ImpactAlpha, January 14 — Cajon, Calif.-based guitar manufacturer Taylor Guitars is now 100% owned by its more than 1,200 employees through an Employee Stock Ownership Program, or ESOP. “We’ve always wanted employees to have a stake in the successes they help us achieve,” said Bob Taylor, who founded the company with Kurt Listug in 1974.
The $100 billion Healthcare of Ontario Pension Plan provided the majority of the capital, one of the first times a pension fund has directly funded an employee ownership conversion. “Pension funds and other institutional investors could really help unlock pathways for the conversion of large companies like Taylor,” said Jon Shell of Canada’s Social Capital Partners, which invested as well.
In the U.S., ESOPs qualify companies for tax benefits based on the percentage of employee ownership. There are other structures for employee ownership as well: KKR is distributing equity stakes at its manufacturing companies (listen to KKR’s Pete Stavros in the podcast, “This private-equity giant has distributed more than $500 million – to hourly employees”).
Instead of corporate buyouts that undermine local economies, “social impact investors could become the agents of a sweeping economic transformation anchored in broad-based employee ownership,” Democracy Collaborative’s Jessica Rose and Soros Fund Management’s Hilary Irby wrote in ImpactAlpha.
The Taylor deal, says Chartwell Financial’s Ted Margarit, who advised on the transaction, “is a case study on how ESOPs can be viable investment opportunities for institutional investors looking to make a real impact.”