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Employee Ownership and Community Involvement
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Ian MacFarlaneEA Engineering, Science, and Technology, Inc., PBC
Bill RoarkTorch Technologies
Timothy GarbinskyNCEO
Leadership and Governance Issues
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The “Benefit Corporation”: A Governance Tool to Enhance “Giving Back”
Presented by:Name Ian MacFarlaneCompany EA Engineering, Science, and Technology, Inc., PBCCity, State Hunt Valley, MD 21031Phone 410-584-7000Email [email protected]
EA Engineering, Science, and Technology, Inc., PBC• EA Brief History
• What is a Benefit Corporation?• Process to Establish• EA’s Adoption• Corporate Social Responsibility (CSR)
Framework• Community Involvement Elements• Volunteer Tracking• Workplace Giving• Lessons Learned
Outline/Agenda
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EA Engineering, Science, and Technology, Inc., PBC
EA – A Brief History
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Founded as Ecological Analysts
Went public, acquired to diversify
Went private
Went partial ESOP
Started Sustainability Program
Moved into LEED Platinum headquarters
Went 100% ESOP and Benefit Corporation
19731986
20012005
20082012
2014
Founder-owner
Traded on NASDAQ
Founder & Institutional
Investor
Founder sells to ESOP and management
Institutional investor and management
bought out
• A consultancy specializing in environmental services for government and industry
EA’s Core Purpose:“To improve the quality of the environment in
which we live, one project at a time.”TM
EA Engineering, Science, and Technology, Inc., PBC• Part of the “conscious capitalism” movement –
Corporate Social Responsibility• A type of for-profit corporate entity, authorized
by 30 states and D.C. that includes positive impact on society, workers, the community, and the environment in addition to profit as its legally defined goals (Wikipedia)
• “B-Corp” certification (from B-Lab) also popular (>2,000 now certified)
• Some states, like Delaware, more flexible in requirements (>400 now legally adopted)
What is a Benefit Corporation?
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EA Engineering, Science, and Technology, Inc., PBC• Decide on legal status adoption vs. B-Corp
certification, or both (we chose legal adoption)• Assess legal feasibility within ESOP
framework• Evaluate pros and cons of adoption
• Governance implications• Client perceptions• Employee perceptions• Potential initiatives to implement and cost• Transaction costs
• Work through Board and Trustee deliberations
Process to Establish
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EA Engineering, Science, and Technology, Inc., PBC• Became a Delaware “Public Benefit
Corporation” (PBC), December 2014
EA’s Adoption
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• Under Delaware’s PBC law, the board has a duty to honor the non-profit ends of the corporation
• Those ends are operationalized through the corporation’s charter
EA Engineering, Science, and Technology, Inc., PBC
Corporate Social Responsibility (CSR)Framework
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• 2015 – benchmarked and assessed CSR elements, and designed our program (12/15 roll-out)
EA Engineering, Science, and Technology, Inc., PBC• “Professional” Communities
• more emphasis on employees giving papers and training
• “Local” Communities• “Personal Volunteer Time” established, which EA supports
8 hrs/year/employee for “mission aligned” efforts ($$)• Personal-time volunteer tracking system (mission and non-
mission aligned)• Budget and process for EA to support ($$)
• employee-led, mission-aligned volunteer initiatives (e.g., tee-shirts for a weekend stream clean-up)
• local charities
• “Environmentally-Affected Global” Community• Workplace giving program focused on Water For People ($$)
Community Involvement Elements
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EA Engineering, Science, and Technology, Inc., PBC
Volunteer Tracking
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EA Engineering, Science, and Technology, Inc., PBC• Purpose: to engender truly social-altruistic
engagement of employees across the firm with one unifying, mission-aligned charity
• Campaign ongoing to• Create awareness
and motivation to give
• Facilitate election for payroll deductions, with $ for $ EA match
• Over time, all employees will be part of this noble charity’s achievements
Workplace Giving
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EA Engineering, Science, and Technology, Inc., PBC• Going “Benefit Corporation” is no easy decision,
but we are happy we did so
• Many employees involved in the design and implementation
• Upcoming biennial PBC/CSR report will be important to communicate EA’s commitment and accomplishments
• The Benefit Corporation aligns with, and reinforces, the employee ownership culture attendant with ESOPs, hopefully creating more stakeholder engagement – hence, a more successful firm.
Lessons Learned
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Reaching Out: Marketing & Community Impact at ESOP Companies
Community Involvement and Engagement for ESOP Companies
Presented by: Bill RoarkTorch Technologies4035 Chris DriveHuntsville, AL 35802256-319-6000
www.TorchTechnologies.com
• Company Overview• Our Journey So Far
• 2003-05: Ad hoc• 2005-Current: Torch Helps 501(c)(3)• 2011: Charity during 100% ESOP deal
• Impact on Ownership Culture• Structural Highlights• Methods to Implement• Challenge to Action• Share Ideas in Small Groups
Building a Unique Culture through Community Involvement & Engagement
Torch’s Growth and Business Focus
Torch Technologies, Inc. established in October 2002
Focused on Government Engineering Solutions and Research and Development
Headquartered in Huntsville, AL
Broad-Based Employee Ownership –100% S-Corp ESOPSmall Business NAICS Code: 541712 ISO 9001 CertifiedCMMI – Level 3Highest Caliber Engineering Services Offered at Best Value
Modeling & SimulationSystem Engineering & IntegrationTest & EvaluationProgrammatic SupportInformation Assurance and Information TechnologiesAdvanced Technologies
Torch Technologies, Inc. Overview
• Problem Discovery• Torch desired to give back locally.• Torch raised money ad hoc for events.• Initially achieved moderate success.• Each “fundraiser” took more time and achieved
less contributions.• Some push-back/complaints began to surface
from employees.• Employees desired to impact locally.• We were determined to solve the problem:
How to best give back locally with impact and in an efficient manner?
