large corporations that have been shipping jobs overseas, employee-owned businesses are not shutting down and they are not moving their businesses to china, mexico, bling lid --, or other low-wage -- bangladesh, or other low-wage countries. Workers become more motivated. Absenteeism goes down. Worker productivity goes up, people stay on the jobs for a longer period of time. They are happier at their work, proud of what they are doing.
▶ 0:22:59Sen. Sanders: Further, employee-owned businesses boost morale because workers share in future profits and have greater control over their work life. Study after study has shown that employee ownership has been proven to increase employment, increase productivity, increase sales, increase wages in the U.S. I'm proud that the author of many of those studies is also here with us this morning, Dr. joseph blasi from the institute of employee ownership and profit sharing at rutgers university.
▶ 0:23:30Sen. Sanders: Thank you so much for being with us. For far too long, many corporations in this country believe that the bottom line is only the bottom line. The only thing that matters are short-term profits, dividends, and increasingly generous compensation packages for ceos. That type of greed come in my view, is not an economic model we should be embracing. In my view, we can and must do better.
▶ 0:24:00Sen. Sanders: That is why I hope that this hearing -- what I hope this hearing will begin to accomplish. Despite the role ownership can play in revitalizing our economy the federal government failed to commit the resources needed to allow this business model to realize its true potential, and I hope we can make significant improvements in that area.
▶ 0:24:19Sen. Sanders: That is why it introduced legislation today to provide the financial assistance workers need to own their own businesses through employee ownership stock, ownership plans, or worker-owned cooperatives. A lot of workers around this country would like to own their own companies and employers, people who started the business, would prefer everything being equal to give their businesses over to their workers. But now there are a lot of impediments in doing that.
▶ 0:24:49Sen. Sanders: Let me conclude, Mr. chairman, by doing something that I don't do often, quote ronald reagan. Are you ready for ronald reagan, guys?
▶ 0:24:57Chair Cassidy: There is hope for us, bernie.
▶ 0:25:00Sen. Sanders: In 1987 ronald reagan said, "I can't help but believe in the future we will see in the united states and throughout the western world an increasing trend towards the next logical step, employee ownership. It is a path that that benefits the free people." reagan was right 38 years ago. Let's do it.
▶ 0:25:25Chair Cassidy: Senator tuberville will introduce Mr. roark.
▶ 0:25:33Sen. Tuberville: I am proud to introduce an auburn man and constituent, Mr. bill roark, cofounder of george technologies inc., executive chairman of starfish holdings inc., and founder of freedom real estate capital llc he stays pretty busy. He is a champion for employee ownership and he has led multiple companies to national recognition through his core values. As the ceo of torch technologies Mr.
▶ 0:26:03Sen. Tuberville: Roark implemented an employee ownership program from companies -- from the company's inception with the goal of becoming a one hundred percent employee stock ownership plan. His company achieved that goal in just under 10 years. Mr. roark gained national attention for being named on the inaugural list of best of america's best small companies by forbes. During his tenure he received multiple business awards and was named the number one fastest growing privately held defense contractor in the southeast region.
▶ 0:26:37Sen. Tuberville: Providing superior research, development, engineering services to the department of defense. Mr. roark recently led them to become a certified evergreen company achieving its long-term commitment to 100% employee ownership and pledged to remain privately held to ensure enduring stability and opportunity for its workforce. This milestone came as torch celebrated its 20th anniversary.
▶ 0:27:03Sen. Tuberville: A true believer in company culture and employee well-being, Mr. roark has prioritized top-tier benefits and working conditions throughout his career. Mr. roark also founded starfish holdings inc., a holding company that provides beneficial ownership's to employees across all of his portfolios through an esop structure. It now includes torch technologies inc. Mr.
▶ 0:27:33Sen. Tuberville: Roark has a proven track record with a common denominator of building companies where employees can thrive and retire with dignity and find a lasting purpose in their work. Thank you for being here today, Mr. roark. [indiscernible]
▶ 0:27:58Chair Cassidy: We will introduce each speaker as they give their testimonies. Mr. roark, will you give your testimony?
▶ 0:28:06Mr. Roark: Chairman cassidy, ranking member sanders, distinguished members of this committee, thank you for the invitation to share my experience as the cofounder of torch technologies and the profound impact that employee ownership has had on our company. I appreciate your efforts to spotlight esop's and legislation that can sustain and grow existing employee owned companies while encouraging more companies to adopt this model. My name is bill roark and I live in huntsville, alabama.
▶ 0:28:36Mr. Roark: My journey began over 40 years ago as a young engineer and eventually an executive for the defense contractor. In 2002, I cofounded torch technologies just after I was laid off following an acquisition. To prevent this from happening to our employees, we established torch as an employee-owned company implementing an esop that would allow us to exit without selling the company. From day one, every employee had the opportunity to be an owner.
▶ 0:29:03Mr. Roark: Our esop was formally established in 2000 four and we became 100% esop in 2011. This fulfilled a commitment that we made to our employees on a cocktail napkin in a local diner when we started the company. The ownership model has been a driving force behind our rapid growth. We are number 57 on the washington technology top 100 government contractors list.
▶ 0:29:27Mr. Roark: Torch is a mid tier defense contractor headquartered in huntsville, strategically located to support redstone arsenal. Our annual revenue currently exceeds 800 million dollars. We received numerous local and national best places to work awards as well as business awards, including 15 consecutive years on the 5000 for outstanding business grows. Wth.
▶ 0:29:57Mr. Roark: We also have significant presence in members of the committee's locations in florida, colorado springs, dayton, ohio, massachusetts, montgomery, alabama. Overall we support multiple military bases and commands in more than 20 states. And overseas. Our employees play crucial roles in advancing state-of-the-art capabilities for our war fighters by delivering superior r&d engineering services and solutions.
▶ 0:30:26Mr. Roark: We provide rapid prototyping and advanced capabilities from concept development to the building and sustainment. The success of torch is directly tied to employee ownership, which gives every employee a stake in the outcome. We recently certified an evergreen company, that commits us to remain in business for the next 100 years.
▶ 0:30:47Mr. Roark: Additionally, we became a public benefit corporation dedicating ourselves to the financial success of our employees, outstanding service to our nation's defense, and support for the communities where we operate. We are also committed to helping other companies become esop's. My book, built with purpose, details this journey and my commitment to building companies where employees can thrive, retire with dignity, and find lasting purpose in their work.
▶ 0:31:15Mr. Roark: This passion led me to serve on the board of the employee as corporations of america. Torch's leadership has connected with companies with similar stories. Esop's were created 30 years ago and there have been significant increases among those companies and worker savings, wealth, wage equality, and economic benefits.
