Ask an ESOP Expert

Mary Sullivan Josephs is founder and CEO of Verit Advisors and a nationally recognized expert in ESOPs, with more than 30 years of experience advising, structuring, and closing over 500 transactions for the ownership transition of middle-market companies.

Mary founded and built the ESOP group at Chicago’s LaSalle National Bank into the nation’s leading middle-market ESOP advisory team. Mary also co-founded and launched a leading ESOP Advisory practice for ABN AMRO LaSalle Corporate Finance. Upon LaSalle’s acquisition by Bank of America, Mary led the ESOP Solutions Group for all of Bank of America-Merrill Lynch,?before going on to form Verit. Mary sits on the boards of numerous ESOP companies, is an Advisory Board member for Employee-Owned S Corporations of America (ESCA) and a member of the Rutgers NJ/NY Center for Employee Ownership Advisory Board. Expanding ESOPs spoke with Mary to learn from her trailblazing career advocating for employee ownership. Follow us for more expert interviews and updates as we grow our movement to bring broad-based employee ownership to every company in the country.

You’ve had such a long and storied career in the ESOP world. How did it start?

I was a French and economics major from Marquette—completely qualified to be unemployed in Paris. My dad didn't like that idea. I had a lot of luck, and through a lot of effort I got into a very exclusive training program at what was then Continental Bank. They invested millions into this program to teach us a wholistic view of many bank specialties.? And I ended up in a rotation that was the premier opportunity in my young mind: It was the International Banking Division. I thought I could use my French. But I ended up coding computer programs for the Letters of Credit and I was completely miserable.

So, I applied and was accepted to get my MBA at the University of Chicago. I figured If I'm going to stay in business, I need to build that language and those technical capabilities. And I was fortunate to transfer into another training program at Continental Bank for another six months, landing in a new opportunity in middle market commercial lending. I immediately fell in love with privately held businesses. The stories, the passion, the work, the vision, the mission, how they care about their employees. One of my dreams was at some point in my career to write this book called Made in America that tells these stories of ordinary people doing extraordinary things. I really believe these privately held companies are the sustenance of American communities. And you don't read about them in the Wall Street Journal. But when you have the privilege to go and visit and see somewhere in that family line, somebody took incredible risk. And now they're employing hundreds of people and they're treating them well and they're giving them benefits. And those businesses have this culture that's like a family. When people feel treated well, they treat their families better. They treat their communities better. And there's so many studies about the ripple effect of that.

Early in my commercial banking career, I fell in love with ESOPs because they're so technically complicated. That attracted me—being a math geek from University of Chicago. Having done one, I was the ESOP expert at Continental Bank and when I transferred to LaSalle Bank, that made me the ESOP expert at LaSalle Bank. We had such an entrepreneurial culture At LaSalle. They gave me the privilege to really lead and do and grow my own thing. I was doing ESOP deals all over the country. When you look at the ESOP lending programs at the major banks across the country right now, they're all modeled after what we did at LaSalle and I'm very, very proud of that.

What was that first ESOP at Continental?

Napco, North American Printing Company of America. It was a small business. They made ink out in the western suburbs of Chicago. They were so excited about the ESOP. It's the story of these two men, partners for life, they had supported their families through this ink. They didn't know what to do with it. It's that heartstring between wanting to cash out and worrying about your legacy and the people who worked there.

Another one of my first ones was Scot Forge , which is still an ESOP today. I’ve gotten to watch over decades how they have grown. I was just out there last year, and I can't believe how big it is. A really hard thing to do for businesses when they grow is to retain that culture and values and mission and people-centric goals, but at Scot Forge, you walk in and it has their mission statement right in the hall. They are unashamedly about who they're about, which is their people and their vision and their mission. They have grown from a small little forging company out in Spring Grove, Illinois to an incredibly large, robust leading industrial company.

And you've probably seen that hundreds of times over in your career. What other stories stand out?

