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The competition for skilled employees has pushed employers to rethink what they offer. Health benefits, paid time off and flexible schedules have become table stakes. Increasingly, what separates a company that retains its best people from one that watches them walk out the door is something more fundamental: a stake in the business itself.

That shift is driving renewed interest in employee stock ownership plans, or ESOPs — a retirement and ownership structure that allows employees to accumulate company stock over time. For business owners in the San Joaquin Valley, ESOPs are emerging not just as a succession planning vehicle, but as a strategic tool for workforce development and long-term competitiveness.

What is an ESOP?

An ESOP is a qualified contribution plan — structured as a stock bonus plan or a combined stock bonus and money purchase plan — in which a company sets aside shares for employee benefit. Employer stock is purchased and allocated to individual participant accounts. When employees retire or leave, they can receive their distribution in cash or shares, which are then sold back to the ESOP.

Plans generally take one of two forms. In a nonleveraged ESOP, the employer contributes cash directly to the plan, which uses it to purchase company stock. In a leveraged ESOP, the plan borrows funds from a bank or other lender, with the employer guaranteeing the loan or committing to pay dividends, make contributions or both.

The scale of ESOP adoption nationally reflects growing employer interest. According to data from the U.S. Department of Labor, 309 new ESOPs were reported in 2023 — the most recent year for which data is available — adding 55,663 active participants. In total, 6,609 plans were identified as ESOPs in the United States, holding total assets of over $2 trillion.

Local momentum

The Valley’s business community has not been slow to take notice. Local companies operating under ESOP structures include Geil Enterprises, Horn Photo, Span Construction, engineering firm 4Creeks, FFB Bank, Teter Architects, and Swinerton Inc.

The most recent addition to that list is Milano Restaurants International, the Fresno-based parent company of Me-n-Ed’s Pizzeria, Me-n’-Ed’s Victory Grill, Blast & Brew, and Piazza del Pane. In late February, the company announced a newly established ESOP that enables employees to earn shares of company stock over time as tax-deferred retirement wealth.

“This structure will only make the Company even more efficient, innovative and responsive to meet our customers’ needs,” said CEO John Ferdinandi. “This is about more than ownership; it’s about creating a culture where every team member feels invested in our shared future.”

A changing workforce calculus

Deborah Nankivell, CEO of the Fresno Stewardship Foundation — a nonprofit with a mission to promote inclusive prosperity and wellbeing in the San Joaquin for present and future generations — sees the ESOP trend as part of a broader shift in how employers must think about talent.

“People are starting to realize if you do human development intentionally, more people will stay with you,” Nankivell said. “Even if they leave, it adds to the talent pool in your community, which also benefits you.”

Nankivell notes that each generation brings different strengths and expectations to the workplace, and younger workers in particular are looking for partnership, life-work balance and a sense that their contributions matter beyond a paycheck. She has also observed a broader diversification of the regional economy, with workers increasingly motivated to add value to the communities where they live — not just the companies that employ them.

Younger employees, she adds, are skeptical of the economic models that defined prior generations of business leadership. “For them and in business schools it’s all about the single bottom line and the shareholders,” Nankivell said. “How did that work out? People with a 401K or who want cheap consumer goods are happy, but people who want peace in the neighborhood — not so much.”

For entrepreneurs who want a profitable business that also adds value to the community, Nankivell argues the logic of ESOP structures is compelling: when a business performs, the people who built that performance share in the reward.

What business owners should know

Nankivell acknowledges that the specifics of an ESOP structure will look different depending on the size and ownership model of the business — whether it’s a small independent, a family-owned enterprise or a larger corporate entity. The values and vision of the leadership team matter as much as the mechanics.

In her experience, business owners become more motivated to explore the ESOP model once they see it working elsewhere and begin asking, “what’s in it for me?” Some may not be aware of the opportunity at all until they watch one of their best employees leave for a company that already has one.

Her advice to owners considering the transition is to start by listening — to employees, to advisors and especially to other business owners who have already made the move.

“The old model of ‘top-down, don’t mess with me because I said so’ — that’s done,” Nankivell said. “Leaders need to be humble, they need to listen, learn, hold people accountable and at the same time accept that human beings need grace.”

The best information, she says, doesn’t come from a white paper or a consultant’s pitch deck. It comes from the people who have been through it. “The best information is not an idea, but experience from the people who have done it,” Nankivell said.