Paul Holmes 04 Aug 2012 // 11:00PM GMT
BOSTON—Shift Communications has created an employee stock ownership plan, making all of its 100 employees part owners of the company.
The launch of the ESOP is accompanied by several changes to the firm’s leadership structure that will see cofounder Todd Defren become CEO, effective immediately. Defren will also be the majority shareholder of the company. Cofounder James Joyal will continue to serve as a partner, and former vice president of operations Paula Finestone will become chief operating officer.
A new board of directors will include senior agency employees and an independent ESOP trustee.
Defren says the decision to introduce an ESOP came about after Shift held discussions with several potential buyers, and management came to the conclusion that a deal that did not reward employees would be “unfair to the people who made us so attractive.”
“We did some basic research and found that ESOP companies tend to outperform their peers,” says Defren. “But that was not a huge factor in our thinking. We wanted to ensure that all of our folks would benefit if there was an equity event. It was more about being true to our values than about the relative pros and cons.”
Having said that, Defren hopes that the move will be advantageous in several ways.
“i’d like to think that this will be seen as the single most significant sign to staff that Shift management genuinely cares about their welfare, so trust in management will only improve, leading to an even happier employee base. And we hope the ESOP will motivate employees to think like owners, to care even more than they already do about client and employee retention, about profitability.”
He also sees benefits in terms of recruitment and ultimately make the firm attractive to future buyers—“they can be assured that the majority of staff will be enthusiastic about the prospect of selling the agency, and more likely to stick around”—although there are no immediate plans to sell.
Every current Shift employee has been given stock in the company, with the amount of equity determined by compensation level, and all future employees will be given stock after 1,000 hours of service, subject to a vesting period.
Despite their advantages, ESOPs are relatively uncommon within the public relations business. Midsize firms with ESOPs include Minneapolis-based Padilla Speer Beardsley, where all 115 employees participate, and Cleveland-based Dix & Eaton, where half of the employees have taken the opportunity to buy shares in the company. Another technology-focused firm, Chicago’s Tech Image, was acquired by an ESOP-owned company in 2008.
From offices in Boston, San Francisco and New York, Shift Communications serves clients including AOL, Overstock.com, Logitech, Bing, Quiznos, Club Med, Akamai, Virgin Mobile, Canadian Club, Quantum, RealNetworks, Yelp, Johnson & Johnson and H&R Block. The firm is known as a pioneer in digital and social media.