▶ 0:31:43Mr. Roark: We applaud chairman cassidy's legislation to reduce tax code barriers to savings and providing a sop -- esop' a voice on the erisa counsel. Torch supports a bipartisan legislation sponsored by senator zidane's hassan which would encourage more employee ownership by providing incentives for s corporation business owners to sell to an
▶ 0:32:13Mr. Roark: Esop or be acquired by an esop company. This initiative long supported by erisa would allow workers to enjoy benefits and retirement savings that we had torch have experienced through employee ownership and we would appreciate the opportunity to collaborate with committee leaders to communicate to the white house the vital importance of employee ownership, creating platforms such as last year's white house convening on worker ownership to further promote this initiative. Mr.
▶ 0:32:43Mr. Roark: Chairman, committee members, thank you for allowing me to share this story. I urge your consideration and support for bipartisan legislation that enables more hard-working americans to share in the american dream at work. Let's keep that dream alive.
▶ 0:32:59Chair Cassidy: Thank you, sir. At first I thought that coach only picked you because you are an auburn person but now I realize you actually have a story to tell. It is my privilege to introduce someone from louisiana, eddy dupuis, chief executive officer of acadian companies. He joined acadian in two thousand nine, a ground and air ambulance service based in lafayette, louisiana.
▶ 0:33:27Chair Cassidy: Of course, his position, chief executive officer, gives some insight into acadian's esop through its financial and oversight roles in the company. He graduated from the university of southwest louisiana and university of louisiana with a bachelor of science in business administration. Thank you, Mr. dupuis. I look forward to hearing from you.
▶ 0:33:51Mr. Dupuis: Chairman cassidy, ranking member sanders, members of the committee, thank you for inviting me to share my experience as the ceo of acadian ambulance service and the impact that employee ownership has had on acadian' is growth, culture of compassion in our home state of louisiana. My name is eddy dupuis and I joined acadian in 2007 and I became the company's ceo last year after serving for five years as its cfo.
▶ 0:34:19Mr. Dupuis: I welcome this opportunity to highlight the esop model and promote legislation that can help sustain and grow existing esop companies and encourage more businesses to become employee-owned. Acadian's story begins in 1970 one in response to a medical transport crisis. New federal regulations caused funeral homes to discontinue providing ambulance services, leaving a gap in emergency services in smaller communities across the country.
▶ 0:34:47Mr. Dupuis: Acadian started with the two ambulances and eight medics. We have steadily grown to over 750 ambulances and 5000 employees, serving parishes and counties in louisiana, mississippi, tennessee, and texas. Our safety, security, mobile health divisions operate nationwide. It's our vision for the name acadian to be synonymous with the best health, safety, security services anywhere in the world.
▶ 0:35:15Mr. Dupuis: We work side-by-side with other first responders, area hospitals, ems associations, accreditation agencies, civic leaders to become interlocal partners in our communities. We support local charities and provide community services, such as standing by at high school football games. One hurricanes and natural disasters strike acadian evaluates the vulnerable and provides emergency response afterwards.
▶ 0:35:42Mr. Dupuis: By 1993, acadian achieved a level of success that led our founders, who understood our workforce was our biggest asset, to transition ownership of the company to an esop. This fostered a culture where acadian employee owners see every day as an opportunity to make a difference, to invest in their future, and build the company together. In fact, during a rigorous accreditation process, an ambulance crew member was asked if he ever had the opportunity to speak to the owner.
▶ 0:36:11Mr. Dupuis: His reply embodies the goal of esop's. Every day, he said. I am an owner. This new ownership structure was a natural complement to what our employees were already achieving, and now they had a financial stake in their actions.
▶ 0:36:26Mr. Dupuis: The employee-owned as corporations of america has conducted research that shows in the 30 years since america created s's esop there is an increase in wealth equality and significant economic benefits. Our own results bear this out. Since the 27 years of becoming an s corp esop, acadian has grown at a faster pace than the previous 27 years.
▶ 0:36:57Mr. Dupuis: As employees began to retire and receive meaningful distributions from the esop, the ownership culture solidified. Acadian benefits in the area of recruitment and retention of staff. The esop coupled with our 401(k) allows us to differentiate from the market for talent. Retention speaks for itself. At our recent company meeting we recognized 20 eight employees celebrating 20 years of service, 12 with 25 years, 12 with 30 years, 16 with over 35 years.
▶ 0:37:29Mr. Dupuis: The institutional knowledge and experience of these employees is invaluable to our operations. Given the success and prosperity that the esop has brought to our company and employees, acadian resoundingly supports the work on promotion and expansion of private employee ownership act, bipartisan legislation responded to by senators daines and hassan providing incentives to s corporation owners to sell to an
▶ 0:38:00Mr. Dupuis: Esop or become acquired by an esop company looking to transition out of the business. Acadian would like to join them in applauding the pair of esop bills that would reduce tax code barriers to savings and give esop's a voice on the erisa advisory council and thank senator sanders for his long-term efforts to grow the community of esop companies and encourage the department of labor to support esop's with the employee ownership initiative program.
▶ 0:38:30Mr. Dupuis: In conclusion, Mr. chairman, members of the committee, thank you for the opportunity to address you today. I look forward to a continued conversation on the impact of esop's on american workers' success and for your support of legislation to sustain and enhance the employee ownership model.
▶ 0:38:46Chair Cassidy: Senator sanders to introduce the democratic witnesses.
▶ 0:38:50Sen. Sanders: I would like to introduce brock barton, the ceo of king arthur baking company . He oversees the company's financial strategy and sits on the king arthur esop board of trustees. Thank you very much for being with us.
▶ 0:39:10Mr. Barton: I sincerely appreciate the opportunity to speak to you today in support of employee-owned businesses. I am brock barton, the chief financial officer at king arthur baking company in vermont. I've been with king arthur for 12 years. In addition to being a proud employee-owner I am the interest he of our esop. I sit on the board of directors on another employee-owned company in central maine.
▶ 0:39:39Mr. Barton: I pride myself on specializing in management and administration of esop's and importantly I believe in the philosophy that employee ownership improves corporate performance and employee engagement. King arthur baking has a long history, 230 years we've been providing bakers with superior ingredients and guidance since 1790. Our flour was once sold out of wooden barrels in boston and can now be found in almost every grocery store across the country.
▶ 0:40:08Mr. Barton: The company has grown from a regional company into a nationally recognized baking brand. Despite the storied history, I believe that one of its most important transitions in 1996 when the company was sold with its employees. They simply didn't hand over the business. They entrusted the employees with the legacy rooted in respect, trust, and the belief that shared ownership drives performance and purpose.
▶ 0:40:35Mr. Barton: Employee ownership has been the foundation of our success ever since. It fosters accountability, pride, commitment to our customers, partners, and communities. Each employee owner, with us for a few years or several decades, plays an important role in shaping our workplace and driving high-performance. As many of you know, there are many financial benefits of employee ownership, and they are usually defined, however, it's important to highlight culture.
▶ 0:41:03Mr. Barton: It's important to sustain this culture. King arthur has a culture committee, the eocc promoting ownership and empowerment through education, communication, and celebration. With almost 30 years of operating as an esop, king arthur and his proof that employee-owned businesses offer a sustainable and successful alternative to a traditional business structure.
