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Beatification Candidate
Picture of big al
posted
This item that WTG posted in the supercooling thread prompted me to raise a question.

quote:
Originally posted by wtg:
John Conrad obit.

https://eepower.com/news/sc-el...-conrad-passes-away/

quote:
Conrad steadfastly maintained S&C Electric as a privately held company and turned down numerous offers to sell the company or merge with conglomerates. He reinvested profits for the long-term and built a remarkably loyal workforce by shunning layoffs and providing good pay and benefits.


An article about the company going ESOP after Conrad's death.

https://www.forbes.com/sites/m...acy/?sh=55c8fc3029d7

A remarkable company in many ways.


I was not aware that they had become an ESOP and that it apparently works for them.

I have mixed ideas about ESOPs. One of my brothers-in-law worked for many years for Weirton Steel, an integrated (raw ore to finished steel) producer. They had been purchased by National Steel and subsequently spun off in an ESOP. The problem that ultimately emerged as the number of retirees grew versus active employees was an unwillingness to make capital improvements. The mill shrunk and ultimately everything except finishing operation were shuttered. How much might have been kept in operation is questionable, given the overall contraction of the US steel industry, but the lack of capital improvements drove that contraction faster for Weirton Steel, to the detriment of the active workers.

I think one factor favoring an ESOP's success is its position in a stable or expanding business segment. I'd be curious to hear others thoughts or experiences with ESOPs.

Big Al


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Money seems to buy the most happiness when you give it away.

Why does everything have to be so complicated, all in the name of convenience. -ShiroKuro

A lifetime of experience will change a person. If it doesn't, then you're already dead inside. -MarkJ

 
Posts: 7381 | Location: Western PA | Registered: 20 April 2005Reply With QuoteReport This Post
Has Achieved Nirvana
Picture of wtg
posted Hide Post
I can add a few bits and pieces about S&C's transition from a privately held company to an ESOP.

Some background on the various steps they went through:

https://www.prweb.com/releases...11/prweb10136546.htm

Not absolutely certain about the order and details of these events, so you'll have to forgive me if I'm a little vague and/or imprecise...I think the major points are accurate...

1. The company stopped the traditional pension plan, replacing it with company contributions that were made to an S&C Stock Fund in some kind of a retirement account, I think a 401k?

New employees only participated in the replacement plan, and existing employees got to keep whatever they had in the old pension plan, which continued to be invested and kept growing. No new company contributions were being made.

Moving forward, old timers got the same plan as the newbies.

2. At the point the company went KSOP, anyone who had stock either had to sell it back to the company, or convert it to more shares in the S&C Stock Fund. The stock fund price tripled in its first valuation after the KSOP went into effect.

3. At some point, the company decided to divest itself completely of the original pension plan.

Everybody who was in that old plan had three choices: a) take a lump sum payment, b) roll your balance into a tax-deferred account (probably an IRA), or c) start taking your pension (a Met Life annuity). Mr wtg opted to take the Met Life annuity. The payment was about 20 percent higher than taking his balance and buying an annuity in the open market.

4. Retired employees could keep their S&C Stock Fund shares in their 401k until reaching the age of 65, which was nice because the only direction it went was a steep upward trajectory.

After age 65, they had to sell any Stock Fund shares and invest in something else. Mr wtg retired at 62, so he got the benefit of the company's growth for three years after he stopped working there.

I think it was a well-thought out plan that was fair to both long-time and new employees, and that allowed them to both share in the profits of the company.

S&C was an pretty unusual company in that it was privately owned for so many years and that John Conrad did a lot of planning for the future. He had a corporate philosophy that was generous to employees. And, as you note, the business climate has been extremely favorable.

My brother-in-law works there and Mr wtg still chats with former associates who are still there. People at the company have done very, very well with this plan.


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We are all visitors to this time, this place. We are just passing through. Our purpose here is to observe, to learn, to grow, to love… and then we return home. - Australian Aboriginal proverb

Bazootiehead-in-training



 
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