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Dozens of Arkansas Companies Rank on List of Largest ESOPs

4 min read

This week Arkansas Business debuts a new list of ESOPs — employee stock ownership plans — ranked by net assets at the end of the most recent fiscal year for which data is publicly available.

The resulting list contains 38 ESOPs that reported for years that ended between Aug. 31, 2016, and Dec. 31, 2017. And they range in size from $1 billion for the Dillard’s Inc. Investment & Employee Stock Ownership Plan to negative $2.4 million for the ESOP of bankrupt Acme Holding Co., the holding company for defunct Allied Bank of Mulberry. (For more on Acme’s ESOP, see Regulators Question Valuations of Acme Holdings’ ESOP.)

An ESOP is a method by which employees can own stock in the company that employs them, and it functions as a retirement plan.

Here’s how it is explained by The ESOP Association of Washington:

“Like 401(k)s, an ESOP is a defined contribution plan: Employers contribute a defined amount to the plan on behalf of employees, and returns on that investment are not guaranteed.

“Unlike a 401(k), an ESOP is designed to invest primarily in the stock of the employer.

Typically, business owners set up an ESOP by selling some or all of their shares to an ESOP trust. Participating employees’ accounts are credited with shares of stock, according to a set formula. The account balances for employees represent their beneficial ownership in the company.

“An ESOP is unique among qualified employee benefit plans in its ability to borrow money. As a result, ‘leveraged ESOPs’ may be used as a technique for corporate finance.”


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The list of the Largest ESOPs in Arkansas is available for purchase in PDF or spreadsheet formats.


An ESOP allows owners of privately held companies to create a ready market for their shares, according to the National Center for Employee Ownership. Either the company itself can contribute cash to an ESOP trust in order to buy out the owners, or the trust can borrow money to buy shares from the company or existing owners.

“The company then makes tax-deductible contributions to the ESOP to repay the loan, meaning both principal and interest are deductible,” according to the NCEO.

This unique ability to borrow is a two-edged sword. It is why Stan Jorgensen, chairman of ECCI Inc. of Little Rock, and his partners rejected an ESOP when they made a plan to sell their company to senior employees last year.

“I’ve never seen [an ESOP] work well for all the parties,” Jorgensen told Arkansas Business last fall. “They usually work well for the owners.”

As the Dillard’s example shows, ESOPs are not limited to private companies. The NCEO says about 5 percent of ESOPs are associated with public companies, but they represent about 40 percent of plan participants. (Dillard’s ESOP had more than 42,000 active participants at the end of 2016; the other 37 ESOPs on the list had barely 6,000 combined.)

Companies with publicly traded stock often use ESOPs to complement other employee savings plans. “Rather than matching employee savings with cash, the company will match them with stock from an ESOP, often at a higher matching level,” according to the NCEO.

But that kind of incentive can also be risky if it leads to a situation in which an employee’s paycheck, benefits and retirement savings all depend on the fortunes of one company.

“Stock from an equity plan is usually a large component of an employee’s annual compensation, so it’s easy for your portfolio to become overly concentrated in your employer’s stock,” Scott Senseney, senior vice president of Fidelity Stock Plan Services, said in a December article for investors. “But you need to take a step back, consider how these benefits fit into your long-term financial objectives, such as college savings, retirement, or a vacation home, and develop a plan to diversify accordingly.”

ESOPs have been fashionable for decades, with plans on this week’s list having start dates ranging from 1963 to 2013. Legislation that was passed by the House Committee on Small Business in March and currently pending in Congress would strengthen the Small Business Administration’s ability to make guaranteed loans to ESOPs.

Every ESOP is required to file a Form 5500 with the Internal Revenue Service annually, and the data in this week’s list was gleaned from these forms, which are made public online by the U.S. Department of Labor.

If ESOPs were inadvertently omitted from this list, please contact Editor Gwen Moritz at GMoritz@ABPG.com.

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