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Publications | November 15, 2017
3 minute read

Attorney Spotlight: Justin Stemple on ESOPs

Why did you choose to become an attorney?

I decided in high school that I wanted to be an attorney because the idea of continuing to learn and do something mentally challenging appealed to me. I entered undergrad as pre-law and selected courses I thought would help me with law school. I attended the College of William & Mary Law School in Virginia and much of the focus was on litigation, case law study and writing. I remember a passing mention of ERISA during an employment law course, but during law school I would not have expected to become a specialist in employee benefits.

Why did you decide that Warner Norcross was the right fit?

I wanted to work in a small or mid-sized city, but at a larger firm. During the interview process I got the feeling that the work-life balance could be achieved here. I also thought the firm and its attorneys clearly represented who they are and the nature of the work we do. I also thought that Warner Norcross and Grand Rapids would be a great fit for me and my family. Thirteen years later, I’m glad I made the choice I did.

What is your area of expertise?

My practice consists of helping employers with qualified retirement plans, non-qualified deferred compensation plans and executive compensation, with an emphasis on employee stock ownership plans (ESOPs), incentive programs and equity compensation. I learned about ERISA, and specifically ESOPs, from Vern Saper, who mentored me into this practice area. 

When and why should a business consider implementing an ESOP in their organization?

An ESOP is one of several transition options an owner may be considering. Usually an owner makes a decision to sell the company to an ESOP for a variety of reasons.  In some cases the ESOP may deliver tax benefits that make an ESOP a better financial option.  In other cases the owner may have a strong desire to keep the company independent or to give back to the employees who helped build the business.  In the perfect situation both of those can be true.  ESOPs are unique because they can be a win-win-win for the owner, company and the employees. 

What kinds of businesses are good fits for ESOPs?

Traditionally, ESOPs tended to be in manufacturing companies, although more recently they have become common in service companies as well.  A company needs to be a corporation or able to become a corporation and will typically have over 25 employees and over $1 million in company enterprise value to justify the cost of implementing and maintaining an ESOP program, and to comply with certain legal requirements. There really is no upper limit to the employees or value. A well-known example of a large ESOP company is Publix, although most ESOP companies range from twenty-five to several hundred employees.

What is the current ESOP trend?

Right now, the Baby Boomer generation have businesses to sell and sometimes their children aren’t interested in taking over the company. So, they are exploring other options, including ESOPs. The market is right for ESOPs, as valuations are strong and financing is available for successful companies. ESOPs continue to be on the rise and when I speak with others in the industry, they are as busy as they’ve ever been.

Any success stories you can share?

Yes, we have many success stories with ESOPs. One that comes to mind took place in April of 2016. We represented Crystal Flash in establishing an ESOP to ensure the long-term future of the organization, the employees and their families. The Michigan-based energy distributor’s 250 employees became beneficial owners at that time. President Tom Olive said, “Research has shown that employee-owned companies perform above industry averages. Knowing our team members, that will be an easy standard for them to continue.”