So many. Clif Bar will always be a favorite for me. Gary Erickson and Kit Crawford , and Gary wrote this great book, Raising the Bar about what I just said, following your passion. He calls it the White Road: take your cues from yourself and not what everybody else is doing. Obviously, as a University of Chicago graduate in 1990, I could have gone to Wall Street. And that could have been a very attractive economic path for me. But I don't look back. Gary and Kit had almost sold the company. Gary went and took a walk and came back and put the pen down to all these dismayed investment bankers and said he wasn't selling. And took on tremendous risk because he had to buy out his partner at the transaction price.

He continued to build this company, treated their employees so well. I remain inspired by his steadfast loyalty to the five aspirations of Clif Bar: people, planet, community, brand, business. One of their parents worked for the government or in a job that had a pension and they wanted that benefit to complete the total benefit package of being at Clif Bar so their employees would have retirement security.

The analysis we did for that. Hundreds of models. We were reverse engineering to end up at a retirement benefit that they felt was right for their employees. And that's how we sized, came to a 20% ESOP. That was 2010. Flash forward 13, 14 years later, they sell to Mondelēz for over $2 billion and the employees of Clif Bar did very, very well for retirement security, well beyond anyone's imagination.

I think the reason that stands out like so many of these is the purpose of choosing an ESOP, over other alternatives, includes a caring for the employees and the people who worked with you, believed in you and got you to help build the business to where it is today.

How did you decide to go out on your own and start Verit?

Six of us from LaSalle Corporate Finance went into the investment bank at Bank of America. And Bank of America was really excited about middle market investment banking. I had a position as head of the ESOP advisory for the investment bank.? When the financial crisis hit, they rightfully decided to get rid of middle market investment banking because they needed to hunt elephants and everybody was fired except me. Because they really liked ESOPs.

We tried really hard to recreate what we were doing in the investment bank within the commercial bank, to call it Bank of America ESOP advisory services. But for regulatory purposes, we couldn't swing it.? There were many amazing opportunities for me to stay at Bank of America.? And I still envy the vast resources available and miss the incredibly talented leaders across the organization. However, I really love the advisory and consulting side of working with privately held owners. And, I loved building businesses and growing talent within the organization.? I had always thought about starting my own business, so I went to Hill Hammock, who was former chief operating officer for LaSalle and a great mentor of mine. And I said, “Hill, I'm thinking of starting my own business.” And he said, “Mary, you've been doing it for 10 years.” How can I help?

I retired from Bank of America in June of 2009.? I was super tentative about anyone taking me seriously as a woman investment banker with five kids in 2009.? It took a while to get off the ground. I made some missteps with some early partners. By 2010, we really launched. I was very blessed with great clients and an amazing team. The hardest thing about a great team, it's not the talent per se or the capability. It's the shared values. We’re not an investment bank that is gunning so much to win for ourselves, that measures ourselves by revenue by year end. We wanted a relationship-focused, client-centric approach. Verit stands for honest truthful advice.? And we have never wavered. I was fortunate to be in a financial position to take the risk; we had already saved for the kids college education, paid off our home, and had no debt. I have never looked back.

After all these years, you seem as passionate about ESOPs as when you started. What keeps you going?

I get really excited about participating in ESCA, Employee-Owned S Corporations of America. To be around several hundred companies who are doing business differently. And they have such a commonality, even though they're from so many vast geographies and industries, of how they want to run their business. There's an overarching aspiration to stay private. And that's not easy to do with the pace of change so insane these days. And the pace of uncertainty is insane. Look at just from COVID to today, you had COVID, you had interest rate hikes that were unanticipated. You had supply chain issues. You had geopolitical issues that are affecting companies. As a CEO myself or an entrepreneur myself what people forget is that risk never goes away. Like you're going to wake up one day and shipping costs have gone up or a major customer was acquired and is going with another business. Surprises happen all the time. How do you navigate and respond to them?

At ESCA, you have a peer group of people who are wanting to do that and can collaborate and it's so inspiring to see these executives, one, take the time, and two, pay it forward in sharing experiences from their own boardrooms to help everyone else get there too.

