Sustainability, largely ignored until the 1990s, has become one of the most talked-about ESOP issues. Years ago, some ESOPs were meant as one-time transactions, most ESOPs held a minority of the company's stock, even those committed to long-term ownership had not faced the issues of mature ESOPs, and people thought that communicating the ESOP was enough to motivate employees. All this is different now. Research showed that companies outperform when employees share ideas and information. As a result of the rise of S corporation ESOPs, 100% ESOP-owned S corporations are now common, and they have a major incentive to remain ESOP-owned. Companies with 100% ESOP ownership become more concerned with creating and sustaining an effective ownership culture. As a consequence, ESOP sustainability is a perennially popular topic at ESOP conferences. Much of the discussion focuses on internal ESOP dynamics such as managing the repurchase obligation. Such considerations are critically important, but they are only part of the story. A truly sustainable ESOP company also has a strategy to maintain an effective employee ownership culture and a profitable business model. In particular, this means effective leadership succession strategies, a governance structure consistent with employee ownership, having a strategy for sustained growth, and more. This book discusses all of these issues, with references to other material that explores each topic in depth.
