EOT Advisors Client - Bioworks Transitions to an Employee Ownership Trust (EOT)
Webinar for the NJ/NY Center for Employee Ownership with EOT Advisors’ Chris Michael and our client Bill Foster of BioWorks.
In this interview, Bill Foster, CEO of BioWorks, discusses the company's transition to an Employee Ownership Trust (EOT) and the factors that led management to choose employee ownership as its succession strategy. Foster explains how the EOT structure aligned with BioWorks' values, preserved the company's independence, and created long-term benefits for employees while providing a fair exit path for shareholders. The conversation explores the transaction process, governance considerations, and lessons learned, offering practical insights for business owners evaluating employee ownership as an alternative to a third-party sale or private equity transaction.
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BETHANY DENNIS: All right, welcome everybody. My name is Bethany Dennis. I'm with the Rutgers New Jersey/New York Center for Employee Ownership. Thank you for joining us this afternoon. I'm going to be your host and moderator. So, this is employee ownership trusts. Many of you might already be familiar with employee stock ownership plans as a form of employee ownership. However, selling to an employee ownership trust, or an EOT, can be a strong alternative to an ESOP. Where the cost of an ESOP is a major consideration, where the sustainability of the employee ownership structure is a major goal. So, today we're going to learn why and when an EOT might be the right option for business succession. So this webinar is scheduled for about 45 minutes and with 15 minutes allotted for Q & A at the end. Participants, please stay muted, you can keep your cameras on if you like and submit any questions you have in the Zoom chat. And then Chris will answer them at the end. So now I'm going to turn things over to Jim Terez. He is the associate director of the New Jersey/New York Center for Employee Ownership. And he's going to speak briefly about some of the Center's major accomplishments from this past year, as well as introduce our new employee ownership online education program, which is launching February 1st. All right, Jim, over to you.
JIM TEREZ: Thanks very much, Bethany. Welcome everyone. Thank you for joining us and thank you too, Chris and Bill for joining us today. I'm really excited to hear what you have to say about employee ownership trusts today. I'm Jim Terez, I'm the associate director of the Center for Employee Ownership. And I just wanted to mention a couple of projects that we've been working on and that you can check out both today and in the near-term future. The first project is a report that the Center did based on Prudential sponsorship. It's studying opportunities for employee ownership among minority veteran-owned businesses. And the report that was generated from our research is available on our website. So, you can go to our website and find it there. And then I also wanted to mention that we had a conference in November. Well, I think that we had a really great set of sessions. It's archived on our website as well. And so you can go there and check out any of those particular sessions. I was thinking that, some of the sessions in particular provided an incredible foundational sense of some of the features and requirements for employee ownership.
And then the other project, which is upcoming, that I wanted to mention is thanks to great sponsorship from the Kellogg foundation. People in our Center have put together a new online educational program to provide information in particular to minority and female business owners about employee ownership strategies. And, it's going to be free. It's not available yet, but it will be available in the next maybe two to three weeks on our site. And so, you'll hear more about that. We're really looking forward to being able to spread the word a little bit about employee ownership. So, stay tuned basically. We're excited about all these developments. Anyway, I want to introduce our two speakers for today. I'm so glad that they were able to join us.
Chris Michael is the founder and managing director of EOT advisors. He himself is basically responsible for developing the employee ownership trust as a financial and legal mechanism in the United States for employee ownership. And he has published a lot of articles introducing the concept into leading peer review journals, including journals like Tax Notes and Probate & Property. Chris also teaches at Rutgers. He's a professor at Rutgers in the School of Management and Labor Relations, and he was recently named as managing director for the Institute for the Study of Employee Ownership and Profit Sharing at Rutgers, of which the Center is a part.
Chris is joined today by Bill Foster. Bill's chief executive officer of BioWorks, located in Rochester, New York. For over 25 years, BioWorks has been helping growers in the horticulture and specialty agriculture markets, which successfully deliver crops to market with biologically based solutions and support. Bill and Chris are going to discuss the sale of Bill's company to an employee ownership trust. Bill and Chris, thank you so much for joining us, we really appreciate it. Thank you.
