Has the financial crisis killed retirement? Pension expenses toppled GM. Stock market losses destroyed lifetimes of savings. Retirement plans are disappearing from benefits packages. Social security is attacked in politics and the EU is poised to raise the retirement age to 70. Things are looking bad, but just as retirement needed a superhero it found one in Clif Bar.
Clif Bar owners Gary Erickson and Kit Crawford have launched a program that could invigorate retirement benefits. The program sold 20% of Clif Bar’s $200 million equity to a trust that pays dividends into employee retirement accounts.
Wait- how does it work?
Clif Bar established an ESOP- an Employee Stock Ownership Plan. ESOPs and employee equity are not new ideas. However, unlike other employee equity plans, the Clif Bar model supplements salaries rather than comprising a portion of pay. Employees do not purchase any stock; they simply begin to earn dividends on the equity set aside in the ESOP. The equity also does not come with governance power. Erickson and Crawford simply redirected a chunk of Clif Bar’s profits for employee benefit. The trust will grow and suffer with the company, providing the same incentive stock options do, but at no personal cost to employees in a bad year.
The private ownership advantage
Can owners be convinced to give a part of their company to employees? That is the crucial question, since every company could offer an ESOP mimicking the Clif Bar model. Despite the change in capital structure, Clif Bar has no plans to go public. They credit private ownership with the flexibility to pioneer unique CSR programs. That trend is evident in other CSR leaders such as Seventh Generation, Trader Joe’s and Stonyfield Farm.
Employees have responded positively, and feel humbled by Erickson and Crawford‘s generosity. Yet, such a generous ESOP model is entirely in line with Clif Bar’s quintuple bottom line management strategy. The quintuple bottom line adds community and brand sustainability to more common social enterprise priorities of people, planet and profit. Erickson’s book Raising the Bar explains that: “Sustaining our people is central to our business model. A good and healthy place to work is a worthy return on investment. A cool, fun place to work is an end in itself. We want employees to lead full and balanced lives.”
Clif Bar has followed through on its employee-centric business model. Offering company gym and wellness programs, a sabbatical system, social events and an employee concierge, Clif Bar competes with Google in employee-care at a fraction of the net income. Now Clif Bar’s ESOP shows that every company can profitably provide retirement support.