Part of the barrier to widespread adoption of employee ownership trusts (EOTs) in the United States is the lack of a clear transaction model. There are multiple methods of transferring ownership into the trust. Some of those methods result in the company owners receiving cash in exchange for their shares, so that the owners have funds to sustain them in retirement and share with their families. But at least two EOTs have grabbed attention in the national press because of the unique motivations of the exiting owners. 

The first was Patagonia (the outdoor clothing and gear company). In 2022, Yvon Chouinard and his family transferred the voting shares of the company to a purpose trust, and nonvoting shares to a 501(c)(4) nonprofit organization. The purpose of the Patagonia EOT is (in general terms) to manage Patagonia in a way that emphasizes employee well-being. 

The second was Grady-White Boats, profiled in the New York Times last week. The owner, Eddie Smith Jr., had built the North Carolina boat building company into a $400 million success. Without any heirs, Smith explored his options and chose to follow Chouinard's example. Smith transferred Grady-White's voting stock to a purpose trust, and nonvoting stock to a 501(c)(4) nonprofit organization. The company's 350 employees are expected to receive ongoing benefits including “generous retirement plan funding, a profit-sharing plan, financial literacy programs, on-site health care and a company chaplain.” These benefits are realized through the purpose trust exercising its governance powers as a shareholder to cause the company to provide them. 

Both Chouinard (Patagonia) and Smith (Grady-White Boats) got no personal or financial advantage from establishing an EOT. They did not sell the stock for any meaningful value. And the transfer of the stock was not for charitable purposes. Indeed, for Chouinard and Smith, the transaction likely cost them a substantial amount to implement.

The generosity of Chouinard and Smith is admirable, to say the least. Maybe it will be matched by others as they look to transition ownership of their companies. Regardless of the path chosen to get there, it's exciting to see EOTs find their place in the field of alternatives for business transitions.