CHRIS MICHAEL: Thanks so much, Jim and Bethany, and to the New Jersey/New York Center for Employee Ownership and to Rutgers, as well. I can't wait to have an interview with Bill, and we’re going to talk about his sale and transition to an employee ownership trust. I thought it might help though, initially, to do a run through in about 10 or 15 minutes, what an employee ownership trust is. Because it's still a new concept here in the United States. So, it's hard to even begin to talk about employee ownership trusts before first speaking about John Lewis Partnership. It's kind of the north star for employee ownership trusts the world over. It's basically like a Macy's in the UK. They also have a large supermarket chain attached at the hip. All of it is an employee ownership trust that has about 90,000 employees. They did 14 billion revenue in 2020. They've been under employee ownership for almost a hundred years using the EOT model. And in the UK are EOTs are the mainstream form of employee ownership. ESOPs aren't the thing in the UK. People refer to this model as the EOT model or the John Lewis model. And politicians on both sides of the aisle in the UK speak about possibilities for a John Lewis economy.
So what is an employee ownership trust? An EOT is a trust that holds the shares of a company on behalf of most or all of the employees of the company. Just like an employee stock ownership plan it offers employee ownership, which is to say that the profits and gains of the company are shared by the whole team in an equitable manner. Also, that the corporate governance is directed towards the best interests of the whole team of employee-owners. And also it provides an opportunity to develop an ownership culture at the company, that enhances and improves the quality of work life.
Now I can't help also but, here in the United States, to discuss how an EOT is different from an ESOP, because ESOPs here in the US are the norm for employee ownership, right? There have been tens of thousands of ESOP businesses over the last half century. An EOT is different from an ESOP for a few reasons. So one is an EOT is not a retirement plan. It's not a way of deferring payment of tax. It doesn't offer a way to defer payment of taxes like an ESOP does. It's also not regulated by ERISA or under ERISA. For those same reasons, because it's not a retirement plan, because it's not regulated under ERISA, there's no need for annual valuations, there are no repurchase obligations, there's no third party ERISA administrator required to keep track of employee share accounts, right? So that substantially reduces the complexity. These features substantially reduce the complexity and burden of operating an EOT company. One way to think about EOTs might be that EOTs are employee ownership just without the ESOP piece. Another way to think about EOTs––and I'll return to this concept later on in the presentation––is that EOTs are a private, flexible, low-cost, easy-to-understand, and I might add sustainable alternative to the ESOP. So if you remember nothing else from today, there are two key points. If you start from these two key points, you can almost figure out for yourself what the differences are. EOTs are different because once the shares is gone into the trust, they stay in the trust generally speaking. And the employees, as they say in the UK are “naked in, naked out.” The employees aren't buying shares. And when they leave the company, they're not being bought out of any shares. The benefits, the financial rewards to the employees come while they're working at the company, typically in the form of profit sharing. That again, I have to say, is speaking in general terms using a default approach to structuring an EOT. As actually you'll hear later today with Bill, there are other approaches that you can use.
At this point in my typical presentation, I like to stop, pause, and say, well, if EOTs are neat, different, cool, offer these benefits and advantages, how come we haven't heard of them before? “E – O – T” looks like the name of a fraternity. So here's my quick “1-2-3” answer to the question of why we haven't heard about EOTs much in the US before. And I think the answer really boils down to that guy in the black and white photo with the bow tie at the bottom of the page. Louis Kelso, in the 1950s, leveraged tax code that was put on the books back in the 1920s and created something called the––what he called the “Kelso plan.” It's what we now know as the ESOP. It was called the Kelso plan at that time. And he and his wife, Patricia Heller, marketed the Kelso plan. They went all over the country, wrote books, went on TV, flew all over the country, and pushed the concept, pushed the concept, pushed the concept for decades before it ultimately landed in federal law when ERISA was legislated.