▶ 0:41:30Mr. Barton: It has been more resilient and stable during economic downturns, it fostered a culture of engagement and empowerment, and it generates wealth for its employee owners. I want to end my time with two quick stories. I'm honored to be invited to many retirement parties. One event always sticks out. Our manufacturing building, and the one retiring had been working on our manufacturing floor for over 25 years.
▶ 0:42:01Mr. Barton: At the end of the event, she approached me with watery eyes. She said that someone like me doesn't have a retirement account like this. The comment was sincere, authentic, and I will never forget. King arthur and esop's has reset expectations and allows any employee, regardless of their role in the company, to thrive professionally and reap the rewards of their hard work once they reach retirement.
▶ 0:42:28Mr. Barton: The second, as part of our employee-owned core values, we share performance with our employees at monthly town meetings. In my tenure, the financials have been largely favorable but we are not immune to sluggish performance. One month in early 2022, commodity prices were high, post-pandemic baking had slowed slightly, and as a result financial results weren't meeting expectations. So, we talked about it.
▶ 0:42:58Mr. Barton: I got up in front of the employee owners and told the truth. There were initial looks of concern, but in seconds the conversation shifted from what does this mean to what can we do? There was no shortage of ideas. With these ideas, would they overcome a cap driven by a spike in wheat prices? Probably not, but the point was to hear hundreds of employees who didn't resigned to external pressures but decided to step into the challenge.
▶ 0:43:26Mr. Barton: It made me proud to be part of an engaged employee owned workforce. For the past 12 years I've witnessed the power of employee ownership, specifically in its ability to drive workplace engagement and by providing opportunities to build meaningful retirement accounts. By investing in this model I truly believe that we can build a stronger economy that works for everyone. Thank you so much for this opportunity to testify today and I welcome any questions.
▶ 0:43:50Sen. Sanders: I would like to introduce now Dr. joseph blasi, director emeritus at the institute for study of employee ownership and profit sharing at rutgers university and recently advising the department of treasury on employee ownership. He spent decades researching employee ownership and has authored numerous books on the topic. Dr. blasi, thank you for being with us.
▶ 0:44:15Mr. Blasi: Thank you very much, chairman senator cassidy and ranking member senator sanders, and members of the committee. At almost 76 years old I have been researching esop's on a bipartisan basis for 50 years across many administrations. The rutgers institute for the study of employee ownership and profit sharing is the foremost university institute studying these issues. Let's understand the scale of esop's in america.
▶ 0:44:43Mr. Blasi: The recent data finds about 15 million participants in esop's, 11 million active employees, 63 hundred esop corporations with 1.8 trillion in total assets. Of these, for our specific purposes today, about 5800 esop's are in closely held corporations not traded on public stock markets, about 2.4 million active employee participants, about one million retirees still receiving benefits.
▶ 0:45:10Mr. Blasi: Closely held esop's have about 477 billion in total plan assets, 332 billion in company stock, every 12 per worker 154 thousand dollars. Often, 51% to 100% employee owned. Average wealth after 10 years of service, based on the U.S. general social survey estimated at 300 $20,000 for esop worker. Our research shows a smaller esop's and larger corporations can produce significant wealth.
▶ 0:45:40Mr. Blasi: The nonprofit national center for employee ownership separately analyzed data that tracks our conclusions. We have seen over 50 years of research on esop's that they provide better retirement benefits, lower turnover, safer workplaces, and are more likely to deeply involve workers in participation and solving company problems. Second, our analysis of the U.S.
▶ 0:46:04Mr. Blasi: Government's health and retirement survey of workers over 50 years of age from 2008-2018, indicates esop participants have about doubled the retirement wealth in old age compared to non-esop participants. The national center for employee ownership found immediate esop account balances is significantly outpaced non-esop worker account balances in every income group and age group. Third, esop's are safer workplaces.
▶ 0:46:32Mr. Blasi: Using data from the occupational health and safety occupation injury-tracking population data from 2016-2019, esop's have 9% to 13 percent decrease in workplace safety incidents compared to non-esop's. Fourth, initial results from initial studies found a 20% increase in labor productivity when thousands of esop manufacturing establishments are compared to tens of thousands of non-esop manufacturing establishments.
▶ 0:47:03Mr. Blasi: Fifth, esop's appear to not replace diversified 401(k) plans and pension plans. Based on our analysis of the general social survey and 10 years of data on 401k plans. Our analysis of the U.S. general social survey indicates that 0% of esop workers report being laid off in the last year compared to 7% of non-esop workers.
▶ 0:47:29Mr. Blasi: 70% of esop workers have company-based training compared to 44% of non-esop workers. 38 percent of esop workers participate in highly involved employee involvement teams to solve problems compared to 26% of non-esop workers. 71 percent of esop workers have annual cash profit sharing compared to 34% of non-esop workers.
▶ 0:47:55Mr. Blasi: Seventh, esop growth among closely held esop corporations has been pretty flat with an average of 220 one new assad's, 31,000 new employees every year. Dr. corey rosen for the national center of employee ownership found esop's are acquiring other esop's of the number may go down but total assets and plans may be going up.
▶ 0:48:18Mr. Blasi: Using census data, the institute, the rutgers institute study found 52% of business owners are close to retirement, and the 130 7000 businesses with a 33 million employees and about $15 trillion in sales, 2 trillion dollars in payroll are potentially esopable, a huge potential thing for american workers. Why this huge gap between esop potential and adoption?
▶ 0:48:44Mr. Blasi: We concluded a lack of awareness of the esop possibility, lack of clarity about a deal well enforcement regarding evaluations, the inability of retired business owners to borrow sufficient funds to effectuate 100% employee by outcome of these are part of the situation.
▶ 0:49:01Mr. Blasi: My personal policy analysis suggests that legislation that makes it easier to finance esop's such as the proposed employee financing act in american ownership resilience act, aspects of the work act and removing esop barriers to shareprice evaluations, efforts to increase awareness on the expanded esop initiative, de-li nk contribution limits, and proposals to expand the esop
▶ 0:49:32Mr. Blasi: Advisory council will all address this really huge gap. Thank you. This is the high honor of my career to testify before you.
▶ 0:49:40Sen. Sanders: I will defer to senator tuberville to ask.
▶ 0:49:47Sen. Tuberville: . Gentlemen, thank you for being here. It's an important topic. Mr. roark, it has to be -- it has to be mind-calming to know if you work at an esop that if owners exit the company not everyone will lose their job. What security does an esop structure have for all employees that you've seen? Some examples?
▶ 0:50:15Mr. Roark: We work real hard to build a succession plan in that prepares our employees as people retire to step forward. That is a challenge, one of the biggest challenges that we've had has led to people retiring early so we had to work that problem a little harder. Training people ready to step into a role.
▶ 0:50:43Mr. Roark: The departure of employees who are retiring creates lots of opportunities for the other employees to accelerate in their career quicker. Successful esop actually creates a lot of successful careers. It also creates the ability for employees to retire with dignity. In fact, the announcement of this hearing went out on our social media last night.
