The employee stock ownership plan will put thousands of dollars into individual employee retirement accounts, according to Eder Flag Co.
This Labor Day weekend will have extra meaning for the employees at Eder Flag Co., in Oak Creek, as Friday they were told they are now company shareholders.
Eder, which has been making flags for more than a century, says it is now a “100% employee-owned company” through an employee stock ownership plan, called an ESOP.
An ESOP is a qualified retirement program, similar to a 401(k) profit sharing plan, but it gives workers a stake in their employer.
For the Eder Flag employees, including the 120 people who work in the company’s Oak Creek plant, it’s a new benefit in addition to their other retirement and profit-sharing plans.
It will put thousands of dollars in the retirement accounts of individual employees, said Tim Ksobiech, Eder Flag’s chief financial officer.
“We chose to make this announcement around Labor Day weekend because it is a holiday to celebrate working people. We thought it would be a perfect time to roll this out,” he said.
Millions of U.S. flags are made in China, but Eder makes its banners in Oak Creek using American-sourced materials. Eder made the flag that firefighters grabbed from a yacht and raised at New York’s ground zero on Sept. 11, a scene immortalized in a now iconic photo.
The company’s longtime owner, the late Eugene Eder, was a World War II veteran passionate about the fight against bigotry, hatred and tyranny.
He also believed strongly in keeping his flag-making business in the Milwaukee area, according to those who knew him well.
Eder, who died in 2008, had no children. Following his death, the company’s ownership was held in a trust that has since been transferred to the employee stock ownership plan.
“The employees were (like) his family, so that is what led us to this decision of becoming an ESOP company,” said Jodi Goglio, Eder Flag’s chief operating officer.
“With Mr. Eder’s legacy, and what he entrusted us with, it just felt like the right thing to do,” Goglio said.
Eder Flag’s management will still run the company, and there’s no change in the current leadership.
Company stock will accumulate in individual employee retirement accounts and, after six years of employment, they are fully vested in the ESOP.
“You get paid from the ESOP when you leave Eder Flag or are eligible to diversify” into other investments, the company said.
“Like many retirement plans, its future value relies on the value of the company and its profitability. However, Eder Flag has a very strong track record of consistent growth, and it’s not unrealistic to project that the benefit, in aggregate, will be worth millions of dollars,” the company said.
Eder Flag has a unique workplace, with about seven languages spoken in the factory.
Radica Markovic, a Serbian immigrant, was hired as a seamstress 23 years ago and now is a sewing department manager.
She is looking forward to accumulating shares of the company through the employee stock ownership plan.
“From everything I have heard about this, it is very positive and beneficial to me, personally,” she said. “I am one of the privileged people who had the chance to work with Mr. Eder. I have very good memories of him.”
Tony Tsakonas, a senior flagpole engineer, also has worked at the company for about 23 years.
The employee ownership plan, he said, solidifies Eugene Eder’s legacy and will help motivate people to stay with the company.
“Long-term, I think it’s going to be great for everybody’s retirement … This is a great day for us,” Tsakonas said.
The employee ownership plan could also help if management is pressured to sell the company to a competitor.
“We know that we have good job security,” said Kevin Andaloro, a staff accountant at Eder Flag.
Company managers say they will meet with employees next week to explain the stock ownership plan. The shares are owned by a trustee and, over time, will be distributed to employees.
The longer someone works at the company, the more they will be rewarded for it, Ksobiech said.
Employee stock ownership plans provide tax benefits for employers, and they can be beneficial for company owners seeking a business succession plan.
By law, the rank-and-file employees are shielded from company liabilities, said Timothy Stewart, an employee benefits attorney and shareholder in the DeWitt Ross & Stevens law firm in Milwaukee.
“The ESOP trust becomes the actual shareholder, and the employees are the beneficiaries of that trust,” Stewart said.
An employee stock ownership plan can motivate workers to do a better job, since they benefit from the profitability of the company.
“The most successful ESOP companies have employees who think like owners. That is, simply, they care more about the success of the company,” Stewart said.