If you go further back in US history, it turns out that we had EOTs in the past in the US. In fact, it's quite possible that John Lewis got the idea for an EOT from a US company called Columbia Conserve Company. The structuring for that deal was actually done by a University of Chicago economics professor who later became the US Senator from Illinois. A few years later after that company was formed is when John Lewis did his EOT. I can't establish the connection firmly, but the dates make it seem like there really might be something there. So, you could imagine an alternative history where the US follows the trajectory that the UK followed. Which is that EOT becomes the mainstream form of employee ownership. But some people have an outsized impact on history. And I think Louis Kelso at least in the employee ownership sphere, certainly was that person for us in the US.
And after the ESOP was legislated in under ERISA and additional tax benefits were conferred on the ESOP in 1984. Well, the rest was history. John Menke who was a senior tax associate with Louis Kelso set up the first ESOP shop and has done thousands of ESOP companies. Corey Rosen founded the NCEO in 1978 and has also helped facilitate thousands of ESOP companies. And, again, the rest was history. So things have only changed in the last few years as Jim mentioned earlier. I published a few articles explaining how the employee ownership trust is an alternative structure for employee ownership, an alternative to the ESOP that we can do today, that we don't need any new laws for, published in Tax Notes and Probate & Property, back in 2015 and early 2017. And I started doing the first EOT transitions back at that time as well. I launched EOT Advisors properly in 2017. And in this published research I show that the traditional EOT is not subject to ERISA. That existing US trust law works. You can do this in any state if need be using another state's trust law, which is totally common when it comes to trust law, picking a jurisdiction that is best for your purposes. And I also, if I have any minor contribution here, it's showing that you can use something called a noncharitable purpose trust, which is a new development specific to US trust law, that is a very handy tool when you're structuring an employee ownership trust. And some of the advantages are listed there. So, EOT Advisors then is the first investment banking and financial advisory firm in the country dedicated to assisting business owners selling to an EOT. We work all around the country. We've been involved in about 15 closed US EOT transactions––that's about all of the EOTs to date, and we're on track to double that number by the end of the year.
Here are some sample clients, actually got to get BioWorks up there on the slide. You can use an EOT with really any company that is a sustainable viable business with a leadership team in place. Nevertheless, you could go down to 10 employees with a million or two in revenue––that can work. You could do this with a billion dollar company and anywhere in between. That being said, people often want to know what the typical company looks like for an EOT transition. And, at the moment, typical client enterprise value is in about the $10 to $20 million range. Now it certainly can go again below that. So, down into the single digit millions enterprise value. But it can also go significantly above that. I'm working with a client right now that's probably about a half a billion enterprise value. Typical workforce size again, it can be lower than this. It can be down to a dozen employees, it could be up to hundreds, or thousands of employees. But a typical client is about fifty to one hundred employees. Typical time to close, although you could push this down to as quickly as two months, if we're all on the same page and we're working quickly and closely together. It can take longer than this as well if it's preferred, but a typical client takes about six months to close working at a very measured pace, not working too hurriedly.
Why would you want to do an EOT as a business owner? I'll repeat again that, it's best to think of EOTs as a private, flexible, low-cost, easy-to-understand, and I'll add sustainable alternative to the ESOP. So, most business owners, especially my clients, I find in my experience as a company advisor, really value privacy. A lot of my clients, they've been operating their business for a couple decades. The only person that really has full access to company financials are them and their CPA that's it. If you're interested in employee ownership and I have to say, I'm a big fan of the ESOP, so this is not a––in fact, I always say I wrote a 300+ page PhD dissertation saying how great ESOPs are. So I think the ESOP is a fantastic tool. I'm a big advocate for the ESOP, but that being said, if you're planning on selling to employee ownership, if you do that to an ESOP, you have to know that ESOPs are kind of quasi-public transactions. Where you're involving a lot of different service providers, investment bankers, lawyers, trustee, multiple valuation firms, multiple lawyers, multiple law firms, and you can easily wind up on calls with 35 people, all picking through your company's financial records. That's just not comfortable for a lot of business owners and with an EOT you can just hire me and I can get you there from A to Z. I'm the only firm that you need to work with. I'm the only firm that you need to hire to sell to an EOT. That's one advantage.