▶ 0:51:12Mr. Roark: One of the posts this morning I will quote for you. It says one of our retired employees from several years ago, tell them how much you helped us retire with dignity. That to me is the essence of why I wanted to do this. Some 25 years ago a company about the company I worked for.
▶ 0:51:35Mr. Roark: A few months after it was bought -- I had a successful career going from entry-level to an executive. I was the president of an operating segment. In that time I had one of the most successful careers of anyone at that company.
▶ 0:51:53Mr. Roark: As that acquisition evolved and I was there, I was shortly thereafter walked to the door and told as I was handed my severance check that we will pack your office and send your stuff home. When I started this company, at the core of what I wanted was I wanted people to retire with dignity. When I stood on that corner I didn't feel very dignified.
▶ 0:52:23Mr. Roark: When I meet an employee in the grocery store, I want them to hug me, not run from me. With the esop, I get lots of hugs. Every year when the esop statements come out, I get a lot of hugs. This is a different way of doing business. I never want to see an employee walked to the door and such an undignified manner. I had put my whole life into that company.
▶ 0:52:52Mr. Roark: Several times I had worked 24 hours straight to get out a delivery on time. Was that respected? No. Stuff showed up in boxes, a bunch of crap I didn't really want. It wasn't dignified at all. I hope that answers your question, coach.
▶ 0:53:10Sen. Tuberville: How can we help on the federal level to make the esop structure more viable?
▶ 0:53:16Mr. Roark: I think there are lots of ideas being proposed in several bills. Making this easier, making it clearer in what we are supposed to do -- there is a lot of murkiness in the bills.
▶ 0:53:31Mr. Roark: One of the things for us in the last few years, we've been in a position where we can contribute more than the maximum allowable to our employees, and that creates an issue with the esop itself. If it is limited to 25% I can only give 25%. If it was higher in some cases I would have given higher, including this year.
▶ 0:54:00Mr. Roark: There are some pieces where we can fine tune some things. The esop is a wonderful tool. It provides stability for the employees and a retirement for them. I think the more that we can refine the regulations around it to encourage people to be able to do this, clear up the rules on how the evaluations are done so that it's clear what needs to be done, I think those would be great helps.
▶ 0:54:31Sen. Tuberville: Thank you, Mr. chairman.
▶ 0:54:33Chair Cassidy: Senator sanders.
▶ 0:54:36Sen. Sanders: I will pick up on senator tuberville's question. Before that, Mr. roark you hit the nail on the head. You used the word dignity many times. You put your life into a company. A change of ownership, you are out the door in a very disrespectful way. I think what employee ownership, esops are about, is empowering workers to say you are just a cog in the machine.
▶ 0:55:06Sen. Sanders: You have a say about how the company runs. You are a decision-maker, not just a worker, and that is a big deal. Let's talk to blasi from this side to that side. Senator cassidy, I, and others on the committee have legislation, but forget the legislation for a moment. If you had your wish, what should the federal government be doing to expand the concept of employee ownership and esops. Be brief.
▶ 0:55:37Sen. Sanders: I would like to hear from everyone. Microphone.
▶ 0:55:40Dr. Blasi: Given the huge potential of trillions of dollars of companies that could potentially be owned by esops, we need significant loan and loan guarantee programs to make this possible. Secondly, and this is my personal opinion, we need clarity about the valuation and adequate consideration is really something that needs to be resolved.
▶ 0:56:09Sen. Sanders: Mr. barton.
▶ 0:56:12Mr. Barton: I would second on the clarity point. I think that that is understanding the guidelines would be a huge benefit. For me, education and awareness. Obviously, there are barriers to entry to all areas of business, but I feel with esops --
▶ 0:56:33Sen. Sanders: Do you think there are a lot of workers and owners, people who started a business and everything being equal would like to leave their business to their employees if they could, do you think there is to the awareness about that that there should be in this country?
▶ 0:56:48Mr. Barton: No, I don't think there is enough. If someone truly wants to invest time and resources into determining, I think that the resources are out there, but I think there are enough barriers to distract owners from going down that path.
▶ 0:57:07Mr. Dupuis: I will echo that. I think that awareness would certainly help in the community. I think that simplicity would certainly help. These are complex transactions. The easier we make it through legislation otherwise to help companies form esops would be helpful. Obviously, we need some of this legislation to be passed.
▶ 0:57:33Mr. Dupuis: Bipartisan approval, an attempt to move some of this forward, all of the legislation that the speakers have mentioned, and myself today, were all positive and leading in the right direction, we would just like to see them come to fruition.
▶ 0:57:45Mr. Roark: I think we have a lot of good suggestions here. I would add one more. We have the ability as a seaport to defer taxes. When a seaport converts there are many other types of businesses out there who have the potential to become employee owned that are not seaports. It would be nice to have that as an incentive to encourage people to go. Clarification around the valuation is vital.
▶ 0:58:17Mr. Roark: I know businesses who have been afraid to go because of concerns about the alternative.
▶ 0:58:29Sen. Sanders: Is there anything we didn't discuss that you would like to throw out here? Ok. Thank you, Mr. chairman.
▶ 0:58:34Chair Cassidy: Senator husted.
▶ 0:58:39Sen. Husted: I would like to thank you and the ranking member for making this a priority. I think the esops are one of the most virtuous forms of capitalism in america. If you look at the information, you can see that it is good for the employees. The companies tend to do better than those who have been exited with a private equity investment.
▶ 0:59:08Sen. Husted: I would like if any of you have thoughts about the difference in the marketplace between an exit that involves a private equity exit versus an esop exit and what that means. I hope that we will get this accomplished, because I believe that there is a lack of awareness about the esop option and that there is friction.
▶ 0:59:36Sen. Husted: The company owners I encounter most are usually family owners. They have a family business. There is not someone to take it over. They would like to exit. They have a private equity option. They have an esop option. If it's more difficult for them to do an esop, they are less likely to do it. If it's easier for them, they can. We also would like you to address the diversity.
▶ 1:00:07Sen. Husted: Capitalism is hard. Running a business is hard. Sometimes they fail because of markets and other factors. How do you protect for the diversification for some of the employees as you are looking at not having all of their eggs in one basket. If anyone has a thought on that, please share. Sure.
▶ 1:00:33Dr. Blasi: Thank you for your question. I will take the diversification issue first. It is important with esops, the research we have I placed into the record that shows esops, 70% tend to have separate 401(k) plans. When esop companies contribute to 401(k) plans they have significantly higher balances than non-esop companies.
▶ 1:01:02Dr. Blasi: More esops have workers with defined benefit plans. Esops are not to the disadvantage of other retirements. It is important to recognize the workers are not buying stock with their savings and wages with virtually all esops. That reduces some of the risk.
▶ 1:01:25Dr. Blasi: Lastly, we have seen esop companies to diversify acquire other companies whose businesses are countercyclical to their own. That is something that requires a lot of future planning. Every esop company should have a committee to plan for when the market changes, because capitalism changes and new things happen. If you plan for it, you can do a better job.
