Ask an ESOP Expert

As the leader of Rady School of Management’s Beyster Institute, Kim Blaugher provides stewardship for programs and initiatives designed to educate students, academic faculty, company founders, and consultants on how to build ESOPs and other employee-owned enterprises. Under his guidance, Beyster staff and Rady School interns engage with companies to provide consulting and feasibility analysis for ESOP transactions and benefit-level modeling. Blaugher has more than 35 years of experience in the ESOP community, helping companies determine the feasibility of an ESOP, forecast repurchase obligations, and craft ESOP transactions. Prior to Beyster, Kim worked in the ESOP practices of private companies, including Principal Financial Group, William M. Mercer & Associates, RSM and KPMG. Expanding ESOPs caught up with Kim to learn from his three decades of advocacy for employee ownership.

How did your ESOP journey begin?

My journey started with Becky Miller . She was a partner at McGladrey Hendrickson & Company, which is now RSM. I was in the tax group at McGladrey. I attended a training class where Becky was teaching about employee benefits and ESOPs. I immediately said, “that's what I want to do.” I had a Master’s in tax and thought the ESOP would be a win for everyone. I had the honor to work with her and get my start being guided by her.

If you look around the ESOP community, it's filled with people of older age who can't retire because they love this community so much. I had a great opportunity to work at BDO and then at Principal in my ESOP career. It came to a point where I knew I'd want to retire and cut back on travel. Tony Mathews had been ED at Beyster and said it was the greatest job ever in his life. When the opportunity came around, I couldn't pass it up, the opportunity to mentor people new to the ESOP profession, to work with the ESOP community as a thought leader and provide academic courses. It has been the greatest job of my life, a fabulous opportunity to work with consultants and companies and the Beyster Institute, which was founded by Dr. J. Robert Beyster to promote employee ownership and entrepreneurship, and has a tremendous legacy.

ESOPs have been part of my career for 36 years. It's been a fabulous trip. It's been a collaborative industry to work in both from company and consultant perspectives. The ability to have companies that want to do such a great thing for their communities, associates and selling shareholders is so rewarding. We had a graduate student whom we made an offer to intern with the Beyster Institute. On the first day, he came into my office and sat across from me. “Welcome to the Beyster Institute, we're excited to have you here,” I said. “I really want to do M&A transactions. This was an open position, so I took it,” he said. I was thinking, “You don't get it. This will be such a reward for you to do transactions where the selling shareholder sells to the workers and everyone wins in the end. The intern is now at a leading ESOP consulting firm as a next generation ESOP consultant.

You mentioned the old folks who won’t retire, but at Beyster you’re seeing lots of interest in ESOPs from a new generation of leaders, right?

We have 10 people who've been Beyster Associates in my six years here who are now at ESOP consulting firms doing great work. They see how they can do tremendous work whether in finance or organizational development or leadership to help companies in this transition to employee ownership and then ongoing to understand how to grow their companies and associates. The people who've come through here continue to shine once they leave and we have three now who will move on in the next year. We work with them for a little while and then they leave me. It's like your children.

What do you hear from young people about why they’re interested in careers in employee ownership?

It’s a solution to the world around them. The young generation I work with is intelligent, hardworking and motivated. They want to have a successful career and help people. They're going to make good money so I don't want to create the impression they're not. I think they come to this community because they want to help. We're at a point in the economy with younger people where I’m hopeful employee ownership can take off.

What makes an ESOP successful?

Leadership, is important, not just the CEO, though that certainly sets the tone for the organization. I had the pleasure of working with Dennis Long , who founded BCI Group. He gained the respect of his peers by being a great leader. Everyone would follow him. That leadership attracts the next level of people who want to work in an environment like that. It has to be the leadership and they have to embrace why ESOPs are the right solution for their business. It's not just a retirement plan. It's ownership. It's a sharing of the wealth of the company with the employees long term. It's a sharing of responsibilities. There are so many benefits we see in these companies. It generates fabulous opportunities.

You’ve also served on ESOP company boards. What have you learned from that experience?

I've been on four boards where I get to see more of the workings of the company. It's clearly the leadership that can command and set a company on a path to the future. They attract associates who want to work at a great company and they want to become leaders. One company I attend their management meetings and the 50 managers who come in are excited and so thankful they work at the type of company that gives them dignity, opportunity and wealth. To me, the biggest employee ownership benefit is the culture, and the opportunities, it's not just the sharing of the wealth. Sure, everyone loves money, but the satisfaction comes from working with your peers and being part of a team. The employees at companies like MOUNTAINLAND SUPPLY COMPANY , Inland Truck Parts & Service and Burns & McDonnell have such positive attitudes and dedication towards their work.

What role can academic institutions play in expanding the reach of employee ownership?

For 50 years, we've tried to help people understand why this is such a tremendous ownership vehicle. We have a great ESOP community, but it's not reaching all the companies. Once I went into a financial services firm to talk about how they could work on ESOPs with clients, and they were like, “Why didn't we sell to an ESOP?”

We don't seem to understand how to get to the right people to inform them. There is no course taught in any academic institution on ESOPs. We're trying to do that at UCSD. When you look at economists across the country, they have a difficult time because they're concerned employees are investing all of their money in one basket. But in most cases, this is an incremental benefit workers don’t pay a penny for that sits on top of existing 401(k) or other retirement plans. I’d love for all top academic institutions to have courses on ESOPs in their top business programs. Putting it up there in M&A transactions. We can show this is a mainstream transaction for larger companies. If we can get ESOPs into academic institutions as a viable tool for ownership, I think that will change the attitude of so many people.

What excites you about Expanding ESOPs?

With Expanding ESOPs, we’re bringing more organizations together and looking forward to broadening our influence. I'm excited about the future. To be frank, I'm an old person. I’m not sure how much longer I can go into battle. Trying to expand and create more ESOPs is something I've always wanted to do. With Expanding ESOPs, I have a renewed hope that we're going to charge forward.