Jul 2026

Meet Zolid AI

Here to help — Zolid AI can answer questions and provide insights. Free for now, with fair usage limits.

Your conversations are not shared with others. We may review them to improve Zolid AI.

Zolid AI may provide inaccurate info, so verify responses.

Summary of Podcast on EP32 - ESCA - interview with Noelle Montano - what they do and how they help ESOPs - The Grid Wiki

EP32 - ESCA - interview with Noelle Montano - what they do and how they help ESOPs

Journey to an ESOP & Beyond

Podcast

| November 18, 2022

Listen to episode Edit

Grid Insight

Quick Summary

Be the first to curate this episode — add a title and quick summary.

Add title and summary

Who Benefits From This Most

No information listed yet. Be the first to add who benefits from this content.

Suggest who benefits

Ask Zolid AI

When should a business owner start succession planning?What advice do business owners who sold to third parties have to offer me?Will all of my employees become owners if I sell the business to them?

Episode

Detailed Summary

No detailed summary yet. Suggest a summary to help the community.

Suggest summary

Answers

No questions listed yet. Be the first to add a question for this topic.

Suggest question

Authors

No authors for this episode.

Add author

Mentions

No mentions for this episode.

Add mention

Original Description

This podcast helps to outline an organization called ESCA-Employee Owned S-Corporations of America. We interview Noelle Montano to better understand Esca’s role in helping Employee-owned companies. We dive into what they do in relation to other ESOP organizations and the value their resources provide.

Transcript

Transcript provided by the publisher.

