Bill Rice- Ohio Nut and Bolt Company has been around for a long time -- since 1905. It started small, and grew under the ownership of Roderick Whaelen, who bought Ohio Nut and Bolt in the late 1920s. The Whaelen family saw the company through the depression, the two world wars, Korea and Vietnam, supplying precision fastening hardware to thousands of manufacturing companies.
But when it came time for Whaelen to retire, the family decided it was time to sell. Pat Finnegan is the current Chief Executive Officer of the company, now known as Fastener Industries.
Pat Finnegan- They approached the person that was then treasurer of the company, Rich Bernacki, and asked if he would like to lead a management-led buyout. He had heard about ESOPs, and said if there's going to be a buyout of the company I'd like to include everybody, not just the managers.
BR- And so the next year an ESOP -- Employee Stock Ownership Program -- was born. Today 215 employees own 100% of what's now known as Fastener Industries. Ron Forman is a welding supervisor and has 21 years with the company. He came in just as the ownership transfer was getting started. He says from his first days he's felt like a major player.
Ron Forman- The previous owners were very employee-oriented, and actually gave part of the profit every year back to the employees...And that same philosophy has always stayed with this company ever since, that the employees were going to be important no matter what we did in business.
BR- Wayne Corman, who operates drill and tapping equipment, also feels a unique connection to the company.
Wayne Corman- You want to do the best you can do, because what your product you make comes back on you. Not only is it drill and tap. It's a corporation, we're all owners, you get more of a pride factor.
RF- You treat it less like a job, and more like a life investment.
BR- There are relatively few ESOPs in Ohio -- about 350-400, according to John Loge, who heads the Ohio Employee Ownership Center at Kent State University. Combined, they employ about 300,000 people. Not to be confused with the sort of employee stock-option plans touted so much during the high-tech expansion in the 90's, or with partnerships such as law and accounting firms, ESOPs typically exist within non-publicly traded companies, and involve larger numbers of employees, some or all of whom own stock. Loge says Fastener Industries' transition to employee ownership followed a common pattern.
John Loge- A retiring owner doesn't have heirs in the family to take over his role and ownership and chooses to sell to employees. About 3/5 of eo companies (are) created that way.
BR- Another common scenario, Loge says, is when employees pool resources and pick up a divested division of a larger company, as happened with two LTV Steel divisions in the 1980s. Employee ownership has numerous benefits, he says. Chief among them: it helps communities retain jobs, and inspires loyalty and dedication in workers. But if you're a single business owner looking to sell, the tax advantages can be substantial. And then, Loge says, there's the prospect of leaving a legacy the remains a community asset.
JL- Many owners have put into it, in effect, all their working life, the most creative part of their working life into building their company, and the idea of selling it to someone who is a bottom fisher and will buy it cheap and milk it for all it's worth and then shut it, or a competitor that you've fought for all the years, that's not very attractive for most owners.
BR- Loge points out that employees-owned companies face the same market ups and downs as other companies. Layoffs and downsizing are options when times get tough, he says, and those are usually executive decisions. Fastener Industries' Pat Finnegan says at his company layoffs are an absolute last resort. They find something for employees to do -- additional training, product development, even painting machines.
PF- Our business slows down just like anybody else's. But in a 100% employee-owned environment we have succeeded in the last twenty years in not having to lay off anybody. And that's one of the things we want to avoid no matter what kind of environment we're in.
BR- In Cleveland, Bill Rice, 90.3 WCPN, 90.3 FM.