ESOP Organized As a Taft-Hartley Trust
ROSAUERS SUPERMARKETS CASE STUDY CATEGORIES:
Owner Led: Family owners kept local business by giving equity in exchange for union concessions
Union Led: UFCW led multiple unions collaborated to save jobs and used Taft-Hartley type voting trust to retain clout in exchange for wage concessions
Employee Stock Ownership Plan (ESOP): ESOP enabled job retention due to labor concessions by providing strong labor governance voice
Effective Employee Participation (Participative Workplace): Active union representation on corporate board.
In July 1990 several unions and management at Rosauers Supermarkets, a regional grocery chain of 15 stores headquartered in Spokane, Washington, entered into an ESOP buyout to save 1,250 jobs. The union buyout team was led by Sean Harrigan, then president of the UFCW local union. They developed some interesting procedures to ensure proper protection and representation of unionized employees interests in an employee owned company where high level management employees own a portion of the company outside the ESOP. The ESOP trust is designed as a Taft-Hartley Trust with labor and management exercising block votes and the provision for a neutral third party to solve potential disputes within the ESOP Committee. They designated a number of shareholder and board of director issues as supermajority issues. They also provided for a termination of their wage set-aside agreement in the event of any foreclosure, liquidation or sale of the company without union approval.
In an effort to improve competitiveness and save jobs the United Food & Commercial Workers (UFCW), Bakery Workers and Teamsters joined in a cooperative effort with management to buy the chain in order to implement a change in marketing strategy. This involved a sliding scale sacrifice in pay affecting all but the lowest paid employees and an end to the management pension plan. Certain high-level management employees made cash investments in stock outside the ESOP, while all unionized employees over age 21 were eligible to participate in the ESOP. Although this ESOP allocated stock based on pay and most employees were eligible, unionized employees owned approximately 55-60% of the stock when the initial acquisition loan was paid off. Thus the Taft-Hartley ESOP, supermajority provisions and termination of wage set-aside provisions were made to protect the stock rights gained in exchange for sacrifices.
In June of 2000, the approximately 2,100 employees, by unanimous vote, re-sold the company to URM stores.
