Owning it: Employees embrace shareholder role at D&H
At D&H Distributing Co. Inc., August is everyone's favorite month.
That’s when employees learn the value of shares they hold in the Harrisburg-based company’s employee stock ownership plan, or ESOP.
It wasn’t much when the plan first started in 1998, employees said. But as the company grew, the ESOP grew. And anyone who was cool to the ESOP then is fully warmed up.
Doug Byrne, a recent retiree who spent almost 26 years at D&H, said it probably took about three years before employees saw any real benefit from the program, but once they did, everyone was on board.
“The company has gone through so much dramatic growth since 1998, those of who were in the ESOP on the ground floor, we were in the right place at the right time,” said Byrne, who finished his career as a purchasing director.
Under an ESOP program, employees become shareholders in a company, giving owners an option for cashing out as part of a company’s succession planning.
Dan Schwab, co-president of D&H with his brother, Michael, said D&H decided to establish an ESOP program when some of his family members were leaving the business. An ESOP, he and his brother believed, would allow employees to take a more active role in guiding the company since the ESOP money — which isn’t paid out until retirement — would depend on the company’s success.
The company kept its 401(k) program. The ESOP, which replaced a profit-sharing plan, was seen as way to retain employees, according to Dan Schwab. Employees make no contribution to the ESOP, which is 100 percent employer-funded. The employees own 36 percent of the company.
“Everything we do can be replicated,” Schwab said. “Except for our people. Our people are our most valuable assets and we’ve always wanted to treat them that way.”
Giving employees a stake in the company, in theory, would encourage them to take a larger stake in the company’s success, Schwab said, “with everyone having a shared common goal.”
That’s happened, he said. But it took some getting used to.
“In the beginning, it was a lot of education, because it was new,” he said. “To this day, we still do a lot of education. We have monthly ESOP activities and our yearly ESOP meeting in the summer. Some of the employees call it ‘Christmas in August.’”
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The efforts are paying off: Longer-term employees know enough about the ESOP to answer questions from new employees, said Jill Shank, a director in the company’s buying office. She came to D&H shortly before the introduction of the ESOP.
“The message from your peers is a lot more meaningful than coming from an executive team you know would want to preach that,” she said. “And now we can point to people who have retired, and (the ESOP has) made their lives easier and more comfortable.”
“We say it’s like free money, but we’re all working hard, busting our butt,” said Tamar Porr, 27, who works in the control room at D&H and became vested in the company’s ESOP program in April, a few months short of her seventh anniversary at the company. “But when you see the ESOP growing, it makes you feel like the hard work you’re doing is really making a difference.”