What is ESOP?
An ESOP, or an Employee Stock Ownership Plan, is a retirement-type plan in which a trust holds stock for its beneficiaries, the employee-owners. To set up an ESOP, the employer creates a trust fund to which it contributes company stock and/or cash to buy stock (either new or existing shares). Unlike 401(k) plans, all contributions to ESOPs come from the employer. Companies may be partially employee-owned (where one or more individuals or groups maintain ownership over a certain percentage of the company and the remaining percentage is owned by the employees), or 100% employee-owned, as STI is.
Incorporated in September 1981, Sebago Technics spent its first few months working out of Founder Walter Stinsons’ house in Windham. Subsequent moves followed as growth and opportunity allowed and the firm moved into its current space at 75 John Roberts Road, South Portland in 2012.
On December 31, 1998, the ESOP was implemented. The year 2000 marked an exciting time in the company’s history. Building on our early Total Quality efforts and subsequent reorganization in the mid 90s, the ESOP purchased its first batch of shares, which placed Sebago Technics on the path to becoming an employee-owned company.
At the start of the new millennium, the Sebago Technics ESOP Trust owned nearly 10 percent of the company. In October of 2003, the STI ESOP reached another milestone when a major transaction took place which brought the Trust ownership to 62 percent achieving “majority ownership” of the company. In 2007, the Company became 100% owned by the Trust.
The Importance of Employee Ownership
The future of the company is measured by the hard work and dedication of its employees. The ESOP provides each person a share in the firm’s growth and prosperity. Future challenges will be met and conquered with the same spirit of teamwork and enthusiasm that has defined our firm over the past 30+ years. As an employee-owned company, we, as employees, will determine our individual and collective success.
A company, like a stool, is supported by three equally important legs. These are its customers, its people, and its management. Long-term survival of a company is a function of its ability to maintain this strong underpinning, because a collapse of any leg will destroy the company.
The success of Sebago Technics can be largely attributed to its people. In recognition of that fact, the ESOP ownership model was chosen for the company to continue beyond the first generation of ownership. The ESOP provides direct benefits to the people who have defined the culture, history, spirit, and success of the organization. Federal legislation was enacted in the late 1990’s which enabled small companies, such as Sebago Technics, to transfer ownership of the company to employees through the ESOP model.
This was a win-win situation. ESOP provided the critical financial mechanism, and it created the opportunity for everyone in the company to share in the firm’s growth and prosperity. It provided the existing shareholders a way to recoup the value of the company without closing the doors or transferring the company’s assets through an outside sale.
As a qualified employee benefit program, administration and implementation of the ESOP are protected by federal law. Everyone can be assured that the program meets the applicable legal standards. The ESOP provides retirement benefits because employees sell their share of company stock when they reach retirement age. The value of each account is directly related to the company’s success, and everyone knows that their efforts help determine the stock value.
Advantages of Being an Employee-Owner
- You own shares in the company without any out-of-pocket expense
- You contribute to the financial success of the company
- You share in the financial success of the company
- You have access to information that illustrates how your actions and decisions affect company profitability
- You have the right to vote on certain decisions about the company’s future