All posts by Jack Veale

What Do Employees Get Out of an ESOP?

Are your employees financially prepared for retirement? Many are not, as a result, they outlive their savings and have to depend on others in their old age.

In recognition of this reality, many owners of privately held companies choose to move toward an ESOP transaction as an exit strategy from their business instead of selling out, going public, or shutting down.

These thoughtful owners choose an ESOP because, among other reasons, it allows their valued employees to keep their jobs and over time, earn beneficial value in the company.

Looking to learn more about ESOPs? Thinking about moving your company toward the ESOP model? Contact an ESOP Lawyer, Advisor, or Consultant today at

But the benefits of an ESOP to the employees does not begin with retirement. There is something to be said for pride of ownership. Historically, companies that have taken the ESOP route have had better employee retention and satisfaction. Why? Simply put – the employee now has “skin in the game”.

Having worked over the years with ESOP companies and having examined the statistics surrounding companies that have adopted an ESOP model, I have discovered the following to be true.

  • Employees feel more in control of their own destiny because they have a stake in how their job impacts company value.
  • Employees (on average) make more money than their counterparts in publicly or privately-owned companies within the same vertical.
  • Employees bring a more trusting attitude with them to work in relation to management.
  • Employees tend to stay longer in their position because of the ESOP financial incentives.
  • Employees band together to work through the difficult times instead of abandoning the company and each other. This builds community and preserves their sweat-equity investment in the company.
  • Employees enjoy greater job satisfaction than their counterparts in other systems of corporate ownership.

Want better for your employees as you transition to a new phase in your business? Contact the ESOP professionals today at


PTCFO’s Strategic Planning Workbook For Family Owned Businesses

PTCFO’s Strategic Planning Workbook For Family Owned Businesses

PTCFO Inc., the company created and headed by ESOP Marketplace founder Jack Veale, has a mission of helping closely held and family businesses engage in sound strategic planning and management. Many non-profits and ESOP companies have benefited from PTCFO’s sound advice.

In addition to providing advisor services, Jack Veale has also compiled his expertise into a basic action plan handbook titled “Creating Strategic Innovation.” This workbook is intended to help closely held and family owned businesses develop internal leadership and problem-solving skills in order to improve efficiency and profitability.

The handbook explains principles of business problem solving to workers and management in a clear and comprehensible way, as well as helping reinforce the knowledge through team-building exercises and activities. If you’re the owner of a family business who would like to improve management practices and strategic planning, “Creating Strategic Innovation” will be of great help to you in this task.


PTCFO Authors Articles On Corporate Governance

PTCFO Authors Articles On Corporate Governance

PTCFO, Inc., is a nationally known financial and management advisory firm that, for over 20 years, has established a reputation for deep knowledge of ESOPs, as well as competent crisis management, succession planning and corporate governance.

Among the articles PTCFO has contributed to this site, this one presents a comprehensive overview of the business life cycle, discussing the various stages in the life of a company from inception to death. As they grow and move away from their creative and free-wheeling beginnings, companies are forced to implement a scalable structure that will make an ever-larger business manageable. However, this structure can become overly conservative and bureaucratic, making it more difficult for the company to meet new challenges and adapt to changing circumstances, leading to stagnation and worse.

One of the specialties of PTCFO and its founder Jack Veale is finding ways for companies to reform their management in a way that will provide stability and a competent command structure, but at the same time retain flexibility and the capacity for change.


New ESOP Webinar Video On ESOPMarketplace

Jack Veale, founder of ESOP Marketplace, recently gave a video presentation on behalf of the Ohio Employee-Owned Network, part of the Ohio Employee Ownership Center at Kent State University.

Mr. Veale’s presentation spanned 50 minutes and covered the topic of “Board evolution,” the way boards of directors evolve in concert with the company at large. The talk also covered typical board behaviors and the way they change over time.

The talk began with the basic principles of governance, such as ethics, introduced the ESOP life spectrum from birth to stagnation and death, and discussed the requirements and challenges that face a board of directors at each stage in order to maintain profitability and growth.

Click on this link to listen to our ESOP webinar, and check in regularly for other informative talks and presentations!


See Chris Best at the NCEO Seminar

Chris Best, our most recent addition to the ESOP Marketplace, will be presenting at the upcoming National Center for Employee Ownership seminar.

The National Center for Employee Ownership (NCEO) is an organization that serves as the leading source of accurate, unbiased information on ESOPs and other compensation plans. The NCEO has done a lot of great work in our field and they’ve helped to move this industry forward. For more information about the NCEO and their contributions to ESOPs you can read our interview with the founder, Corey Rosen.

The title of the seminar Chris Best will be presenting is “Determining Stock Value.” During the presentation, Chris will clarify the process used to value ESOP-owned shares in an S corporation. It’s a presentation that Chris Best is highly qualified to present as the managing director at Acclaro Valuation Advisors. That’s why Chris is the featured ESOP advisor for our business valuation section. If your business needs help with its valuation efforts, you can’t go wrong by enlisting the help of Chris Best.


