Diversifying your ESOP Board
On April 6, I’m speaking on a panel at the 2017 National Center for Employee Ownership conference. I will be joined by Shevanthi Daniel-Rabkin from Democracy at Work Institute and Lian Gravelle of Schatz Brown Glassman LLP. We’ll be having a conversation with attendees about how an ESOP can be strengthened through diversity.
Per the National Center for Employee Ownership, Employee Stock Ownership Plans (ESOPs) are commonly used to provide a market for the shares of departing owners of successful closely held companies, to motivate and reward employees, or to take advantage of incentives to borrow money for acquiring new assets in pretax dollars. In almost every case, ESOPs are a contribution to the employee, not an employee purchase. Our discussion will explore the topic of diversity in leadership and how diverse leadership leads to strong organizations, whether that strength is in profits or community impact. My focus will be on how diverse ESOP board of directors leads to stronger companies. All ESOPs should form a board of directors when they are established. The Board has two main functions:
- Grow the value of the shareholders
As a shareholder, you want the most return for your investment. Having a board made up of diverse individuals who think both liberally and conservatively about investment options will produce results for shareholders that equate to a better protection of their money and greater profits.
- Advise the CEO
The Board keeps the CEO accountable and on task of the strategic plan. The board approves financial statements and makes cash and strategic decisions. Some of these duties include:
- Oversight of the CEO including selection, evaluation, compensation, and replacement
- Serve as a sounding board to make ethical decisions in compliance with regulations
- Review and approve financial statements and plans
Diversity is important in both of these functions. Diversity brings a variety of ideas, experiences, and opinions to the table to solve problems and come to better outcomes than homogenous teams. When you talk about growing profits and protecting investments, you want people with conservative and liberal spending habits to talk about the pros can cons of each in order to get to better solutions. A diversity of ages and genders will lead to decisions that may impact women or young families in a way that may not have occurred to a board full of retired men. When you put together your Board of Directors, remember, to stay relevant you must innovate. To innovate, you must diversify.
For more information on board governance and board diversity, follow along on Twitter or Instagram. Nikki McCord is the founder of McCord Consulting Group, the only choice for organizations looking to energize, innovate, and diversify their Board of Directors.