This spring, a recipe for lemon cake filled with pastry cream and lemon curd spread quickly on Facebook, garnering 6,200 shares and 9,900 likes. Of the 300-plus commenters, some had followed the recipe and were displaying photos of their frosted creations, while others asked baking questions or inquired about dairy- and gluten-free versions of the recipe. Another contingent was just plain hungry. “I need a piece of that cake right now,” one person wrote.
The recipe and the Facebook page are those of King Arthur Flour, which began importing flour to Boston from Britain in 1790. Now based in Norwich, Vt., the company makes and sells its own products, including dozens of flours along with baking supplies and equipment.
Jesse Cloutier, the company’s digital engagement supervisor, quickly wrote a playful reply to the Facebook user who was desperate for an immediate lemon-cake fix. “We’ve got a piece right here that we’ll be happy to mail to yo...,” Mr. Cloutier wrote. “Oh! Oh dear. I’m afraid there are only a few crumbs lef — aaaaaand those are gone too.”
Cloutier isn’t just on staff at King Arthur Flour; like 340 other employees, he’s also a partial owner of the company.
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Since 2004, King Arthur Flour has been 100 percent employee-owned. After the first year of employment, all workers who log more than 800 hours a year, including seasonal and part-time laborers, are eligible for the employee stock ownership program, or ESOP.
ESOPs are retirement plans that function much like 401(k)’s, but with one enormous difference: The company fully funds ESOPs without any financial contributions by employees.
There are roughly 7,000 ESOPs in the United States, according to data compiled by the National Center for Employee Ownership. Companies with ESOPs include Avis, Bob’s Red Mill, Heartland Brewery, the Gensler architecture firm, the Chinese telecom business Huawei, the Omaha World-Herald newspaper, Publix supermarkets, W.L. Gore & Associates and W.W. Norton & Co.
In April, the majority owner of the Greek yogurt company Chobani, Hamdi Ulukaya, announced that he planned to give a 10 percent stake in the company to employees, of which there are now 2,000. Given that Chobani is valued at $3 billion to $5 billion, its employee owners could reap major financial benefits if Chobani were to go public or be sold.
In 1996, Frank Sands, a fifth-generation owner of King Arthur Flour, and his wife, Brinna, began contemplating the succession plan for their business. With no family members interested in taking it over, Frank Sands came up with the idea of selling it to his employees.
“Frank decided to rethink what would be the best way to move forward,” said his stepdaughter Ellen Kitchel, who works as an administrator for King Arthur Flour’s educational programs, including baking classes. “He really liked the idea of having the employee ownership. He thought it brought out the best in people.”
Not a utopian workplace
Family-business owners are often drawn to employee ownership out of goodwill and generosity, said Joseph Blasi, a management professor at Rutgers University who studies ESOPs and is a co-author of the book “The Citizen’s Share: Reducing Inequality in the 21st Century.”
But there is also a practical reason that some turn to employee ownership. “Not being able to get their wealth out of the company so that they can retire is one of the major problems of family entrepreneurs,” Blasi said. Hence, turning to the managers and workers who helped build the business may be appealing.
“These people don’t have $15 million,” Blasi said. “But all of a sudden, the ESOP allows them to have $15 million if they have a business plan and if there’s a bank that approves a credit line.”
Profitability and a history of peaceful labor relations are keys to setting up and sustaining a successful ESOP, along with worker support for the plan and strong management leadership. Full employee ownership, like King Arthur Flour’s model, isn’t necessary, but it helps ensure stability, Blasi said.
But ESOPs don’t create utopias. Working at a company with an ESOP can be riskier than simply earning a wage. This is because with ESOPs, employees can potentially lose both their jobs and their ownership shares. Mitigating that risk, Blasi said, is the fact that workers don’t personally contribute to the ESOP and aren’t required to vouch for the loan obtained to buy the business.
King Arthur Flour has experienced major growth since it became employee-owned. In the late 1990s, the company started distributing products outside New England, to the Midwest and beyond, growing from a small regional business into a national one with robust sales. Its annual sales are now more than $100 million. More than 2,000 King Arthur Flour products are sold in grocery stores, to bakeries and through the company’s website and catalog.
But, Kitchel says, the culture at King Arthur Flour isn’t very different from what it was under her family’s ownership.
“There are many similarities from when my mother and Frank owned it,” she said. “There’s a lot of real hands-on involvement. People care about each other, and people care how things get done.”
King Arthur Flour’s three co-chief executives say employee ownership has helped them attract talent and unite the work force. (The company also has profit-sharing and 401(k) programs.)
And some of King Arthur Flour’s employees might be able to expect the ESOP to pay off handsomely in the long term, said Ralph Carlton, one of the chief executives.
If the value of the company’s equity continues to grow, workers who are employed long enough to accumulate hefty retirement funds will find that the benefit “is not just icing on the cake,” Carlton said. “It allows people to retire in a very comfortable manner.”
The Top 10
Here is a list of the top 10 employee-owned U.S. companies in 2015, according the National Center for Employee Ownership:
1. Publix Super Markets, Lakeland, Fla.
2. CH2M Hill, engineering firm, Englewood, Colo.
3. Lifetouch, photography, Eden Prairie, Minn.
4. Price Chopper, supermarket, Schenectady, N.Y.
5. Houchens Industries, supermarkets, Bowling Green, Ky.
6. Penmac, staffing, Springfield, Mo.
7. Amsted Industries, industrial components, Chicago
8. (tie) Parsons, engineering, Pasadena, Calif.
8. (tie) WinCo Foods, supermarkets, Boise, Idaho
10. Alliance Holdings, holding company, Abington, Penn.
Three North Carolina companies made the top 100 list:
71. Columbia Forest Products, plywood, Greensboro
84. Acuity Healthcare, hospitals and health care services, Charlotte
98. S&M, engineering, Raleigh