▶ 1:01:50Sen. Husted: Go ahead.
▶ 1:01:52Dr. Blasi: I am ok.
▶ 1:01:56Mr. Barton: On the diversification piece as a sample size of one at king arthur, design required options that you have to offer someone who is 55 years of age with 10 years of experience, they can diversify. At king arthur we have taken that one step further and amended our plan to bring the age to 40 years.
▶ 1:02:21Mr. Barton: It's not a diversification it is a redistribution, but that allows the younger workforce to diversify some.
▶ 1:02:33Mr. Dupuis: Private equity versus an esop, an esop is a longer-term transition. You will have a different goal in moving your company to an esop, meaning you probably want to continue the culture, leadership, in even maybe as an owner into the life of the esop. To me that's longer-term.
▶ 1:03:03Mr. Dupuis: A private equity transaction will also have a completely different objective, because typically that is a shorter-term hold. There is the difference. It boils down to, what does the owner want to establish for his company?
▶ 1:03:13Sen. Husted: Do you know someone who wanted to do an esop in the rules were so difficult that they decided otherwise? Have you encountered that?
▶ 1:03:22Mr. Roark: I have seen that at least a couple of times around the valuation issues that I mentioned earlier. We have multiple, additional opportunities to diversify I think starting at age 45. Beyond 55, once you are 55 you can diversify once a year until the end. We bring in investment advisors to counsel our employees about the need to diversify.
▶ 1:03:55Mr. Roark: However, we have outperformed the market so much that we have had very little success in getting people to diversify.
▶ 1:04:01Sen. Husted: Thank you, Mr. chairman.
▶ 1:04:04Chair Cassidy: Senator hassan.
▶ 1:04:07Sen. Hassan: Welcome, thank you Mr. chair and ranking member sanders for this hearing. My first question was going to be one that you have already answered about barriers to more companies becoming esops.
▶ 1:04:24Sen. Hassan: I wanted to note for all of you, also my colleagues, that senator daines and I have a bipartisan bill that would incentivize business owners to provide stock ownership plans, because it would deal with some of the difference between an s corporation and a c corporation.
▶ 1:04:43Sen. Hassan: Allowing s corporations to get the same tax treatment when people sell stock back to the company so it can be used for the esop is something we are working on and I look forward to working on it with my colleagues here. Mr. burton, king arthur baking company was founded in 1790 and has employed many granite stators. You met one this morning who is now on my staff. Over the years, contributing to new hampshire's economic success and vermont's and the region's.
▶ 1:05:14Sen. Hassan: The company transitioned to an esop in the mid-1990's. You have nearly 30 years of insight into the benefits of being an employee-owned company. I came in at the end of your testimony and you talked about a little of them. In response to senator who -- senator who -- senator husted you did as well.
▶ 1:05:37Mr. Barton: It is my second story that I think was the core of the answer to how our teams step into the challenges. Yeah, in the example that I gave there were wild swings in wheat futures and the cost would be impossible to overcome, but it was more of the mindset and ability to chip away at
▶ 1:06:08Mr. Barton: Deficits, and create an environment where everyone is comfortable stepping in. It might not be that all of our 400 employees get a say in every decision, but there are forums within departments, teams, the company so that our employee owners feel welcome to step into those challenges, feel empowered , be educated on how we can move forward.
▶ 1:06:32Sen. Hassan: Cell, it provides some stability that you might not see in other companies -- so, they provide some stability that you might not see and other companies. Esops help build wealth for workers regardless of their position in the company. Making sure that entry-level workers can join a benefit from profit gains and growth is the strength of the esop model.
▶ 1:06:54Sen. Hassan: You articulated, if someone were asking you in a couple of simple sentences to answer this question, how would you? How does an esop help workers at all levels share in a company's success?
▶ 1:07:10Dr. Blasi: Because they get greater retirement security by sharing in the increased value of the company, and also because 70% of esop companies offer cash profit sharing to their employees. More esop companies -- we did a survey together with the esop association -- offered more than 10% of salary cash profit sharing per year. Esop companies are employee owned but also share companies.
▶ 1:07:40Sen. Hassan: Thank you very much. You have been asked this several times. As you have been listening to each other's testimony, any barriers to esop formation that we haven't talked about that you want to get out on the table? You have covered a lot, so I wanted to make sure that you had the opportunity. Mr. blasi?
▶ 1:08:01Dr. Blasi: If you look across the cabinet departments, the federal government that touches businesses, most of them do a really bad job of sharing information on esops.
▶ 1:08:13Sen. Hassan: That is very helpful. Thank you, Mr. chair.
▶ 1:08:20Sen. Marshall: Another red letter day that senator sanders and I agree on something. We have to mark these days it down. I appreciate both of your leadership on this. Of all of the business models out there come esop is one of my favorite. When I go visit them, the employees have a hop in their step. It is more than just getting a paycheck. They are working for the future. I bet you have incredible employee and customer satisfaction because of those esops.
▶ 1:08:50Sen. Marshall: It is an area that I dove into before I got here. As I was looking towards economic development in small communities. What can be done from keeping these companies being sold to the east coast or west coast companies, and even more concern is ownership out of the country. What I found was president reagan, that's a reason he wanted to expand the use was to prevent the foreign ownership of local companies and keep jobs there.
▶ 1:09:20Sen. Marshall: Congratulations to all of the esops. 6000 employee owners in kansas, eagle radio, inland tracking, and I could go on and on. You can tell an esop company the second that you walk through the door. How you are greeted. They provide security, boost wages, and an incredible retirement plan.
▶ 1:09:47Sen. Marshall: I want to address our retirement through ownership act, and thank you, senator kaine, for your leadership. This is something that should become law. As I understand, if you're not a publicly traded esop and you have to do an evaluation of this company, it's a challenge. Mr. roark, could you help address why this is important, that we address this valuation issue?
▶ 1:10:11Mr. Roark: Yes, it's very important. One of the challenges as you go through this is the uncertainty --
▶ 1:10:18Sen. Marshall: Is your mic on?
▶ 1:10:22Mr. Roark: Maybe I need to lean in. One of the challenges as you go through the uncertainty is the nervousness and the fear of being sued. One of the concerns that I have is, a person who wants to remain as an esop long-term, is if the valuation comes in too low, someone from the outside may offer such a substantial offer that I would be forced into looking at a sale.
▶ 1:10:54Mr. Roark: It would be nice if those things were well defined and that we could get a valuation more consistent with the public markets. Maybe it doesn't need to be quite as high as the public markets, but it needs to be reasonable. There is often uncertainty in those valuations.
▶ 1:11:11Sen. Marshall: You want to get the right valuation. Mr. dupuis, do you have anything you would like to add to the importance of this issue?