Kelso/Long: The First-Hand Story from Norm Kurland

The legendary meeting in November 1973 between economist Louis Kelso and Senator Russell Long was the key moment when ESOPs stopped being merely an esoteric financial instrument, and began their path towards the tax code. While Long was initially resistant to the idea of expanded ownership, and the ERISA tax law contained provisions that would eliminate ESOPs as they’re known today, Kelso’s passion proved to be infectious, and after their dinner together, Long became a major advocate for ESOPs.

In the process of seeking out first-hand sources and ESOP professionals to interview about the early days of ESOPs, we found Norman Kurland’s excellent account of the meeting of minds between Kelso and Long.

The push to get ESOPs into law went through a torturous and uncertain process. The National Maritime Union approached Kurland and Kelso to help them save the passenger ship industry, and the plan they developed became the subject of hearings in Congress. At the time, Long rejected it, unhappy with the redistributive aspects of the plan.

However, George & Charles Pillsbury, of Pillsbury Corporation, were interested in ESOPs, and, coming from the opposite parts of the political spectrum, were able to get Kurland and Kelso in touch with prominent Senate Democrats and Republicans alike.

Through their new connections, and exposure from 1973 hearings on saving the troubled US freight rail system, where they presented a plan similar to the Maritime Union, Kelso and Kurland’s name began to spread around Washington.

The ideas eventually filtered to Russell Long’s executive assistant, Wayne Thevenot, and after meeting Kelso, he began working towards arranging a face-to-face between Kelso and Long.

On November 26, 1973, Long was ready to hear about ESOPs. A dinner took place, with Long, Thevenot, Kurland and Kelso in attendance.

It’s difficult to get even four minutes of face time with Chairman of the Senate Finance Committee. The meeting between Kelso and Long lasted for four hours… and at the end, Long picked up the tab.

From then on, ESOPs had the most powerful backer on Capitol Hill that anyone could have hoped for. Long pushed to include ESOP provisions in the Internal Revenue Code, as part of the 1974 ERISA act; those provisions are there to this day.

Read more at the original article, or check out a different angle on the tale from ESOP lawyer and Kelso associate Roland Attenborough.


Comparing generations of business owners


Continued from Fostering Sustainability at ESOPs

We usually relate these generational issues to observations found in the history of Westvaco Corporation.  By the year 2000, Westvaco was the OLDEST and LONGEST LIVING company to provide consistent dividends to their shareholders EVERY YEAR.  It was also led by the Luke family since its inception, and was always a well regarded, well managed company.  Of importance to ESOPs and sustainability, the continuation of the business and the risks the Luke family took to grow and expand are the hallmark of great governance and succession planning.  To help with understanding the generational issues, we are providing what we think illustrates the behaviors by management as each generation unfolds, in family business jargon:


A)    Grandparents (1st Generation) did not go to college, they worked their tails off fixing customer problems, risking everything to meet payrolls, vendor demands; they signed personal guarantees for bank financing, and later retired from the business by being paid off, usually over their remaining lives, by the second generation; when they sell the company, the 1st generation is commonly worried about their employees and family members, as well as having the funds for retirement.  The story of Westvaco is as follows:  “Born into a Scottish papermaking family, Westvaco founder William Luke came to theUnited States in 1852. Ten years later he began running a plant for Jessup & Moore Paper Company in Harper’s Ferry,West Virginia. Although employed by Jessup & Moore until 1898, he set up a small plant of his own with his two sons (John and David) in 1889.”  In ESOP terms, the next generation needs to have the same commitment, passion and risk taking ability as the Lukes!


B)    Parents (2nd) went to State Universities, had tough jobs during their early years in the business, that is doing “dirty work,” because the grandparents needed cheap but dependable labor and wanting their children to know the value of “hard work;” learned the essential values of working with others and treating people well, be it customer, vendor or employee;  express appreciation for those who helped build the business which created the wealth to allow them to buy second homes, new cars, and a better life style their parents never had;  Family dysfunctions form in this generation, and show up in conflict, accepting mediocrity, incompetence, avoiding the difficult issues, and power plays that create “us versus them” working environments.  Of concern is when these dysfunctions show up at board meetings with siblings as directors, and one of them is the CEO!  Grand parents rarely have siblings telling them how to run the company, now the next generation does!  When the next generation begins their discussions of succession, and they look at maximizing their wealth, they do so because of their belief their next generation will not achieve the values they now have.  For Westvaco, their story was: “In 1904 William Luke relinquished the presidency of the company to his son John Luke, who held the position until 1921. William Luke died in 1912, at which time the company had four mills operating inWest Virginia,Pennsylvania,Virginia, andNew York.  While white paper production volume remained relatively constant, diversification accounted for virtually all growth.”  In ESOPs, strategic planning must be about changing the company during the transition.