Show

Welcome everybody this is the ESOP guy and so happy that you could join us today on this journey to an ESOP.  And just like all the episodes that we have it's always exciting to do something new and different today will be,  will be that we get to look at other resources that really will help you and of course,  doing the podcast has been really the mission and the vision behind the podcast was to provide a resource that.  What I would like to say is like just compartmental e gives gives some information in small doses for people to to really work through what an employee stock ownership plan does what it looks like.  How does it benefit you and so we've we've been doing that for three seasons now and so today is going to be to help really,  identify and talk about another resource that I think is going to be,  very helpful for you and one of the things with that is is to is to understand sometimes what's out there and what you might want to get involved in that might be really helpful and so there's an organization in the United States called,  esca which which is ESC a the employee-owned.  S corporations of America and they really are there as as they describe themselves on their website as they the voice in Washington DC and so to understand what what  this organization does is you have to understand that an ESOP itself is a creation.    [1:39] Of legislation from Washington that politicians have.  Voted on and basically said hey this this is how an employee-owned company will function these are the tax benefits that an employee-owned company will receive.  And so esca is primarily focused on the S corporation side so you as an ESOP company could either be an S corporation or a c-corporation.  And one of the main differing factors is that an s-corporation is going to be a tax-exempt entity,  once they become an ESOP well if they're 100% nice up their tax-exempt all the way up there are partial ESOP than their tax exempt for the portion of the company that's owned.    [2:21] By the ESOP.  And so that's a very big privilege and it's a very big tax benefit and that needs to be thought about in terms of how does that get protected and sustained and so we're going to we're going to talk,  to Noel today Noelle Montano who is escas executive director,  she has represented esca for 20 years and she's a former associate with major washing a major Washington DC Law Firm she's also been a legislative director for the house and Ways and Means Committee for chairman Bill Archer.  And she holds a law degree from George Mason University School,  and a bachelor's degree from Duke University so with all of that I wanted to enter properly introduce you Noel thank you so much for joining us today on the podcast.    [3:09] Thank you Phil and I also want to thank you on behalf of esca for all of your efforts to promote Aesop's I think education is really the number one thing to having more Aesop's in this country so we're really glad to be here and thank you for this awesome.  So to start off just so that you know I gave you a little bit of an intro but how did you get in like involved with these opposite when it all started I mean you sound like you.  He had a lot of grief and you are very involved with politics.    [3:38] I was so I did work on Capitol Hill for seven years I was very fortunate that my hometown member of Congress Bill Archer from Houston Texas ended up becoming the house ways and means committee chairman in.  January 1995 after the 1994 election so while I certainly didn't grow up and think I want to be a tax lobbyist or I want to work on ESOP issues I was fortunate to get my start in tax policy by working for chairman Archer.  And then after being in a law firm for a couple of years a lot of lawyers eventually want to escape that world.    [4:12] And I was fortunate to be connected with Stephanie Silverman so Stephanie is the founder and c.e.o.  Esca she was instrumental in advocating for the creation of s-corporation ESOP so when Congress changed the law in 1996 and created them that's because Stephanie was,  it's working with a small handful of companies to Advocate and say their c-corporation Aesop's why can't there be s-corporation esops.  So when I met Stephanie she said I have this small Coalition that's just getting started if this works out I have a job for you,  so 20 years later here I am today and a scada is 200 almost 200,  member companies strong awesome yeah so that's a long time to be at any organization so you must love it there oh absolutely,  absolutely I mean you know what a privilege it is to represent employee on companies right absolutely an issue that makes Progressive members of Congress light up the response you may get usually when you introduce yourself is oh I love esops they might not know anything about what an ESOP is  but that's the response.  So with your the way you work in esca are you walking down the halls of Washington DC and then people say Here Comes Noel I know what she's going to talk to me about.    [5:28] Ideally that is the case with the you know the members of Congress that we focus on are  primarily on the tax-writing Committees so the house Ways and Means Committee and the Senate finance committee and if that is as much as they know is no l equals Aesop's or Stephanie equals esops we've done our job,  that's part of our job exactly.  So let's let's expand that a little bit I mean esca started with what Stephanie saw is a vision and a need obviously you don't start an organization unless you see the,  that there's a true need.  The mission that escas on as it started and maybe as it is in 20 years is it really kind of like let's define the mission and then talk about how that might have.  Changed over the 20 years.    [6:10] Well esca at its heart is an advocacy organization so unlike some other organizations in the ESOP space that do great research and data and education and how companies  you know run their ESOP promote their ESOP we're again Mission focused on  advocacy and the advocacy is to ensure that Congress does not change for the - the S corporation ESOP structure,  and as you mentioned in Congress changed the law back in 1996 so what,  what they created they could easily undo and you know you've talked about it's definitely a complicated entity when you marry a pass-through with,  qualified retirement savings plans so that complexity means there are a lot of things that could happen so our mission is to make sure that the laws do not change too.  Mess up what was done so well in terms of the tax structure of an s-corporation Isa.    [7:05] That's awesome so the that's a very clear Mission and it sounds like the you obviously have staff that are doing the advocacy.  