▶ 1:11:18Mr. Dupuis: No, I don't, but that is an issue that I've come across. The question that came up earlier is, do we experience companies that are hesitant to do this? I will tell you in my 20-ish years with acadian, I probably spoken to about eight or 10 companies that, once I went through the explanation of how it worked, they kind of shied away from it. I don't think any of them went.
▶ 1:11:44Sen. Marshall: It creates uncertainty I believe is the word that I would use. We have been waiting for over 50 years for a little clarification. Exactly. Mr. barton, you have king arthur baking company. I wonder, could you speak to how good kansas wheat is? That it has a high protein content, the best for baking? Anything you want to add about how good kansas wheat is for baking?
▶ 1:12:11Mr. Barton: No objections whatsoever. We have many, many partners in kansas.
▶ 1:12:17Sen. Marshall: I always bragged that kansas has high protein in it. It is one reason why kansas wheat is better than french wheat. It truly is better for baking.
▶ 1:12:28Mr. Barton: Absolutely. One of our claims to fame and one of the reasons why bakers continue to come back is our consistency and protein. We don't necessarily have swings like other flours and we have your farmers to thank for that.
▶ 1:12:44Sen. Marshall: If you have a wedding cake and this is your big event you need consistent protein in the flour.
▶ 1:12:51Mr. Barton: 100%.
▶ 1:12:53Sen. Marshall: Thank you for agreeing with me. Mr. blasi, what are your biggest challenges right now is an esop? And it can be beyond right now. What challenges are you seeing in your organization?
▶ 1:13:10Dr. Blasi: Esop companies have to figure out how to have a supportive corporate culture, employee participation in solving real company problems at the job level, department level where employees can make an important difference. Esop companies need to look towards expanding profit sharing and gainsharing from short-term results. Combining corporate culture with the greater financial advantage to employees.
▶ 1:13:36Sen. Marshall: I want to apologize. I was hoping that you would say the cost of health care. That we need more transparency in health care. Thank you for joining us and we are routing you want. -- rooting you on.
▶ 1:13:51Sen. Kaine: Thank you for holding this hearing. It's important. For me this hearing crystallizes why I have never been comfortable with the label capitalist or capitalism to describe what our system should be. I don't think that capital should be at the top of the pyramid. Capital is really important, but talent, labor, creativity, innovation is really important. I will call it humanity.
▶ 1:14:21Sen. Kaine: I think that capital c1 to say capitalism is the top value I don't think it's really accurate and I think this testimony today and your own experiences is a really different model that put humanity at the top -- puts humanity at the top of the period.
▶ 1:14:45Sen. Kaine: We've got about two esops esops hundred 50 -- 250 esops really active in virginia. Wiley wilson is an architecture firm. They have done a lot of federal contracting work back in 2000, the majority owner was thinking about selling and considered a lot of options and one of the prime contending options was a large foreign firm but in the
▶ 1:15:16Sen. Kaine: End they decided to go the esop route. What that owner have been as committed to maintaining a strong virginia presence, as committed to growing their employees' wealth? Maybe, but probably in all likelihood not as much as the esop model. It building supply company with cabinets and other surprise, they became 100% esop in 1985.
▶ 1:15:48Sen. Kaine: They were looking at a lot of exit options. One of the employees went to the owner and said, let's explore and go esop. They took a 20 year loan to buy the company, they paid it back in 12. Since they have converted to esop they have contributed to the plan, paying back the initial debt six times over to pay back the debt and employees.
▶ 1:16:20Sen. Kaine: Right now they have more than 20 employees at the company with a million-dollar balance and ownership of the company. The average is they have a balance in excess of $100,000 in ownership. I applaud my colleague to deal with this valuation question. They were charged by congress with developing a regulation.
▶ 1:16:56Sen. Kaine: They have started it a couple of times. We have a lot of experts in the room but we also have some that are not experts. We have an owner entitled to fair market value from his business. You can get offers.
▶ 1:17:16Sen. Kaine: The owner shouldn't be forced to sell it at a big discount, the owner should get adequate consideration much is the owner would if they were exploring other action -- exit options, but because it involves employees taking on a lot of debt, you don't want the owner to charge more than the company is worth with individuals with employees taking on more debt than they should.
▶ 1:17:43Sen. Kaine: You are trying to get them to not sell at a discount but also not putting too much on the employees who have to pay it back so it is really important to have valuation standards. The bill that we have introduced would basically take a whole lot of existing irs law about how you value shares in closely held corporations and set of guidelines to sell to the employees.
▶ 1:18:12Sen. Kaine: We would not forestall the ability to do additional guidance should they choose to. We would use well accepted irs principles and what we would do is give a seller a safe harbor. If you follow the provisions in the legislation, then somebody can't come back against you years later and say, you charged us too much and you put too much debt on the shoulders of employees.
▶ 1:18:44Sen. Kaine: You said you have known folks who have said they decided not to go the esop route because evaluation uncertainty. We are using well-established irs principles and allow future or tightening up.
▶ 1:19:13Sen. Kaine: I hope my colleagues my support it, but thank you all for sharing your stories because I think these are all very powerful stories showing that up -- at the top of the period it should be humanity and capital should serve humanity and not vice versa. >> thank you. I will take my turn now.
▶ 1:19:33Sen. Kaine: For those people watching, we've talked about a corporate governance, not as an there is a corporation was somebody at the top, but almost a committee of the whole, I'm sure it varies but at times a company feels as if it may exit a line of business. I don't know if you have done that but you may exit a geographic location which you were formerly in now. How do you manage that?
▶ 1:20:07Sen. Kaine: Tell us that. >> we don't operate plans or facilities that have large numbers that could be displaced. On occasion our contract may not be renewed.
▶ 1:20:26Sen. Kaine: Fortune and in our case that we are under a shortage of medics and paramedics to take employees to use them elsewhere. Senator, we have not come across that specific issue.
▶ 1:20:47Chair Cassidy: There is a price of wheat in kansas that went to high. Did you opt to do layoffs did people voluntarily cut my pay? >> there were no layoffs.
▶ 1:21:11Chair Cassidy: There was a reference with public companies required for quarterly reporting and quarterly targets, we obviously have those targets but our financial model is built on sustainability, not built on meeting quarterly targets. That has certainly helped us through. Fiscal year 2022 was not a great year but we strengthened our foundation and set aside for future success.
▶ 1:21:44Chair Cassidy: Allowing financial performance to dip slightly. >> you mentioned the need for financial markets. I think you are proposing something different than those two. Tell us the shortcomings of using a traditional bank or bonding or whatever.
▶ 1:22:15Chair Cassidy: >> thank you for that question, it is really a core question. The small business administration has generally not been friendly to financing esop 's. That is not a really good route.
▶ 1:22:37Chair Cassidy: Secondly, most esop's if they are still manufacturing esop's or service esop's don't have the hard assets to get more than 40% or 60% of the capital needed to do a leveraged buyout.
▶ 1:22:57Chair Cassidy: There is a certain amount of discipline there. The U.S. government has a bad history, politically motivated, turned out not so well. And then that burns everybody and we start passing on things we maybe should do. If we correct the valuation because that seems to be a lender.