If you're flexible with an ESOP, you have a clear menu of options and you have to pick from those options. And if you deviate too much from those options, you might lose the qualified tax status of the ESOP. With an EOT, and you'll hear this a bit with Bill as well, you can really choose what you want to do. I mean, I will give you, what international ethical standards to use, if you want to call it employee ownership. I'll provide you with information so that you don't stray from the very broadly defined international ethical standards for employee ownership. But, once we get past those very broad standards, you can really do what you want in terms of structuring the employee ownership trust. And actually, if you're somebody who in interested in environmental goals or other social goals or community goals, you can factor that into the trust and you can include those goals in the trust. So, if you're going to call it employee ownership, you'd have that as the highest goal of the trust, but you can also have these alternative goals layered in. You can't do that with the ESOP. You can combine an employee ownership trust with a family trust. So that's another thing you can't really do at least inside of the ESOP.
Low-cost, just suffice it to say that EOTs cost a fraction of what an ESOP costs to implement and to maintain over time. ESOPs have very high installation costs and the annual year-after-year cost of keeping the ESOP is also very high. Whereas with an EOT the year-after-year maintenance cost can be nothing depending on how you structure it.
I always like the phrase “Keep It Simple Student.” All other things being equal, it’s generally speaking better to take the simple course and the EOT’s much easier to understand for you as the selling owner. You don't need to do a one-year crash course in ESOPs. It can be much quicker than that. Likewise, for your employees, for the employee-owners, it's much easier to understand. Every ESOP practitioner worth their salt will be forthright and honest about the fact that explaining what ESOPs are to your team is a very challenging process. And ultimately, it can take years to really help your team understand what an ESOP is. I've heard it said, and I think this makes perfect sense, that it's really not until the first generation of employees retires and gets paid out of the ESOP that the team really feels like it's real.
EOTs are more sustainable than the ESOP and ESOPs can always get bought out by a third party if there's a sufficiently high offer. With an EOT you can customize when, how, under what terms you would want to allow for the company to be sold out from under employee ownership. And if you're somebody who prefers to preserve the company and the legacy of the company under employee ownership for the long haul, you can also program that in the design of your employee ownership trust.
So with all of those advantages, let me also say that in the current environment, as in right now, I think it's even better to do an EOT. For one thing, if you're savvy to the specific tax benefit that's, granted to an ESOP, when you're using a C corporation structure, it's known as the 1042 rollover that allows you to defer payment of capital gains tax. Fewer sellers to an ESOP are even using that strategy. And so, the use of that 1042 tax deferral strategy for the seller––this is a longer discussion, and glad to have it with you on a one-on-one basis, but it's really not clear what the big picture, what the financial advantage to the seller of doing an ESOP would be.
Another factor in the current environment is that investment bankers and private equity firms have really gotten laser-focused on the opportunities in the lower middle market right now, in a way that they have never been before. And so, all of my clients say to me, and these are again, $10 to $20 million firms. These are firms that a decade or two ago would not have been on the radar of investment bankers and private equity. They're now getting calls every day, once a week, with an offer to buy. And if you're somebody that wants to preserve employee ownership of the firm, then right now, if you sell to an ESOP, it's very likely that the company's going to continue to get offers. Even just a few years after the sale to an ESOP, it’s not guaranteed to happen, but it might have an offer that's too good to refuse. And where the ESOP trustee feels compelled, even against perhaps the employees’ wishes. Unfortunately, there's also an increased level of litigation right now. That's not a great thing to have to deal with. There’s substantially less litigation risk with an EOT. And because of the increased litigation risk, there are even higher costs today than in previous years, in establishing an ESOP. And again, that's a factor that I think would encourage choosing an EOT.
So with that said, we're going to now go to our case study with Bill Foster. So let me just stop the share here. BioWorks. So, Bill, welcome, and thank you so much for agreeing to do this webinar for the New Jersey/New York Center for Employee Ownership.
BILL FOSTER: Absolutely, Chris happy to.
MICHAEL: Oh, so glad. And, Bill and I worked together about a year or two ago to help structure his EOT. And so just to first get a sense of what, what you guys do. I thought we might begin at the beginning and find out a little bit about how you got into the specialty agriculture industry.