Our Journey So Far: 2003-05 – Ad hoc Engagement
• The Challenge• Challenged employee-owners for ideas.
• Two employee-owners independently presented management with proposals to solve the problem.
• CEO challenged these two employees to blend their solutions and come back with a budget and plan.
Our Journey So Far: 2005 – Challenge
• Form a 501(c)(3) charity - employee organized, funded, managed, and run.
• By vote of our employees, the 501(c)(3) was named “Torch Helps.”
Our Journey So Far: 2005 – Solution
Katrina -
Our Journey So Far: 2005 – Impact Begins
10 times more given in first six months than previous years!
“Outpouring of support was phenomenal”
Boy Scouts -
The ARC
2-to-1 Match = A New Car
“Beautiful example of paying it forward”
Harris Home
Our Journey So Far: 2006
Rainbow Omega
HEALSBlount House
• Quarterly Grant Program giving levels raised 50% after third quarter of operation
Habitat
Our Journey So Far: 2007
Chessie Foundation
Boys & Girls Club
Hospice• IRS grants
501(c)(3) status
• Torch Helps BoD sets three-year rotation objectives
• Small Grants add six donations
Habitat Build Days across 14 weekends
CASA A/C Installs
The ARC
Our Journey So Far: 2008-2011
• Employee-owner perspective
• + a dozen small grants
ALS
CASA Huntsville AMBUCS
Hospice
Our Journey So Far: 2011
ALS Huntsville HospitalCare Center
• + 11 small grants
+$18,000 across two charities for tornado response
Tornado Response Volunteer Day
• Torch Helps created a culture of giving
• Once the transaction to achieve 100% ESOP was announced:• Stockholders asked for ways to gift stock rather
than cash.• Tax benefit for gifted stock can be substantially
better than giving cash.• The gift can be valued at current value, yet no income
was received.
• Working with our local community foundation, we were able to make this possible in a manner that did not put the transaction at risk.
Our Journey So Far: 2011 – Gifted Stock
305 8th Street
Our Journey So Far: 2012 - Present
Village of Promise
Hospice Huntsville AMBUCS
His WayALS
AGAPE & Inner City
Kids to Love
Cerebral Palsy
Free Clinic
Other ways to give back: 2011 - Current: Heart Walk
• A culture of giving helps people engage to support others.
• Momentum builds over time
2011 2014
Our Journey So Far: Independent Corporate Giving
Cause Walks
Charity Golf Events
Parks/Memorials
Table EventsThe Arts
Community Foundation
Relief Response
• Employees “own” the problem, the solution, and the impact.
• Does not mix with Corporate giving…at the request of employees
• Torch Helps President presents at Torch All-Hands meetings.
• Reinforces that Torch values employee-owners’ involvement.
• Reinforces that Torch trusts the judgment of our employee-owners.
• Builds Leadership
Our Journey So Far: Impact on Ownership Culture
• Rotating Board of Directors gives our employee-owners business governance experience.
• Serving on the Torch Helps Review Committee exposes our employee-owners to the business structures, financial ratios, and management priorities of a host of charitable organizations.
• New hires regularly tell us that they picked Torch due to Torch Helps.
• Reinforces that Torch trusts the judgment of our employee-owners.
Our Journey So Far: Impact on Ownership Culture
• Challenge a group of employees to “own” the solution to how best to give back locally.
• Establish a Donor-Advised Fund with your local community foundation.
• Challenge your charity program leadership team to take it to the next level of impact and involvement.
• Consider gifting stock to a Donor-Advised Fund.
Challenge to Action
• 100% Financial Efficiency: Every dollar raised goes to charity. Torch covers all expenses related to Torch Helps operations.
• Employee Organized and Run: Goals set by employee-owners, not management.
• Employees Vote Each Quarter: Votes are empowering and engaging. Quarterly grants keeps vision and mission fresh.
• Use BBB’s Wise Giving Alliance Standards for Large Grant Review.
Torch Helps: Structural Highlights (1 of 2)
• Funds raised through Payroll Deduction: Eliminated random inefficient fundraising.
• Formal Grant Application Process: Streamlined for small grants (<$500). Bypassed only by supermajority process when an urgent need emerges.
• 3-Year Term Limits for Board of Directors: Keeps dynamic involvement with two to three positions opening up each year.
Torch Helps: Structural Highlights (2 of 2)
• 501(c)(3) “pass through” charity/foundation• Setup costs $5K-$10K+ (mostly in legal fees).
• Must operate for 1 to 5 years as a “self-declared” 501(c)(3) before IRS will issue a formal letter of 501(c)(3) determination.
• Must file IRS Form 990 each year.
• Must issue “Giving Statements” to contributors.
Torch Helps: Methods to Implement (1 of 2)
• Donor-Advised Funds (2006 Breakthrough)• Low costs. Setup in the low $100s. Admin in the
2-3% range.
• Immediate 501(c)(3) status since it was pre-established by the foundation that manages the Donor-Advised Fund.
• Your local community foundation can be a great resource to understand the current local needs/opportunities.
Torch Helps: Methods to Implement (2 of 2)
• How does your company give back to the community?
• What other ways can a company give back to the community?
How Can You Get Involved?
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• We are willing to assist in the formation of a nationwide ESOP charitable Foundation.• If interested, email me at
[email protected]• The NCEO would like to start a PR
Campaign showcasing ESOP companies that give back to their community• Send any stories, pictures, or news articles
How the NCEO can help
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