▶ 1:23:26Chair Cassidy: We have the kane marshall bill and the correct purchase price my side is kind of nervous about this, as opposed to inject the federal government into it could be political.
▶ 1:23:40Dr. Blasi: I see where you are going. I'm not an investment banker so I don't want to give a definitive response but I have studied these kinds of transactions and I have done interviews with these kind of those who have done them. It is hard for a potential esop transaction to get the capital to effectuate a majority or 100% buyout in a retiring business.
▶ 1:24:09Chair Cassidy: In that answer you applied -- implied the buyout could be 100%. With maybe a game plan to sell in the future.
▶ 1:24:22Dr. Blasi: That is absolutely true and there are some wonderful examples. Family businesses like profit-sharing, employee ownership.
▶ 1:24:39Chair Cassidy: So the federal loan program would allow the luxury of 100%, but the absence of that program does not necessarily eliminate the ability to create an esop?
▶ 1:24:54Dr. Blasi: Probably in some cases, yes, sir.
▶ 1:24:57Chair Cassidy: Senator hickenlooper.
▶ 1:25:00Senator Hickenlooper: Thank you, Mr. chair. I could not be more enthusiastic about your willingness to come here and talk about this. As one of the huge true small intrapreneurs with small businesses left in the senate, I put everything on the line and created that bond with my employees and we have all different manners, we got going pretty far.
▶ 1:25:32Senator Hickenlooper: I was reading jack's textbook "the great game of business" and drove out to springfield, missouri, in pursuit of how to do that in a company, which we did copy. And I respect and hold in high regard the relationship between management and employees and the people that own the stock.
▶ 1:26:04Senator Hickenlooper: They do have an alignment. I know senator hassan was talking a little bit about corporations and how we need to solve for that. We had a number of different restaurants.
▶ 1:26:27Senator Hickenlooper: I wanted to point out, I'm not sure how well you know colorado's state laws, but we have a number of different incentives that the state provides, education, training I thought I would ask, what other state initiatives have you heard of that would be helpful to
▶ 1:26:58Senator Hickenlooper: Yours and similar companies across the country. What should we be looking at in addition and be quick, don't be too long. If you don't have a lot of answers, that's all right, we will move to the next question.
▶ 1:27:13Mr. Roark: We do have a fairly sizable presence in colorado. In the colorado springs area.
▶ 1:27:25Sen. Hickenlooper: I know it.
▶ 1:27:26Mr. Roark: I don't know that I have much to add to that. I would let these other gentlemen see what they have to say.
▶ 1:27:38Mr. Dupuis: It will be a short response as well. Nothing toward esop's specifically.
▶ 1:27:47Mr. Barton: Fun fact, we are opening up two pop-up stores in colorado coming soon, this holiday season. We are very excited for that.
▶ 1:27:59Sen. Hickenlooper: Opening pop-ups in colorado, I want to make sure we are getting that out there.
▶ 1:28:06Mr. Barton: I don't have much to add. I mentioned it earlier. It is a broad umbrella. Looking for succession planning. It is just kind of broadening and promoting division. I can't speak to any specific initiatives out there.
▶ 1:28:38Sen. Hickenlooper: I'm hearing from all three of you we need to get awareness raised and whether we do that through the irs, there are a lot of different forms that could take but I appreciate that. Dr. blasi, there have been a bunch of studies, research ownership. Ownership of different demographic groups.
▶ 1:29:11Sen. Hickenlooper: Can you talk about the research and the impact on workers who do participate?
▶ 1:29:17Dr. Blasi: Yes, we did one interesting study funded by the cornflake people. And found that esop's allowed them to be more involved in investing in families with children, so esop wealth has a specific impact on families with children.
▶ 1:29:42Sen. Hickenlooper: I love that, thank you. Last question and I will probably get cut off because the chairman can be a little authoritarian here. Again, we have seen breweries in colorado, we have had a lot of esop's within brewing industry. Are there other industries with other parts of the country that are especially receptive to esop's?
▶ 1:30:07Dr. Blasi: Esop's are highly concentrated in U.S. manufacturing and it showed a huge increase in productivity, they are highly concentrated in affectional service corporations. Most people don't understand that. Once you get a group of companies they start developing a whole focus on an industry.
▶ 1:30:35Dr. Blasi: We heard about kansas with a lot of significant construction company so there is a lot of potential.
▶ 1:30:41Sen. Hickenlooper: Thank you, I healed back to the chair. I also ask unanimous consent to enter into the record a statement from the employee owned s corporations of america in support of the ranking member's legislation.
▶ 1:31:00Chair Cassidy: Without objection. Senator markey.
▶ 1:31:05Senator Markey: Thank you very much and thank you for taking a look at how to support employee ownership. In massachusetts, we have over 100 companies that bought into this category. With nearly 24,000 employees who are owners. It is an excellent way to empower workers.
▶ 1:31:29Chair Cassidy: Senator markey, I'm sorry. Senator banks was here before you and we should be going back and forth. Would you mind if we go there?
▶ 1:31:40Sen. Markey: Yes, no problem.
▶ 1:31:43Chair Cassidy: That is my bad. >> thank, Mr. chairman. I will be quick. Mr. chairman, I appreciate this hearing very much because my mom for over 30 years worked in nursing homes. As a cook. She was a cook in a nursing home.
▶ 1:32:09Chair Cassidy: And the nursing home that over time became an employee owned business, became an esop. My family saw firsthand the value and I'm glad to see the bipartisan support from this committee to do more to support employee owned businesses.
▶ 1:32:34Chair Cassidy: There are about 6400 employee owned companies with the state of indiana that represent over 50 million workers and retirees like my mom. Lafayette, michigan city, valparaiso. Just to name a few of those that do great work in our state.
▶ 1:33:03Chair Cassidy: 15 million people is a lot of people but it covers a very small percentage of the entire workforce of the state of indiana. I wonder if you could explain, how would the economy overall be different if there were more workers who worked for esop's?
▶ 1:33:21Dr. Blasi: Our research suggests one would see fewer layoffs, more employment stability. So fewer unemployment compensation costs. When a community and we talked about really huge cities, 33 counties in the united states, a few companies that can be sold to an esop's and sure a lot of
▶ 1:33:53Dr. Blasi: Social stability in those communities. There are increases in alcoholism and divorce on families lose their jobs, all kinds of effects on children and families. When a small city of 10,000 people loses a supermarket or its anchor manufacturing because it sold to some country outside the united states, that is really not a good thing.
▶ 1:34:21Dr. Blasi: Esop's really go directly at this issue in a very significant way.
▶ 1:34:26Sen. Markey: Indiana is also the top manufacturing state per capita in the country. You have talked about the manufacturing industries being ripe for employee owned businesses. How can we speed that up to restore the manufacturing base in this country?