FOSTER: Sure, happy to. I'll try to make the story short. The company was started in 1993 based on some technology that came from a Cornell University research station in Geneva. If you want to end a cocktail conversation you tell them about what you actually do. So, we grow mold. So the professor at Cornell found some plants that were living under certain conditions and isolated this fungus. And we can actually start to, we can grow the fungus commercially. It's regulated by the Environmental Protection Agency. So our products are EPA registered. So the company was started in 1993. I joined the company in 1998. So I try to be really clear that I'm not a founder of the company, not that that matters, but I don't want to give credit where credit isn't due. And then we were growing slowly. A lot of companies in that same space, that were trying to provide alternatives to chemical pesticides used in agriculture. A lot of private equity money went in. BioWorks was one of those. As my story goes, luckily I wasn't very good at raising money, or we wouldn't have been able to buy the company, which I'll talk about. But there's this whole idea of instead of using chemical insecticides or pesticides to control insects or diseases, you can actually do it biologically using organisms that mother nature produces for us. But being fairly observant about when they work and when they don't work. And so, there's this whole industry called the biological products industry that was formed in the 1980s and has been growing significantly ever since and we're part of that industry. So yeah, it's been a blast. I love it.
MICHAEL: That's fantastic. And what got you to the point in terms of your tenure at the company that, that facilitated the transition so that you actually became the owner? That's not my typical client by the way––typically my clients are the company founders.
FOSTER: Yeah. We were growing, 10-ish percent a year, but we had 220 shareholders at one point in time. And we never felt that we would become the investors' dream. Even today compared to what the original expectations were, we’re not the investor's dream. And so in 2007, we approached––there were five of us back then. We approached the board of directors at BioWorks and said, "Hey, we're interested in buying the company," a management buyout. As I recognized later on, a highly leveraged management buyout. But we approached the board, we negotiated with the board for an excruciating 28 months. As I joke with someone, at some point in time I'll write the book on it. Although I don't know if I want to relive the whole scenario again, but the outcome was fantastic. We ended up in 2010 buying the company, five of us, and then over the next about five years, we slowly paid off the debt that we incurred from the original management buyout.
MICHAEL: And are those––I can't recall, have you since then bought out some of those other partners?
FOSTER: Yes. So, there's now just two owners of BioWorks, myself and another gentleman and we bought out the previous three.
MICHAEL: Okay. That's fantastic. So, you finally own the company and now you're going to give it all away.
FOSTER: Exactly. Yeah. Again, if you talk to traditional business owners, they look at me and say, "What is wrong with you?" Because one of the slides you put in there is so true. I still get calls if not every week, probably every other week from some private equity company, someone interested in looking at buying the company. I remember the day the management buyout closed. I slept, I think, the best I've ever slept because every time the phone rang up to that point in time, I figured, hey, it's my fiduciary responsibility to talk to them. And I just kept on envisioning the employees. I think back then we probably had maybe 30 or so. What am I going to tell them? They have committed their career to BioWorks and I have to go tell them and say, "Oh, by the way, I know you've been working with us for 10 years, but it really doesn't matter anymore because the owners wanted to...." I'm not going to fault the shareholders at all, but that's just not part of my DNA. I just didn't want to do that. So when we bought the company, it was just a nice relaxing moment for me. So, I no longer had a Pavlov’s dog response and cringe every time the phone would ring.
MICHAEL: And, of course the Rochester region has its own saga with, firm closing, etc. I mean, what would happen if you had sold, instead of working with me, if you had sold to another, a third party––what would be the most likely scenario? I mean, would...
FOSTER: It's tough for me to say. Sometimes, I've talked to the companies that had expressed interest in acquiring us and still do. And it's wonderful to tell them, to say, we use the term perpetual purpose trust.
MICHAEL: Yeah.