And how in the membership of esca how does that work in relationship to having them involved in the same mission.    [7:22] Well it's works with a number of different ways I think  we give the assurances to Our member companies that we are their eyes their ears their voice and Washington's that they know they can focus on running their companies they can do what they're experts in,  but they can also be supportive of esca  and we like to say while Stephanie and I and the rest of our team can be excellent lobbyists truly the best people to tell the story,  are the employee owners whether it's a c-suite executive talking about the jobs they created the impact on the community or even more powerfully,  it's the line employees the construction worker the factory worker the secretary who's been at an employee on company for 20 years 30 years.  And they are saving for retirement in a way that they never ever could have dreamed of and that's providing opportunities for their family,  so that those are the stories that members of Congress remember and they get to talk about if they're supportive of Aesop's right and they're in there campaigning or however they.  They have strategized to be re-elected I would imagine that's great.    [8:28] So exactly and it's such a positive message because if you think about just the political discourse and the differing opinions on issues ranging from trade to healthcare to other economic issues,  that we really are a bridge between the parties I think employee ownership is something that.    [8:46] Anybody of any political persuasion can support for a reason and I think we also like to remind policymakers that this was intentionally done I mean you reference the great tax benefits that come from it but it's not a loophole it was intentionally created by Congress  to promote retirement savings and employee ownership so our message is you all did something great,  back in 1996 and we're here to share with you that it's even working even better than you could have anticipated and we're sharing that message both through connecting them with their member companies back home and the data and research that we provide.    [9:19] So in a given year.  Because some people don't go lobbying in Washington what are some of the examples of efforts I know being an advocate you know I would imagine you're meeting with.  The staff of the congressman or whatever what are some of the some of the specifics that you guys.    [9:39] Engage in in order to continue to support the message of supporting s-corporation Aesop's basically that's the primary I think,  important to note that we're playing defense and we're playing offense so the defense is our overall mission of ensuring that nothing is done to impact the escort be substructure  and it depends on what the current threat is there's you know an ongoing tax policy activity there was a tremendous amount especially with the new Administration the Biden administration had a number of tax policy ideas,  things like a new corporate minimum tax book income tax a tax on stock BuyBacks,  things like that that we have to be mindful of because again of the nuances that members of Congress are looking at these broad-based policy ideas they're not thinking unless we're there to think for them and tell them how would that potentially impact an s-corporation Esau.    [10:33] So our defensive efforts have to be pretty widespread there's also things to look at such as limitations on retirement savings plans,  you know with somebody get the idea to say oh we should cap retirement savings accounts at two million dollars three million dollars and while that may,  sounds like a lot of money to some people those of us in their time and Savings business know that you know you need a large figure to be assured of a strong retirement,  and could always dial that back if they capped it at 3 million what's to say they're not going to cap something,  had two million so defensive efforts are number one and part of our mission,  but also to support those efforts we do playoff ins and eska has worked with members of the Ways and Means Committee and the Senate finance committee on legislation.  To encourage the creation of more s-corporation esops,  like it said that like a 10:42 like a 10:42 legislation exactly 10:42 for s-corporation sellers is the heart and soul of this bill I know you had Corey resin on a recent episode and Corey talked about  his work to create the 10:42 provision in the first place for c-corporation Aesop's so,  our message on 1042 is if Congress truly wants to incentivize and fully ownership further let's provide that same incentive,  for an s-corporation seller and there's finally been some movement on that the House and Senate this year and last year have been working on a bipartisan retirement savings bill.    [12:01] And we got a small portion of 10:42 and the bill that was passed by the house,  and that same small portion and the bill that was passed by the Senate finance committee so it's wrapped up into a broader package,  and the fate of that package is murky at best right now as you know members of Congress are back home campaigning for re-election so when they come back after the midterms they'll have a list of items that they want to finish up this year.  We're hopeful because of the broad bipartisan support for this retirement savings bill that it will ultimately be attached to something that's moving.  And passed the house in the Senate again and get signed into law but it's unclear.    [12:43] But do you want to stress it it really is a great symbolic Victory to have part of 1042 included I mean that really shows the support at the highest level.  The leadership of the Ways and Means Committee and the Senate finance committee for doing more to promote s-corporation Aesop's I think that's I know you have to move.    [13:02] You know sometimes inch by inch to get to where we want to go eventually which is a.  You know the same the same benefits as a c-corp you get as an S corp when it comes to 1042 and there really isn't any logical reason why you can't.  In my head because except for we're taking money out of the government's budget.    [13:23] So let me let me yeah one thing I want to make sure I stop I always have to do this too because some people.  You know maybe jump on right now and they're like I don't even know what 10:42 is so real quickly a 1042 is when you sell your company to a nice.  And you're able to defer the capital gains on the ESOP by using a like-kind Exchange.  And so you exchange the Private Stock that you sold it for for a qualified replacement property.  Which is are eligible stock that you can hold so in order to actually not have to pay the capital gains on the portion that gets set up in the qrp.  