M: Business 3rd Edition by O. C. Ferrell, Geoffrey Hirt, Linda Ferrell

Exercise 91

How would you like to get a company as a gift . . . on somebody else’s birthday? On February 15, 2010, Bob Moore, founder of Bob’s Red Mill Products, gave his employees company ownership through an employee stock ownership plan (ESOP). It was his 81st birthday. Bob’s Red Mill was founded over 25 years ago by Bob and Charlee Moore after they stumbled across an old abandoned mill and decided to turn it into a business. Today, Bob’s Red Mill offers over 400 whole-grain natural food products, ranging from flour to cereal to baking ingredients. The company boasts sales of over $70 million annually and enjoys consistent growth of 20 to 30 percent per year.

With an ESOP program, Bob’s Red Mill has an employee trust fund made up of stock shares. Employees receive shares based on a formula. With seniority comes a greater right to shares, called vesting. At Bob’s Red Mill, employees are fully vested after three years of service. With shares often come voting rights, which gives employees a direct say in how the company is run. Upon retirement from the company, employees receive money for their shares. As Bob sees it, he’s selling the company to his employees without any money leaving their pockets.

Bob’s Red Mill has succeeded thanks to its dedication to high-quality products, excellent customer service, and a reputation for treating employees like family.

Moore regularly receives offers from those looking to purchase Bob’s Red Mill for large sums of money, but his dream has always been to reward those who truly made the company what it is today. Although he has no intention of retiring, Moore now believes his company will always be in the hands of those who care deeply about its success.

What are the advantages of having employees as owners at Bob’s Red Mill Products?

Step 1 of 2

An ESOP allows an organization to gradually buy out its current employees, typically by making tax deductible contributions to facilitate the employee stock ownership plan. This move can be surprisingly beneficial at tax time. The profits through an ESOP subjects to lower tax rate as compared to direct profits.