FOSTER: Because when I say EOT, most everyone hears ESOP. So, I say no, it's different and I go into explaining why a little bit. But, we still get companies interested in buying us. And again, it's just wonderful to be able to say––I could say no, starting in 2010––it’s now more fun to say no, and tell the story behind it and why. Like typically what they'll tell you is, "Okay, for the first five years, we're going to treat you as a standalone. And then after five years you're coming under, our company, the mothership.” And for us––you've talked about legacy––the culture at BioWorks is the most important thing to me, retaining that culture. We have a fairly unique culture and we attract high quality team members because of our culture. And the last thing I wanted to do was destroy that culture. The potential buyers would say, don't worry about it, we're going to leave you alone and everything else. It's like, I'm sorry I just don't believe that...
MICHAEL: That was my next question, would they really leave you alone for five years?
FOSTER: Exactly. Yeah. They'd leave you alone for five years. Because that's what the earn-out probably would be––over a five-year period.
MICHAEL: Right.
FOSTER: And then after you're gone, thank you very much. And they take the technology, and some good people, what they perceive as good people, and then everyone else would be out looking for another job. And that's, again, that’s part of why we are where we are with BioWorks. That wasn't the intent originally, the intent was––I was just joking the other day with someone, "Why did they bring you in as CEO, Bill?” I started with the company in 1998. And my job was to do deals and sell the company. My job was figure out how I can increase the value of the company and give a profit to the shareholders, not the stakeholders, the shareholders. And, I was okay with that until, my story goes, I fell in love with the company and the people and said, there's got to be a better way. There's just got to be a better way to run a company.
MICHAEL: Right. Well, that speaks then to what was it that had you gravitate from that role as CEO and shareholder? What specifically made you think about employee ownership? Or is it more––and this is again, absolutely fine––is it more the perpetual purpose aspect of things and the business legacy aspect of things? Or is it the employee ownership side of things? Or is it some combination of those?
FOSTER: It really goes back to the purpose why we exist and it's––we share this readily––it's three parts: grow our team, serve others, and save our earth. And I won't spend a whole lot of time going into that. It's funny I looked at an ESOP. I went to an ESOP conference in Arizona probably seven or eight years ago thinking ESOP, ESOP, ESOP. And I remember, I read a press release about New Belgium Brewing company being acquired. It's like naively, I kept on thinking, well, that, that, that doesn't seem possible. And luckily in Rochester, we had connected with Rob Brown, who's an ESOP expert and I said, "Rob, is it possible that an ESOP company can be acquired?" He was probably rolling his eyes at me at that point in time, and he said, "Yeah, if the valuation is significantly higher, and then it's the fiduciary responsibility to recommend to the shareholders to sell.” I remember that just created a pit in my stomach thinking, well, I can't go down that way. To me, it's the people that helped build the company that should be rewarded with ownership, not necessarily maybe stock ownership, but owning where the company's going to go. And funny enough I called our corporate attorney and he was working with a client of yours who I know fairly well and he said, "Bill, your timing is perfect. I'm working with this other company on an employee ownership trust. Here's what it is." It's like, that's it. That's exactly what we want to do, and so I learn more about it, and it's been a great story.
MICHAEL: I understand that you have made some changes there. So maybe you could speak to some of the changes that you've already introduced at the company.
FOSTER: Sure. And so we created the trust. We had two board members. We've actually added a third board member. He's elected by the employees and this year, actually, we're just starting this quarterly rhythm of board meetings reviewing how the company's doing. Prior to the management buyout, I was reporting to the board of directors and every quarter, I would give them a board update. Well, I liked that process of communication and sharing. So we continued that even after the management buyout and we're going to continue that going forward. So I envision myself at some point in time, stepping away, being a trustee, but stepping away saying, okay, I want to know what's going on with the company. We're going to have these regularly scheduled board meetings that overlap with companywide updates. They last about an hour and a half. And we talk about the status of the company. We'll add some other things about how we're doing regarding our core purpose, how we're doing with our core values, employee satisfaction, we'll be adding some things to that. But they'll be quarterly board meetings where we talk about that. And that's the way to share information, not only with the trustees, but also with everyone in that company.