So do you know there's a whole podcast on cue our on 1042 but what's interesting about this is s corporations.  Have the benefit of the exemption but if you get the 1042,  in addition to that it would be super powerful opportunity and benefit for people to do more esops which will really help everybody in the country dramatically.    [14:18] I think it would also help in education efforts to so even a seller that doesn't necessarily.  You know end up utilizing 1042 it just may bring the attention of Aesop's two more sellers looking to transition out of the business.  So it stimulates a ton of activity and as we talked about like you mentioned Cory's conversation it was like,  this is really good for the country and so many ways but definitely with with wealth transfer and you know equalizing some of the gaps that have been created over the last 5 to 10 to 20 years and so that would be a good thing for everybody.  Which is partly why as we as we think about one of the things I wanted to talk about which.    [14:58] I'm not I'm not a expert with politics you know in politics it's actually something I don't really like as much.    [15:04] Because maybe some of the obvious reasons but we think about bipartisan support.  You know esops are fun to talk about with politics because we do have more of a bipartisan support.    [15:15] Talk about that a little bit from being a more of a political having more political experience and being more of an expert at that level.    [15:24] And first of all I think it's just such a positive message again you're talking about employee ownership you're talking about retirement savings I think there's something that appeals to members that are.  Leaning more towards the left side of the aisle that like that the workers have this power the workers are engaged in a kind of.  Just the spirit of employee ownership really speaks to them and on the right it could be more of like this is capitalism at its best right these are private companies all they needed you know with this structure they are growing they're adding jobs.    [15:56] It's just I mean the data supports how strong these companies are in the culture that it builds and I think when members of Congress regardless of which party they're in go to visit one of these companies we love when they come out of it and say  this feels different I can tell that this feels different so it really does.    [16:16] Transcend politics to some extent in terms of the bipartisan support.  Back when tax reform was being worked on it was ultimately passed in 2017 but there is work being done on that for a number of years the Senate finance committee has some subgroups of senators that were working on retirement savings issues.  And the lead Republican and the lead Democrat who are chairing the retirement savings group are.  Big supporters of Aesop's and they kind of joked with us with esta saying this is like I mean they're partially joking but they said this is one of the few issues that we both can agree upon,  and that's really validating and that really resonates and I think you'll continue to find that's the case.  And you look at some of the supporters of the legislation that we have you could have some really conservative Republicans and some really liberal Democrats and anyone in between again it just it speaks to everybody and I think that's part of the power behind  ESOP said employee ownership yeah I know that like I'm pretty negative about the government in general just as you know they think about,  what they done to do things like they want to try to help somebody and I get it.    [17:27] But they end up kind of screwing it all up but with Aesop's they actually have helped like this is one thing I would say the government has done very well.    [17:35] And we love to hear that right and that's what's really funny I mean you can go meet with a member of Congress that wasn't in Congress back in 1996 they're not a lot of them  still around at where there but if we say congress did something right like they sit up a little straighter they look a little proud like yes leads good,  and they they understand how more should be done and particularly I know you've cited and previous episodes like just the retirement savings the lack of retirement savings when you think that,  you know half of working Americans go to work every day at a place that does not offer any retirement Savings Plan,  when at ESOP companies those employee honors have at least one retirement Savings Plan the ESOP that's,  holy provided by the employer and when we surveyed Our eska member companies more than 90% also offer 401k,  that really just shows the commitment to the workers yeah and if they're going to have yeah and then the workers are going to have a future I mean you know we all assumed that the companies can continue to grow in value but.  If all that works out they have the ability to retire and I think the biggest question for people now is what is social security look like in the future I mean it's.  That becomes a you know a bigger bigger issue and as we get closer and closer to the Baby Boomers you know really retiring.    [18:54] That's questionable so this is this is going to be very very big opportunity for people if.  We just keep the pace in grow with new ESOP companies.    [19:05] Exactly and I think looking back towards kind of the heart of the pandemic members of Congress we would done we did a ton of virtual meetings with them they were very interested of course and how are your company's doing you know what are you doing for your employee owners,  and it was just such an incredible story that accompanies had to tell about looking out for their employee owners.  And you know making sure that even if many of them were an essential services that were coming to work,  about how they were taking care of them how they rallied together how they got through you know whether the storm together just as they did in the 2007,  recession that there is a lot of data there,  but I think you know just that speaks to the just the continuity the stability of these businesses that try not to lay people off because they realize when the good times come back around  they want their workers they need their workers yeah so I think that was something that policymakers were also very interested in.  Yeah I think that's having a bigger picture of what what the workers need in the future and,  so I think that that creates great opportunity with with eska as we think about the the actual organization as a resource.    [20:12] How you know how do you help existing as Corp esops so you have you're going to have like that as probably part of your membership right and what percentage of your membership are those types of companies.    [20:23] 99.5 percent of our members are already s-corporation esops are a tiny handful of companies and say we want to join us go right away,  but it's primarily companies that have already done the transaction sometimes we get them right after the transaction so they're still a little  you know blurry eyed and it's been quite quite a process to do that transition.  But first of all we're in advocacy resource again as I mentioned that they can feel the confidence in the assurance that were their eyes ears voice in Washington,  so that their leadership of those companies are able to tell their employee honors we belong to esca.    [21:00] So that we can tell you we are doing everything in our power to ensure that this SE substructure that is so important to our company,  remains in place both for your generation and the next generation of our company,  simply honors so we're the advocacy resource we also help them build political connections through their lobbying efforts whether they're up on the hill.  Bringing members of Congress back to visit their companies,  and those connections can come in handy for non ESOP related issues you know whether it's a company that's in the infrastructure space or the energy space or something like that they might not have been politically involved before.    [21:37] And I think what they,  what they learn from attending esque events is the importance it is of being politically involved and connected to policymakers because you don't know when you might need that help and it's much better to have that relationship,  before something's on fire hmm,  we're also a resource in the c-suite network that we provide a it's really fun at our conferences to see even when the programming's over everyone still hanging out together at the bar.  Um you know connecting and I think a number of business relationships are formed that have nothing to do with the ESOP just because of the networking connections,  and I think they very much appreciate that the connections to bounce ideas off each other you know what are you doing for repurchase you know what are you hearing on this issue that it's at the most senior level with the company decision-makers,  that they are you know coming together through the Forum that esca provides.    [22:33] And then I also think that we helped build internally support with the employee-owners because sometimes they'll come up for Lobby days or by the employee owners of the  you know the more junior level participating in,  a member of Congress visiting their company or us coming out to give a political update I think it also encourages all of the employee-owners how important it is to be a Mindful and thoughtful voter  recognizing that the people you elect can have a very real impact on your company.    [23:05] That's those are awesome I like that and this is what I was thinking.    [23:09] Because I see this a lot with a lot of the esops that I helped kind of create and form is like you said there they are a little bit blurry eyed there are a little bit.  What's this A like they've dealt with all the ESOP.  People write the professionals which are you know we've went through a transaction so you've got the trustee you've got the valuation firm you've got the attorneys.  All these are great people.  But there's something about once you get through that whole process that you just you want to talk to other people that are ESOP companies and so.  In and just kind of like some of its share my experience it's like hey how did you guys do this or how are you doing that and I think that's a huge to me a huge benefit.  Is if you think about escas membership and you know looking at like that's a pretty high percentage of.  Of their membership being dedicated to those types of companies and so you know just with you know obviously the political Parts very important but just the other side of it is as I know these companies they they just want to talk to people.    [24:14] Maybe their HR people need to talk to people maybe they're they're thinking about.  You know how to communicate the message of the ESOP better there's just a lot of topics to delve in and and as much as I like to.  Talk about Aesop's it's just much better much better to talk to somebody that's been doing it for years you know as an existing company and maybe even similar Industries to you know,  right exactly do you want to meet with someone in your industry a company that's similar in size and revenue to you that we can help connect them and match them up and be a resource and that way.    [24:45] So how many meetings do you guys have a year or do you have a.  Yeah I'm sure you could do conferences and maybe we can kind of announce the next one we have we did two annual conferences so our kickoff event every year is the week of  Presidents Day in February where we're in Fort Lauderdale Florida we have a lot of members that are in the midwest area so of course they're super happy about getting out of the cold in February and it's just exciting it's our kickoff event of the year.  Every two years it's a new Congress so we're focused on every four years it could be a new Administration so we're really laying out the political and policy outlook for the year ahead,  we typically have three to four members of Congress who join us to speak to our attendees and do breakout sessions over the this is all over the course of about two and a half days in Fort Lauderdale.    [25:32] And then our federal policy conference and Lobby day is held in September.  Every year we just finished that last month we had almost 200 people we had 26 teams that we took out two.  Capitol Hill so we covered with those teams about 100 Congressional offices we had anywhere from two to five people on each lobbied a team.  And that really gave us a chance again to be back up in person for the first time we had not held an in-person Lobby day since 2019 so.  The muscle memory was still fresh we we could still do this but that was exciting to have everyone up on Capitol Hill so it's similar programming to Florida in terms of the speakers of political Outlook members of Congress,  and but it's also half days on Thursday afternoon and Friday morning to go up to Capitol Hill.    [26:22] And then recently we've launched a series of regional conferences to particularly touch our members and membership prospects that might just not be able to make it out to d.c.  Or to Florida so we'll be in San Diego in October and then next yes it's not a bad place to go.  Already already like I think we have people coming from the East Coast just because it's such a nice venue and why not go to San Diego and spend time with some good esca people.  And then next year we'll be in Boston Chicago for the first time we're doing Dallas and then back to San Diego.  