A Milwaukee-based brokerage is bucking the consolidation trend as its primary stockholder undertakes ownership transfer to its employees under an employee stock ownership plan (ESOP).
Jim McCormack, co-founder of Diversified Insurance Solutions, which employs 70 in Brookfield, said the idea of selling his company to his employees appealed to him after his chief executive Christian Lie, and Karl Cumblad, chief financial officer, broached the idea to him.
“They are the ones who do the work, and they are the ones who deserve any future success,” McCormack said in a
Journal Sentinel report.
Under the ESOP, employees get to keep their jobs, in contrast to selling to another company which could potentially result in staff cuts, the report said.
Want the latest insurance industry news first? Sign up for our completely free newsletter service now.
In addition, they will receive shares in Diversified Insurance as its debt is paid off. Upon retirement, employees can cash in their shares and although similar to a 401(k) plan, the company will still maintain a separate retirement program for its employees to spread risk.
Keeping the company in employees’ hands will also give Diversified Insurance a competitive advantage because a large part of its clientele is also made up of local companies, Cumblad said in the report.
ESOPs are gaining popularity as the baby boomer generation goes into retirement and works to preserve their professional legacy.
Citing statistics from the National Center for Employee Ownership, the report said that in 2014, 6,717 companies, including 565 public firms, shifted to ESOP.
Related stories:
Why I turned down $230 million for my agency
THE CHRISTENSEN GROUP
