By Christine Graf
If you’ve visited your local Stewart’s Shops lately, you may have been waited on by a millionaire. Thanks to the company’s Employee Stock Ownership Plan (ESOP), a significant number of employees have become millionaires.
Nationwide, only about 6,300 companies offer ESOPs, employee benefit plans that give workers ownership interest in their company in the form of shares of stock. Stewart’s Shop is one of just a handful of local businesses to offer this benefit to its employees.
“ESOP programs have been getting a lot more attention from leaders in the state and other businesses,” said Robin Cooper, public relations manager for Stewart’s Shops. “I’m only aware of four or five companies in the region that have them.”
At Stewarts, both full- and part-time employees ages 19 and up are eligible to enroll. A person must work 500 hours in a quarter or 1,000 hours in a year, whichever occurs first. After a period of six years, the employee is fully vested. At that point in time, the balance of his or her ESOP is equivalent to approximately one year’s salary.
In 2022, Stewart’s Shops made $19 million in contributions to the ESOP accounts of 3,000 active employees, each one receiving the equivalent of 16 percent of his or her annual salary. That year, ESOP participants saw their account balances grow by 12.5 percent compared to the previous year.
The Stewart’s ESOP was established in 2001, and employees now own 40 percent of the privately-held company. The plan is 100 percent company paid.
“We have also been paying dividends for about the past ten years,” said Alison Abbey, personnel manager for Stewart’s Shops. “Those are paid quarterly. People can take them as cash or roll them into their balance.”
Abbey estimates that approximately 40 percent of employees choose cash payouts on dividends.
“The majority of dividends are invested back into the company, and we try to educate people on what they are giving up if they take it.”
Long-term employees who have been diligent about reinvesting their dividends have reaped significant rewards, the company now boasting 200 millionaires.
“That was up from 175 the previous year. That number includes current, active employees who are still working,” said Abbey. “And a lot of those millionaires are hourly employees, so you don’t need to be a senior executive to become a millionaire.”
Since establishing its ESOP program, Stewart’s has worked hard to instill a sense of ownership among its employees.
“Once someone is in ESOP and sees their yearly statement that shows their balance, it becomes real to them. That’s when they buy into that ownership mentality that much more,” said Abbey.
A study conducted by Rutgers University found that companies that offer ESOPs experience substantial gains in performance. Employees with ESOPs report feeling more appreciated and connected to their company.
“The program instills a sense of pride in our employees. We call them partners because they own 40 percent of the company,” said Cooper. “And part of the beauty of the ESOP is that unlike companies with 401k programs, this is 100 percent paid by the company. Nothing comes out of the employee’s pocket, and I don’t think a lot of people realize that. This gives us a big advantage when it comes to recruitment and retention. Folks that are working in the plant, working in the shops, and working in the offices can become millionaires.”
As an example, Cooper mentions and employee who spent his career working in the company’s milk production plant.
“He retired at 57, so he wasn’t old enough to collect social security. But he was making more drawing interest off his ESOP than what he had been earning as a salary.”