Probably the two biggest things is we added an employee to the board, and the second part is we'd always had this variable compensation plan bonus that we modified not so much because of the perpetual purpose trust, but again, because we thought it was the right thing to do. And that is, we have a profit sharing plan and we used to share it based on your compensation. So, if there were 10 people in the company and the highest person made five times as much as the other person, that person would get five times as much in their bonus variable compensation plan. And we said, well, that's interesting. We did that for a few years. We said, "but, from a fairness standpoint, what if we shared the profits equally?" At the end of the year, we made a hundred bucks and there are 10 people in the company. Now everyone gets $10. And so regardless of your position in the company, there is a component of tenure as far as when you started in that year. But once you've been with the company for a year, you're participating in getting a bonus at the same level that everyone else is. So that's a second thing, but it's just consistent with this idea of people. The purpose of the company, going back, it's the team that's creating the value of the company, value that will not be recognized, which is perfectly fine. Except in stock appreciation rights. So that's the third part we're doing––we're modifying and enhancing our stock appreciation rights plan. So that the opportunity for wealth is created by everyone, on a regular and ongoing basis.
MICHAEL: So that's a really interesting point, a lot of interesting stuff there. I mean, one is of course, you don't need to have any employee voting rights at the company with an EOT. But you, you guys chose to have an employee-elected board member. Although it's much more common to use a compensation basis for profit sharing, it's certainly a more egalitarian approach to use equal profit sharing. I mean, everybody's working full time and the modest differential between compensation levels at the end of the day might be simpler and easier and a better feeling in a way to just make it equal for the profit share. Again, that's going to be structured differently at different companies. And then the last point I think is fantastic because there are some folks particularly in the ESOP community––to them employee ownership means capital gains.
FOSTER: Uh-hum.
MICHAEL: It’s the way that they've been doing it in the UK for decades, but it's almost as if it's been difficult for some practitioners to accept the notion that you can actually combine EOT ownership and equity ownership in capital gains. And of course we have examples of this in the US already, but here's another example where you're layering on an existing SARS program in conjunction with the EOT and it can work perfectly well together.
FOSTER: Yeah. When someone joins BioWorks, we give them 25 SARS units right up front, vested over five years. And then every year we give everyone the opportunity to buy up to an additional hundred SARS units. We do go through a formal third-party valuation process. The banks like it. We like it just because it gives us an outsider's perspective of how things are going. What I liked about an ESOP was this idea of, you could create, I'll say, significant employee wealth at that point in time. And 25 SARS units are nice, but they’re not going to create significant employee wealth. And we're still in the process of working it out, but we want to figure out a way of how we can give regular tranches of grants––we don't know what that number is. There might be some responsibility component to how many SARS unit grants we'll give you, and we're still working through those details. But we want to be able to create this opportunity that when someone leaves BioWorks after working here for, 15, 20 years, they're looking at anywhere between $100,000 to $250,000 of appreciation in value so that, it just allows them to live a lifestyle that they want to live. So that's what we're targeting right now.
MICHAEL: And that's fantastic. And that's actually right on par with the account values that you see on average with ESOPs. This has been such a fantastic conversation, Bill.
FOSTER: Fantastic.
DENNIS: Chris, this is great. And Bill, thank you so much. Listening to your story helps educate me as I learn even more about the ESOP and employee ownership process and EOTs. So thank you everybody for being here. If you would like to know more about what we're doing and view past webinars go to ownership.rutgers.edu. Chris, can you throw up that slide if you can? If not, I'll just say it slower. There we go. Perfect. So it's ownership.rutgers.edu. There's contact information for our executive director, Bill Castellano, and Jim Terez, who's here with us today, and myself. If there's a topic that you would like us to do a webinar on, or you want to know more about, you can contact us for that. I will reiterate that we are going to be doing a marketing blast and announcing our new employee ownership online program, which is going to be focusing on minority and female business owners. But it's open to anybody and it's free. It's going to be really exciting. So you'll hear more about that from us very soon. This was a recording so we're going to be sending out the recording to everybody who was here and who wasn't able to make it today. So look for that in the next day or two, and Jim, if you have any final words for us.
TEREZ: Thanks, Bethany. I just wanted to thank you, Bill and Chris, for joining us today. That was really great. Really appreciate it. And thank you to all our participants. We really appreciate you joining us. I hope everyone has a good day.
