Ep. 390 — Daniel Goldstein: The ESOP Holding Company Model and the Purest Form of Capitalism

6 min read

Subscribe: Apple Podcasts · Spotify · YouTube · Amazon Music · iHeartRadio · Pandora · RSS

Episode Summary

You’ve been told the ESOP is a tax scheme. You’ve also been told it turns your company into a co-op where the forklift driver votes on acquisitions. Neither is true, and the gap between those two myths is where most owners stop asking questions. I had Daniel Goldstein back on the show six years after our first conversation, this time as the just-retired CEO of Folliance, a 141-year-old company that started as the Cedar Rapids Gazette and is now an ESOP holding company spanning media, ambulance manufacturing, and horse-and-trailer manufacturing. Daniel walked me through what actually happened in those six years: how the diversification thesis got tested by COVID and hit record share prices on the other side, why he sequenced culture first and the financial benefit second (the opposite of what most ESOPs do), how a holding company structure gives sellers a path to exit without forcing employees to run both a business and an ESOP, and why he thinks manufacturing ESOPs are a national security tool. We also got into safety as a wealth-building decision, succession as a two-year capital-and-culture project, and the honest version of where the “I want out” instinct comes from and what it actually costs you.

Watch on YouTube

## Top 10 Takeaways
  1. If you lead with the financial benefit and bolt culture on, employees pay attention twice a year. Flip it and they pay attention every day.
  2. Being an employee owner is not the same as being the owner. Shared value, not shared control, and that distinction is what makes the structure work.
  3. The ESOP holding company gives sellers a clean exit and gives employees diversification across unrelated businesses instead of one stock.
  4. Your house going up in value doesn’t mean you sell it to buy TVs. Distributions fund the month; reinvestment funds the retirement.
  5. Roll-ups make operational sense everywhere. The question is whether the platform is patient capital or a three-to-five-year IRR clock.
  6. Safety is not a priority. Priorities get set aside when things get tough. Values don’t.
  7. Workplace accidents are how many companies first find out about the risk in the workplace. The data was already there; nobody asked the employees.
  8. A succession plan is a two-year project across capital structure, repurchase obligation forecast, leadership depth, and culture, not a search.
  9. Employee ownership keeps the company, the IP, and the jobs local. That is a national security argument, not just a culture argument.
  10. Your “I want out” instinct is usually about the job, not the asset. Solve the job problem and the exit menu gets wider.

Sound Bites

“100% of the companies on the planet that I’ve ever met are underpriced.” (@TBD) — Daniel Goldstein

“It’s not 200 employees, Daniel. It’s 200 families.” (@TBD) — Daniel Goldstein, quoting Michael of Cimarron Trailers

“Workplace accidents are the way that many companies find out about the risk in the workplace.” (@TBD) — Daniel Goldstein, quoting Gabe Glenn of MakuSafe

“Safety can’t be a priority because when things get tough, priorities get set aside. It has to be a value, because you don’t set aside your values.” (@TBD) — Daniel Goldstein, paraphrasing Todd Conklin

“Employee ownership, to me, does not equate to eternal, no change of ownership. There are times where when you own something, it is going to be in your better interest to sell.” (@TBD) — Daniel Goldstein

About This Episode

Daniel Goldstein is the recently retired President and CEO of Folliance, a 141-year-old ESOP holding company that started as the Cedar Rapids Gazette and now includes media, ambulance manufacturing, and horse-and-trailer manufacturing businesses. Under his leadership, Folliance reached its highest share price since the ESOP’s 1986 inception and was named the 2022 National Employee-Owned Company of the Year by the ESOP Association. He came to the ESOP world from over 20 years in family office, family business, and investment work, sits on multiple ESOP boards, recently completed his term on the executive board of the ESOP Association, and was just named an Executive Fellow at the Rutgers Institute for the Study of Employee Ownership and Profit Sharing. This is his second time on the show; the first was in 2017, right after he was named CEO.

Resources Mentioned

  • Beyond Rainbows and Unicorns: The Case for Talking About ESOP Companies as a Business — Daniel’s LinkedIn article that prompted this conversation.
  • GoESOP LLC — Daniel’s post-Folliance entity for advisory and board work. — GoESOPLLC@gmail.com
  • The Citizen’s Share by Joseph Blasi, Richard Freeman, and Douglas Kruse — Traces employee ownership to the founding of the United States.
  • Doing Safety Differently by Todd Conklin — The book behind the safety reframe Daniel uses.
  • Leading in an Ownership Setting — The University of Pennsylvania program for ESOP CEOs founded by Dr. Ginny Vanderslice. — employeeownershipfoundation.org
  • MakuSafe — Iowa-based wearable safety device company that gives operators data to make safety decisions. — makusafe.com
  • Manufacturing Extension Partnerships (MEP) / NIST — Federal-state partnership Daniel worked with through CIRAS in Iowa to promote ESOPs as a manufacturing competitiveness tool.
  • ESOP Association — esopassociation.org
  • Rutgers Institute for the Study of Employee Ownership and Profit Sharing — Where Daniel was just named Executive Fellow.
  • Outlive by Peter Attia — Referenced by Ryan on health span and the “marginal decade.”
  • Tasty Catering / Tom Walter — Referenced as a non-ESOP company with an ownership-style culture.

Connections

Phase + Module:

Milestones:

Concepts referenced:

Graph View