When people think of employee-owned businesses, large companies such as grocery chain WinCo — with scores of locations across the western U.S. — spring to mind, said Poncho Baker, the new CEO of Ritchie Trucking in Fresno. But for owners who want to see their business and life’s work continue, and for workers looking for job security and a larger stake in what they’ve helped build, transferring ownership via an employee-stock ownership program (ESOP) can mean keeping the integrity and the culture of a business alive.
Bruce Lackey had wanted to retire for a number of years before his company became employee-owned, said Baker, attorney and former Klein DeNatale Goldner law firm partner who had been general legal counsel for Ritchie Trucking for 22 years. Lackey had thought of selling the business to an outside company. “That was given serious consideration,” Baker said. “Then I think he looked at other companies that had sold to bigger companies, and there was no security for the employees.”
Any one of Ritchie’s eight locations employing a total of 150 people could be shut down, which concerned Lackey and his wife, Pam, Baker said. “Bruce and Pam were really the type of owners that thought ‘how can we reward the people who made us successful?’” That was when the decision was made to sell Ritchie’s Trucking to its workers, with the transfer of ownership completed in January. The process took about a year.
Ultimately, ESOPs are a retirement program for a company’s employees. By way of a loan or other fundraising method, a body of workers buys out the previous ownership. The process can be expensive. Attorneys and accountants need to be hired, and documents need to be drawn up. Both sides need to determine the value of the company before they can agree on the price. They also need to decide how to divide up the stocks among employees.
At Ritchie Trucking, stock is divided up at the end of each year based on the percentage of payroll each worker is paid, Baker said. After six years, employees become vested in the company. For employees who have been with the company for a number of years, the concession was made that veteran employees would earn two years toward investiture each year. The company handles logistics for big-ticket items like appliances for major retailers. They also do trucking and are expanding into deliveries directly to customers. So, for the 1,290 appliances moving in and out of Ritchie Trucking every day, employees see a return when the company is profitable. This has created a culture company-wide where employees have taken it upon themselves to cut costs where they can to increase profitability.
Where once Ritchie Trucking was supplying hundreds of Keurig coffee cups to their employees for free each day, the employees took it upon themselves to begin charging a quarter for one, potentially saving the company thousands of dollars a year, Baker said. “When you have 150 employees, that’s a cost no one ever really thought about, because they’re not paying for it,” he added. Getting employees involved in the ownership process is key.