C)    Grand Children (3rd) were born into, and did not earn wealth, raised with second homes, country clubs and private schools; during their student years, they worked in the office with easy jobs, avoiding hard work in the field; as a result, their expectations included being CEO because of ownership not performance and experience; without developing the successful values of leadership and entrepreneurship their prior generations had to suffer through and learn.  This generation usually views the business as an investment and people as expenses; since their value is based on prior generations success- not their own.  The 3rd Generation also loses sight of the people, customers, or relationships with each other as being the foundation of an effective company.  In many cases, 3rd generation peers and school friends were members of other wealthy families, so did not appreciate rank and file employees as people of value.  When thinking of succession, those non-employed family members, who do not work in the business, regularly look at the stock’s value to determine if they should harvest (sell) to maximize the value.  As a result, they will also focus their attention to dividend payments versus business reinvestment; resulting in concerns their prior generations never considered.  While we describe the 3rd generation as the generation that starts the slide to “shirtsleeves,”  The Luke family was able to avoid these characteristics for over 6 generations.  The Westvaco story for this generation is: “Ascending to president in 1945, David L. Luke, a grandson of the founder, established the company’s modern growth pattern. He immediately began the first of many expansion programs, spending the $17.5 million the company had accumulated during the war. The company also used some of its cash surplus to acquire more land, selling the trees too mature for papermaking to provide additional financing.”


The Great Grandchildren (4th and beyond) many times found themselves skipping college, starting their own business, working in fields far from the business such as social or political work, engaging in the fine arts or non-profit communities, sitting in a staff or shop floor job, or like their parents, enjoyed the experiences of unearned wealth.  They went to exclusive schools, drove the best cars, treated people badly, and behaved arrogantly.  These people rarely are criminals, or incompetents; they just have different choices to career development due to their wealth. One Harvard business school study determined that wealthy people develop a lack of care in others (please see  In some cases, these grandchildren build their own entrepreneurial opportunities and use the family wealth to create new wealth, becoming the next founders. In other words, they sell off their ownership shares to fund their own growth elsewhere.  For Westvaco, the story continues this way: “Hesitant to join his family’s company at first, David L. Luke’s son David L. Luke III became CEO in 1963, after working 11 years for WVPP. He maintained the product development momentum initiated by his father and continued to upgrade efficiency with frequent spending programs. Nearly half of sales in 1967 came from products introduced in the previous ten years.  In 1962 the Luke family controlled 30 percent of the company’s stock; by 1984 it controlled only two percent.  During David Luke III’s 24 years as CEO, Westvaco did more than most papermakers to free itself from the cyclicality of commodity production. His program that accomplished this, “differentiation,” continued under his successors–his brother John A. Luke, who became CEO in 1988, and John A. Luke Jr., whose attainment of the CEO position in 1992 represented the fifth generation of Lukes at the company helm.  In 2002, MeadWestvaco was formed as the result of a merger between The Mead Corporation and Westvaco.”


We provided the above paragraph to help illustrate some of the anecdotal behaviors of each generation.  Before we go further, we want to emphasize that these observations are neither consistent nor predictable.  Many companies avoid these descriptions.  Companies like Wal-Mart, Ford, Dow Jones, and Comcast are/were publicly held companies with family dynamics that show various stages in different ways.  For the Ford Motor company, their history of having family members in the CEO position is well documented.  While Henry Ford (1st) formed the business, his son Edsell nearly killed it, only to find Henry II to fill in for his dead father and rebuild the company.


Fostering Sustainability at ESOPs

Business Life Cycle: ESOP Sustainability – Succession

Shirtsleeves to Shirtsleeves in three Generations

By Jack Veale, President, PTCFO, Inc

The Business Life Cycle of a company involves not only an internal organization’s evolution, it also involves the company’s ownership transition and governance dynamics.  The title of this article is about an “American proverb” that shows up in other countries and cultures.  When Andrew Carnegie coined the term in the late 1800’s, he was describing the actions and behaviors of a typical family owned business with high wealth.  Almost every language has a common philosophical view of wealth and enterprise.Italy’s translation, for example, is “from barn stalls to the stars and back to barn stalls.” Great Britainhas the phrase: “from clogs to clogs in three generations.” For ESOP companies, we describe it as “from nonexistence to nonexistence in 3 generations.”

What these phrases mean is the founder of a successful business started “in shirtsleeves” or a nonexistent business, and by the time the third or last generation of owners finished their ownership, the ensuing generation ended up in “shirtsleeves” or “nonexistence” with the company.  Statistically, less than 15% of Family-owned and/or ESOP companies survive the passing of the torch three times.  Family businesses describe these transitions from one generation to the next as a “family business legacy.”  For ESOPs, the word is “Sustainability.”  The “typical” generational transition profile for any company is usually described by the following: “first generation starts the business, second generation builds the business, and the third generation harvests the business, so their offspring are back to “shirtsleeves” again.

In the ESOP world, the word “Sustainability” reflects the same condition as family businesses; ESOPs do not survive many years or generations after the debt of the founder is paid off.  Statistically, in 1995 there were 9232 ESOPs filing 5500’s in the US.  By 2010 there were 6,664 ESOP filings.  In other words, the number of companies forming a new ESOP was less than the number of ESOP companies no longer filing tax returns as an independent ESOP. Why?  ESOP companies usually falter during the transitions to a new management team or style with a new vision that doesn’t work.  In some cases, the value driven by management is less than what the market will pay.   What these ESOP’s lost was the ability to grow in new directions and increase stock value.

In my next post, I’ll discuss aspects of each generation.