SEARSPORT, Maine — For nearly 100 years, people have been making industrial chemicals at the end of Kidder Point in Searsport.
But for nearly all those decades, there was just one owner at a time at the top — until this summer. A big change came for GAC Chemical Corp. on June 23, the day the privately held company was sold by its majority out-of-state shareholder to its employees who now own the company.
“Does it feel different? No,” Ryan Morrison, a production manager, said last week. “We’re all focused on getting the job done. What I think is different, what I get reminded of by employees, is that we now have a real stake in the ownership.”
“Talk about skin in the game,” Jen Alley, a technical and quality manager at GAC, added.
GAC Chemical, which employs fewer than 100 people and produces chemicals for food, pharmaceutical, papermaking and other industries 24 hours per day at the facility on the shores of Penobscot Bay, has joined the growing ranks of other companies that participate in an employee stock ownership plan, or ESOP.
That is a structure that allows employees of a business to purchase it without having to pay for it outright, according to Mark Adams of Sebago Technics, Inc., in Westbrook, a company that became employee-owned in 1998. He is the president of the New England chapter of the ESOP Association.
“At the very core, ESOPs are retirement plans,” Adams said Wednesday. “I think it’s a great option for folks. It’s got to fit. There’s a lot of things to consider, financially and otherwise. I think that if all of those things work for you, it’s a great, great option.”
He said there are more than 30 companies in Maine that have joined the employee stock ownership plan model, including firms as large and well-known as Pittsfield-based Cianbro, Johnny’s Selected Seeds of Winslow, Dennis Paper & Food Service in Hampden and Stillwater-based Sargent Corp.
According to the National Center for Employee Ownership, the number of companies sharing ownership with employees has grown substantially over the past decade. There are more than 7,000 ESOPs in the country that have more than 11 million active participants.
“Companies want employees to ‘think and act like owners,’” the website for the National Center for Employee Ownership stated. “What better way to do that than to make them owners?”
Companies that want to follow this model must set up an employee stock ownership trust, he said, adding that the easiest way to explain it is to compare it to a 401k. After a period of vestment, or waiting, owner-employees are distributed shares annually. The value of those shares has to be set by an independent entity.
One primary reason to follow this model is to ensure the company’s succession. That was the case for Sebago Technics and for GAC Chemical Corp., according to Adams and David Colter, president and CEO of the chemical company.
“The owner of the company had always believed that its success was built on the hard work of the people who built the company,” Adams said of Sebago Technics. “As he was looking really long term, he found that you can retire [from the company], you can sell it, you can let it dissolve. He found the ESOP and thought it was a great option to give back to the people who made the company successful. For us, it really creates a culture of a little more commitment, a little more teamwork.”
In Searsport, Colter said that when Jim Poure — chairman, founder and former CEO of GAC Chemical Corp. — decided he wanted to retire, he could have sold the company to a competitor. That likely would have led to the business being moved out of state and local jobs being lost. But when the employees decided to pursue purchasing the company, it meant their jobs were assured and Poure still got his money when he sold his shares to the ESOP trust.
Bar Harbor Bank & Trust helped shepherd the deal, which also was helped by a 75 percent loan guarantee from the U.S. Small Business Administration. Initially, the company’s union employees also will not be owners, because federal rules mandate that retirement plan benefits need to be collectively bargained. The next time that collective bargaining occurs, those union workers also may become employee owners, officials said.
“It was a win-win,” Colter said. “Quite a few of the employees said, ‘What’s the catch?’ Well, the catch is, for the value of the company to increase, we have to work hard and can’t rest on our laurels.”
For GAC, the management structure of the company has remained intact. Customers are not likely to notice any changes, though some have said they can tell.
“The perception that customers have is a little different — that we’re more committed and more accountable to results,” Morrison said. “And more committed to Maine.”
Employee stock ownership plans are not the only way employees can own their businesses. Another option is to become a worker cooperative, which differs from employee stock ownership plans in that members of cooperatives get to vote on major decisions instead of just getting a share of the value. Maine businesses that operate under worker cooperatives include the Island Employee Cooperative, which owns three retail stores in Deer Isle and Stonington; Crown of Maine, an organic food distributor in North Vassalboro; and Local Sprouts, a cafe and catering business in Portland.
Employees purchasing a business from the owner may not be right for every company. Jeweler G.M. Pollack & Sons was family-owned until 2009, when the Pollack family sold the company to its employees, which company officials said made it the first employee-owned jewelry chain in the state. The venerable jeweler closed all its stores this summer and is seeking Chapter 7 bankruptcy protection.
Adams said companies interested in pursuing ESOPs definitely should research whether it would be a good fit for them.
“If a company was in financial distress, I don’t know it would be a great option,” he said. “But if your options are keep it in house or sell it to an external entity, if you already have a good employee culture and you’re a successful company, I think it’s an awesome option.”