I also love my work. And I have five children.? And I’m proof that you can love your kids and love your work. Those aren't mutually exclusive. My kids are awesome. You can be a great mom and be a working mom. I would say for me, I'm a better mom as a working mom. And I think my kids would say the same thing too. I know they would. There's all these myths on how your family should look and what a good mom looks like, what a good business looks like and these things. You just have to be true to yourself. And be honest with what you're seeing and put your gifts, skills, talents, and passion into that.? Gary and Kit at Clif Bar are right – take the White Road.

Three of my kids did business majors or minors. They all primarily stayed away from the finance world. Some of them grew up in Occupy Wall Street and felt like business is bad. And it's for self-serving and self-aggrandizement. But if we don't have good people in business, then that will become a self-fulfilling prophecy. Business really can be a force for good. You're seeing it at business schools across the country, the Quinlen School of Business at Loyola University is focused on business for good. The University of Chicago has a social impact major in their MBA program. Aspen Institute is studying good jobs. What defines good jobs? How do we get more good jobs?

And, obviously, ESOPs are just a joy in the overall good outcome world. And it's been such a privilege for me to do this work that that makes such a difference for so many people whom I'll never meet.

We’ve got an unsustainable wealth gap in the country. What role do you see employee ownership playing in addressing it?

Financial security is so important. It pains me and is very worrisome to see the statistic on average American retirement savings, the brutality of it. Throughout my career, I’ve prayed that retirement savings would become a key issue in Washington. It's untenable. America can't afford the safety net that would be involved in filling the gap to create retirement security. Think how long people are living, how health care bills, food, housing, shelter, safety, automobiles, insurance, are all going up. It's astounding how under saved we are as a country. And that's a mathematical issue. And a social issue. The painful part of the social issue is it's got to hit your self-esteem. And so now you have sad people who feel undervalued. So, they're not giving their best self into the world, into their communities, into their jobs or into their families. And the ripple effect of that is not a good force. It’s not the America that I believe and many believe we could be.

You talk about all these stories that could fill a book, your Made in America book. Yet the number of ESOPs has been stagnant for years and it’s still such a small portion of the economy. What are the roadblocks preventing ESOPs from reaching more workers?

Earlier in my ESOP journey, it was not uncommon for large, public c corporations to have partial ESOPs, benefitting all employees.? Polaroid, DynCorp, National Can, and others. The regulations changed in the 1990s curtailing the incentives previously available to these companies.?And, combined with accounting treatment on earnings per share, we quickly saw large corporate plans evaporate. So, while thrilled with the success and growth of ESOP companies, ESOPs are predominantly attractive to middle market. We are missing a huge population of workers who could be worker owners, and enjoy good jobs, dignity and increased financial security.?

Expanding ESOPs is so inspiring to me. I've spent my whole career in ESOPs and as you said we've not been effective in moving the needle on the number of employee-owned companies. To this day when I'm speaking to a prospective ESOP company, as they lean into it, it is very common to have the question, “Why haven't I heard about this?” In our research and your own research, it’s clear that people just don't know about it, which is so interesting because that's alongside the fact that the net approval rating of ESOPs is like 90%. So those who have it love it in a way that astounds marketers and nobody's heard of it in a similar way that astounds marketers.

Expanding ESOPs, what's extraordinary about it is a number of things. In my lifetime, I never imagined that there could be a force that could so exponentially change the number of employee owners. And I'm all in on that. And then another thing it's done is bring together a coalition of like-minded leaders across the ESOP community in a very collaborative way. You have different ESOP associations and organizations leaning in. How can we make this happen? You have leaders who've put decades of their career into employee ownership asking, “How can we help make this happen?”

We have a bigger vision to bring people into the ESOP community who would be aligned, but didn't have knowledge. All the conversation is exhilarating. I'm a big fan of the concept of the tipping point. It would be a dream come true to see ESOPs reach a tipping point and be everyday conversation.?And every worker’s opportunity.

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