▶ 1:34:48Dr. Blasi: Many retiring business owners could get a 100% check from a private equity firm or a strategic buyer, but esop's need more loans and loan guarantees to be able to finance 100% although I deferred to Mr. chairman saying it doesn't always have to be 100%.
▶ 1:35:13Sen. Banks: I hope to work with you Mr. chairman and others on the other side of the aisle because it makes a difference.
▶ 1:35:21Chair Cassidy: Thank you. Senator markey, thank you, and take a bit of extra time if you need to.
▶ 1:35:27Sen. Markey: Thank you Mr. chairman very much. I'm the ranking member of the small business committee and I know how crucial it is at this point to expand esop's. In massachusetts over 50% of businesses have an owner that is 55 years old or older. Many are struggling to find a succession plan that honors their life's work.
▶ 1:35:54Sen. Markey: Too many have to close their doors or turn to a corporate buyer that has no loyalty to the business owner, the workers, or the community and I look forward to making progress on this crucial issue, Mr. dupree, you said arcadian was founded in a medical transport crisis I would imagine having ambulance crews know how important emergency medical services are.
▶ 1:36:24Sen. Markey: When a loved one has a heart attack or stroke, the other ones who will get them to the hospital on time, they are also understanding of the financial difficulty when people don't have insurance or how difficult it can be to provide emergency care when the care people need is too far away. What is the impact of having frontline emergency providers serve as owners of the company?
▶ 1:36:52Mr. Dupuis: Thank you, senator. Our employees are aware of the personal situation of the patients going through a crisis. We are aware of the reimbursement reality of what a patient may or may not have.
▶ 1:37:12Mr. Dupuis: Ultimately our mission is to provide the best medical services we can and we are out there, I think it is an issue where we allow them to worry about providing the care and we manage the financial aspects of it.
▶ 1:37:29Sen. Markey: We are not any longer in a business as usual environment. We just had the biggest cuts to medical care passed the congress and signed by the president in the history of our country. I wish we had this hearing before we had votes on that bill , especially someone like you, the trillion dollars in cuts will push one -- push people off
▶ 1:38:01Sen. Markey: Their insurance. Labor and delivery, mental health, emergency care. It is going to impact businesses all across the country. Would you like to expand further? Yes, I can. We are health-care providers of the medicaid cuts will affect us.
▶ 1:38:33Sen. Markey: We understand what congress was trying to accomplish, but we hope to understand -- hope to have additional conversations. When people come off the medicaid rolls, we have to answer the calls regardless of a patient possibility to pay.
▶ 1:38:59Sen. Markey: We will have the same level of operating cost but it may be reduced as a result. It is a concern, I would like to supplement because it goes hand-in-hand and I think that being an esop instills a certain
▶ 1:39:29Sen. Markey: Level of discipline in the management of a company. We are dealing with our employees retirement accounts and we see them every day in the field and we have to make difficult decisions to protect retirement accounts.
▶ 1:39:47Sen. Markey: We absolutely know that, but we can't cross our fingers and hope. A vision without funding is a hallucination and we know people are going to be hurt unless those cuts are reversed. Employee ownership gives workers dignity, security, it evens the scale between workers and big corporations.
▶ 1:40:16Sen. Markey: We just can't see a reduction in people's lives in their security because that is going to absolutely require us to reverse the balance that has been struck for the future which is that billionaires get bigger tax breaks than individual worker programs keeping their companies going.
▶ 1:40:41Sen. Markey: So, that would be my perspective on this and I think it is central to the future of esop's getting what they need to be successful.
▶ 1:40:51Chair Cassidy: Senator kaine has a follow-up question.
▶ 1:40:55Senator Kaine: We have a lot of experts in the room, but people watching or learning this. You dropped a line you didn't explain, which is that your company recently decided to become a public benefit corporation. Tell folks what that means.
▶ 1:41:14Mr. Roark: Thank you for that question, by the way. One of the challenges we have as an esop wanting to be in business for 100 years as we have said it is our goal and that goal changes every day to be 100 more years.
▶ 1:41:33Mr. Roark: One of the challenges is we have sort of sneaked up to this and some of the discussion earlier, if somebody comes in and makes a substantial offer, we have to consider that, even though we may be able to set and agree that the best thing for our employees is to stay in business as we are and not to sell and have a bunch of them walked through the door and the benefits change and all of these things going forward.
▶ 1:42:01Mr. Roark: Some of the state laws provide some protection for you if you define what you are in business to do. Federal law does not do that as of now so we have the fiduciary responsibility to look at those. That is one area I would like to see changed. I don't know where it falls. But as a public benefit corporation, we define in our articles of incorporation things that are just as important as making a profit for our employees.
▶ 1:42:31Mr. Roark: For us, we have defined that financial, growing the financial capability of our employees and putting them in a good position for retirement is our number one aspect. Number two, our customers in terms of what we do, if we take care of our employees, they will take care of our soldiers in the field.
▶ 1:42:59Mr. Roark: And number three, the key of our culture is to give back to our local communities so we give back to every community in which we participate, we participate in the charities in those communities. In fact, in the last couple of years, we have been honored by three philanthropy awards for the company giving back to the community, three different organizations have honored us.
▶ 1:43:24Mr. Roark: Last, but not least, our number four item in our public benefit statement that we have indoctrinated into our articles of corporation is we will make it our mission to help other companies become employee owned. A large portion of my time that I spend now, I've retired as an employee, I'm no longer a member of the esop but I'm still chairman of the board and I still work a couple days a week.
▶ 1:43:51Mr. Roark: Most of the time I spend now is helping other companies. I work on two issues and one is the repurchase liability which is not come up here which is a big issue for esop companies and the other is helping other companies with either sustaining their current esop or becoming an esop.
▶ 1:44:18Mr. Roark: As a public benefit corporation, those four items count just like profit.
▶ 1:44:22Sen. Markey: That is really
▶ 1:44:25Important -- Senator Kaine: That is really important. To summarize, 36 states allow public benefit corporations. The federal government does not allow it. If you are following federal law, the guiding line is shareholder value.
▶ 1:44:49Important -- Senator Kaine: Here is that we measure our performance and what you can hold us accountable to and it is not just shareholder value and I think that is an important thing and I'm glad you are able to kind of explain that.
▶ 1:44:58Mr. Roark: You understand this issue. 90% of our employees voted to be a public benefit corporation. We did devote two ways, one by shares, so the share counts 89.6%, and we did it by noses because we wanted the employees to have an equal share. We would not have gone forward if we didn't get a positive from both of those.
▶ 1:45:22Sen. Kaine: Thank you very much, I yield back.
▶ 1:45:25Chair Cassidy: Thank you all. In closing, I want to thank the esop association for their leadership and feedback. Eight has illuminated the issue and thank you very much. I ask unanimous consent to enter several letters of support from the esop association into the record and the two of us agree. With that, I close the hearing.
▶ 1:45:54Chair Cassidy: For any senator wishing to ask additional questions, questions for the record will be due 5:00 p.m. Thursday, august 7. I think the witnesses for being here, the committee stands adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]