Mud Bay is giving its staff a bigger stake in the chain's success by instituting an employee stock ownership plan.
Mud Bay will soon be getting some new, yet familiar, owners—its employees. The retail chain is in the midst of instituting an employee stock ownership plan (ESOP), through which its staff will get a long-term stake in the company. It is all part of the prevailing culture of empowering and investing in employees that has become a hallmark of the Mud Bay retail model.
“We believe that being an owner-operator has helped make our work for Mud Bay fulfilling, and we want all of Mud Bay’s staff to have the same experience,” says co-CEO Lars Wulff. “Sharing ownership with staff just seems fair—like the right thing to do.”
Many of the details of Mud Bay’s transition to an ESOP company are still being hammered out, but what has been decided is that employee shares will be paid for out of the business’ annual profits, with incremental shares being earned when the company exceeds its profit budget. Employees working 1,000 hours or more annually will quality for the program, with a vesting schedule still to be determined.
According to Michael Becker, chief financial officer for Mud Bay, the move toward employee ownership is designed to allow the company’s employees to build a meaningful ownership stake in Mud Bay over the course of a career in which they get to think, act and maybe even worry like owners. Thus, they will “share in the wealth and share in the occasional sleepless nights,” he says.
That is not to say that the current ownership won’t retain a fair share of both, though. “Most ESOPs are used to buy business owners out completely,” says Lars. “They use it as an exit strategy, leaving with a big payday while leaving the company behind with a lot of debt.” This, he says, is not in the cards for Mud Bay. Its employee owners may one day hold a majority stake in the business, but Lars says that he expects his family to retain an ownership stake in perpetuity. And he expects that he and his sister will continue to have significant roles in Mud Bay for another 15 or 20 years.
While the final arrangements are being made for instituting an ESOP at Mud Bay—Becker describes the legal process of creating the plan as “walking a narrow road”—the short-term and long-term goals of the move are clear. “It is important to us that Mud Bay feels like one team, and employee ownership helps remove the divides between owners and employees and between management and staff,” says Lars. “We think employers have a responsibility to help long-term employees prepare for retirement. We want to create jobs that people can have for a lifetime, and we want to make sure that someone who has been working for Mud Bay for 25 years can retire someday.”