Cool yeah I think that's yeah that's that the regional conferences are trying to get people together more is that the goal of doing  they are at it's trying to make it easier for people geographically and TimeWise these are a shortened version of our annual conferences our big annual conferences so it's really just kicks off with a Monday night say Monday night Monday night reception and dinner,  and then programming that would end by 3 p.m. the next day,  so this one night at the hotel easy in and out our California Conference in particular is probably about the attendance might be  that 40% California residents it's really yeah easy for them to get their absolutely again price points lower yeah for sure.    [27:42] Okay so think about so the existing companies but for those that are not yet an ESOP that some of them.  Primarily I would say my audience what is out as esca support those kind of companies.    [27:56] I think through the work that we do in Washington I hope that that would give business owners continue that are considering transitioning to an ESOP  a greater sense of assurance that this policy won't change again we've been doing this for 20 years Stephanie's been added since the very beginning it's personal it's a very real commitment that we have.  To protecting the structure so that hopefully that you know gives them an insurance and confidence that if they do this transition and take all of the time and money,  that it requires the transition to an s-corporation ESOP that there is an organization that is dedicated to the continuity of that model.    [28:36] I think the networking guidance that we talked about for existing members is still it can still be a resource for companies that have not transitioned yet you know if someone,  I'm ready to get in touch with eska and say could you point me to a great advisor could you point me to another company again that's in my industry or my sizer,  geographic area because I'd really like to just you know pick their brain about whether we should do this transition we can do that.    [29:04] And I think the data and studies that esta continually pushes out we tend to partner with national Center for employee ownership almost every year,  understudy say look at looking at retirement savings benefits or looking at the workforce we work with other economists also and pollsters to come out with new data because that's really important to our political messaging to have the data back up this story,  but I think those studies are probably useful for companies that are not yet s-corporation Aesop's or not our members both  for you know educating people about the value of an SEC shop and what a difference it can make for your company if you transition and what a difference it makes for your employee owners in particular to help build,  their support and engagement because a lot of employees,  you know if you're told like oh we're going to come ESOP own like yeah they don't know what that means at first they do not yeah it's pretty exciting once they understand but it may take you know,  really some strong education efforts to do that and I think probably the data and studies can back that up so we've looked at things like.    [30:09] Howdy Millennials it out feel about an ESOP and do they have a better do the younger Generations have a better understanding about the importance of retirement savings because they're getting that in an ESOP owned company.  Yeah I think that's a great it's a great I didn't actually think about that but being able to publish some data for two.  Solidify it may be or as you become an ESOP company be able to publish that data in your communication of your ESOP so I think that's a great at that's a great advantage and I would Lima.  That I was going to come back to the same thing like these guys be able to talk to other companies that have done it I've gone through the course I think is.  Is very very valuable for you know companies that aren't yet Aesop's and that can kind of think about,  what are the pitfalls they saw or what are the things that they experience to the process what would you do differently yes she recommends.    [31:04] So that's really good so so going into.    [31:08] Just thinking about like the challenges that face esops right now and either existing ones or thinking about the future what would you say are the greatest challenges,  facing right well my political lens I would say it's the turnover in Congress  we're losing some really important champions for s-corporation Aesop's at the most senior level of the Ways and Means Committee and the finance committee these are members of Congress that we have strong personal relationships with,  that are personally invested their the members that would jump in front of the train that's moving towards us Aesop's and the retiring and there's this continual churn  but I think that pace has increased over.  The past few years I mean it's not necessarily a fun place to be it's a very difficult job for even more reasons than it probably was a decade ago.  So that means that we have to be very forward-thinking and continually building up this bench of,  allies and champions that are going to make s-corporation Aesop's one of their top issues you know so we have to be very strategic at  looking at members of Congress where we have strong company presents where there's another reason we would have a personal connection.    [32:24] And do they want to take on this issue and make it one of their top issues so  that's the biggest political challenge really I mean you know we've gotten really good at you know batting down the threats and arguing about why a sec option be subject to this entity level tax or these retirement,  contribution limits but it really is an ongoing.    [32:44] An ongoing effort to educate members and to get them invested I mean with it should the house flip to Republican control,  there could be 10 Newman Republican members on the house Ways and Means Committee,  next year and we're starting to look at him because of our connections and because of what we do we have a list of who those members are likely to be and we're starting to see,  connect them with our companies get to know their staff but with turnover like that that's a lot of people  to educate and that means you've got a lot of senior members that haven't been in Congress that long Mmm Yeah Yeah that's it that's that's a lot of work yeah because you start literally completely over I would imagine just like.  You know now it's like what does an ESOP right they may even be completely inexperienced in at that level exactly and what level of detail do you need to get into you know between like talking about deferral and things like that or really just like hey an ESOP is  you know a retirement savings plan for the employee owners and I think the other main political challenge is just the.    [33:47] You know fiscal concerns and the ongoing need for Revenue Congress will always be looking for Revenue.  It depends on the day whether they seek to offset  tax cuts with tax increases I think and they would do that through what are called pay Force if you're going to you know cut taxes on one hand then you better raise revenue on the other hand so that there's zero impact,  to the treasury on those tax cuts and that's something that of course we were concerned about back when in 2017 with the tax reform efforts.  The primary reason for tax reform at that point was to lower c-corporation rates you know with the message of let's make American businesses more competitive with other businesses.    [34:32] You know around the world,  and so to lower c-corporation rates that's really expensive to do and so everything was on the table at that point and then we had to be very vigorous about defending s-corporation Aesop's and saying you don't want to chip away at S corporation  to lower Sea corporates by 0.001 percent so but there's always going to be the need for tax revenue  when you are a tax expenditure which is anything that costs treasury Revenue you're always on a list so you're never you never done there's no way to pass a law that says as preparation esops are the greatest thing Congress has ever done they should be protected  forever and ever that doesn't happen so I think it's that you know being mindful of the revenue and the tax activity that will always occur it doesn't matter,  who's in control of the house or Senate who's in the White House there will be a need to do tax policy,  saying that whenever there's a need to do tax policy something could happen on the escort side something could happen on the east side and that work will continue and I think it's been looked at,  you know even when there is say a democrat in the White House and the Republican it's a republican House and Senate sometimes when there's two parties involved.    [35:47] More activity happens but there's now a likelihood that there will be more and then I'm sure you probably talked about in Prior up a says the lack of regulatory guidance from the Department of Labor yeah.  Yeah valuation issues.  That continues to be a challenge for Aesop's that's something that Esko works on both through ongoing conversations with the Department of Labor urging them to issue.  These adequate consideration regulations that the.    [36:15] The community has been asking for for quite some time we've also work with members of Congress to encourage them to utilize their oversight of the agencies and.  And encourage the Department of Labor to do that and then finally I think our companies what we hear they're facing,  similar to other companies Workforce challenges just finding enough workers again business is good our companies we hear from our doing really really well and this economy and that's exciting but they tell us,  and they tell members of Congress when they have the opportunity to meet with them their challenge really is finding enough skilled workers Mmm Yeah now that's.  I was curious on the Department of Labor of thing just to go back to that for a second because I know that's that's.    [37:00] Been a long-term issue and it's like you're almost you know that you have the deal I'll process agreement that does kind of lay out some some steps for the trustee.    [37:09] But there isn't anything definitive and are you guys making progress with that I mean it's like.  Talking to them or do you see anything coming out of the the efforts there well we've made progress in terms of the Senate.  Committee they passed legislation it's their portion of the retirement savings bill that I referenced earlier that would direct the Secretary of Labor to issue these regulations so that's some really good progress again we're not sure what's going to ultimately happen.  With the bill I think we're just trying to keep the lines of dialogue open with the Department of Labor,  should they eventually start the regulatory process I think we're well equipped to respond and issue comments and it's really just about having the rules of the road I think that's what the community wants is right  we can we can edit and we know it's rare when we talked to members of Congress like you want regulation like yes we do that gives us some stability and Assurance is that,  we can we want rules we want good Aesop's we just want clear guidance,  and these valuation issues that we've been asking for yeah I mean it affects everything it affects the way the deals are done then the variance and then the potential costs for investigator for an investigation or.  A DOL audit or a lawsuit then that becomes extremely expensive and I've got to I've got an episode that's coming out about.    [38:31] Just the way that those those are handled and.  Then Insurance costs have gone up right and and who does it really negatively affected affects the employees of these companies be yeah because their value of the businesses have to have to incur the cost.    [38:47] To manage all of those steps in addition to just paying down debt and things that you have to normally do.  So I think that would help everybody if the Department of Labor were much clearer about what their what they want this to look like.    [39:00] Exactly and ask us concerned that it could be chilling the marketplace to some extent right you've got business owners that are thinking about selling to an ESOP and then they hear about these Department of Labor issues and they.  Do I really want to risk this is that too much of a you know yeah do I want to yeah do I want to step into this yeah place so yeah I think that that's interesting too like so that was kind of my next question as we as we think about.  That the the what we call the silver tsunami and the silver tsunami all these companies really coming in at almost the same time or around the same time of looking at.  Their own exit plans.  And using obviously ESOP is a popular way to go are you how are you seeing that in terms of what you're seeing on a day-to-day basis from.  Your own dealings yeah I think it's more of what we're hearing from our professional advisors.    [39:55] That there's a lot of enthusiasm they're doing a lot of deals so that's very encouraging to us because again we don't tend to see the companies until they find they've actually,  done the transaction and they are s-corporation,  but I think just anecdotally just hearing again from the advisors that there's a lot of enthusiasm that they're doing more deals than ever before that's really encouraging.  And I think if we can get some more momentum and get 1042 partially across the Finish Line with the small benefit that that will help but it's you know that's a really important question and a good issue and.    [40:30] Jared Bernstein who is a well-known Economist who serves on President Biden's Council of economic advisers he did a paper for esca that we released in D21 and he look.    [40:43] Elect at why there aren't more s-corporation esops like what are the hurdles to companies transitioning to that status,  and his answer is really weren't surprising to us but it was good just to have this out there it's education.  Awareness and sometimes there are owners in Pockets where there aren't enough advisors that are in the field you know we have a lot of companies that are in the,  Kansas City area in the Chicago area that's because some of the best advisors respiration he stops are located there so if you have companies that are somewhere and they're talking to their account nerd and their attorney they might not be.  Given the suggestion of an Isa yeah are even worse they may be detracted from it because their visor.  Doesn't understand them and they and they because they understand them they're negative about them they might even say hey don't even think about any stop because it's too complicated it's too costly it's this and that.  And the other thing and so that's part of the podcast I mean that's part of you know really promoting what an ESOP is.    [41:46] Throughout the entire country and that's why having eska and other organizations are very important because we do need more education.  And people need to know that it's definitely a viable option.  And I think the last time it's got the last time I looked at it was like seven thousand companies are Aesop's in the country is that about what you have absolute 7,000 esops and closer to,  3500 4000 SQ stops yeah yeah so that's not a big number you know when you think about it right with all the companies in the country so.  You know it makes me think that there's a lot of work to be done to communicate that this is a very viable option.    [42:25] And that's exactly what Jared's point was and then kind of looking at how can the government whether it's at the federal level state level or local level  I'll provide some of this education and support for Aesop's it's ultimately going to end of going to benefit the local communities and the states to keep those businesses in  the area absolutely yeah I mean and benefits everybody yeah and I we've done podcast episodes with companies that.  We're going to sell to mr. big and then they stayed and then the community kept the jobs and to me it's it's a very big part of our economy that.  You know you can't Overlook and so it started to make sense from a lot of different fronts that way.    [43:05] So so knowing what you know kind of to finalize what we're talking about what do you think the long-term future of Aesop's are for the United States.    [43:14] I would say Future's bright and I think economically the studies back is up against a reference that we have studies for how to Desi sub companies do during the 2007 to 2009 recession how resilient the companies were.  During the pandemic and I think it's because as you get to know these companies and their leadership in their employee owners there's that commitment to their employees there's the commitment to building for the future.    [43:40] And that resonates across generations of employee-owners There's real commitment that their Community I think a lot of these companies do a tremendous amount of community service.  And support organizations locally in their community.  I think politically it goes back to what we talked about that esops being a bipartisan bridge that we've got to find issues that members across the aisle can communicate on and work on together despite the,  very real difficulties and you know contentious topics that they deal with on a regular basis,  you know that we can be a solution to the challenge with the retirement savings crisis or challenges that Congress would be looking to solve if they're not tied up in all of these,  other issues and I think I'd ask is and we're really excited about the future next year we will be celebrating 25 years of s-corporation ESOP so while  the bill was passed in 1996 the effective date was 1198 so we intend to be you know  living it up for 25 years it'll be yeah it'll be a big celebration here that'll be awesome.  Great salute they and then here's here's to the next 25 years right keep it going yep keep it going well great well great work Noel thank you for doing that and for everybody that as a as a Tesco we applaud the efforts that we know it's important.  You know but it's really helpful to hear what you guys really do and I think anybody can go to your website esca.com.    [45:10] But that's good yes that's good that us okay sorry I almost plugged you then I screwed up the whole thing but esca dot u s so anybody can go there of course and we encourage you to do that.  But but to understand what you do is really helpful you know and hopefully this gives us a platform to help you guys spread the word more and get more membership and more support and the things that you're doing to really help.  Promote Aesop's we really appreciate that though because again it's a square small organization as he sucks you mentioned if there's three to four thousand you know it's not a,  it's not a big issue but we have to play Big so that we're competitive and that our voices are heard in Washington's that's the only way that you'll get anything done is to have a regular presence here and have your voice heard and was such a positive message we can do that so  thank you for helping us promote that message great well thank you again Noel so with that we look forward to our next step on this journey to an ESOP have a great day everybody.

More from this show

EP1 - Warrants on an ESOP transaction with Will Rodriguez at Vision Point Capital

Podcast

EP21 - “Create Amazing” Interview with author Greg Graves, Retired, Chairman and CEO, Burns & McDonnell - ESOP company.

Podcast

EP22 - Before it Erupts - Kaboom! Working through business volatility

Podcast

Ep6 - Mt. Everest Part 1 - Revenue Planning

Podcast

About Journey to an ESOP & Beyond

ESOPs are gaining traction. In the "Journey to an ESOP & Beyond” podcast, Phillip Hayes explains the process of the ESOP transaction and addresses ESOPs from a business owner’s perspective. The "ESOP Guy" illuminates the simplicity of ESOPs as he debunks common misconceptions that ESOPs are immensely costly and complicated.

Curators(1)

People who have contributed edits to this page.

Jun 26

Zolid AI

+0/−0

View revision history