Boldt takes bold step with new structure

Release Date: 03/19/2016 | USA Today Network - Wisconsin

The Boldt Company, an Appleton-based construction firm, can boast many larger-than-life accomplishments.

  • The company is poised to reach $1 billion in revenues this year.
  • It celebrated a remarkable 125th anniversary in 2014, with third and four generation Boldt family owners at the helm.
  • It has built landmarks like the Fox Cities Performing Arts Center, modern buildings like the new $44 million ThedaCare Regional Cancer Center in Appleton and is currently partnering with Herrero Builders to construct one of the largest health care projects in the country, Sutter Health’s $1.3 billion, 13-story Van Ness and Geary hospital in San Francisco.

But the major shift that happened in 2015 was the company decision to create an employee stock ownership plan, or ESOP and equivalent MSOP for management.

That voluntary move, which rewards its employees and cements Boldt’s future in the Fox Cities, prompted a panel of judges to name Boldt as Post-Crescent Media’s Large Business of the Year.

The reason to create an ESOP, said chairman Oscar C. Boldt, was simple: “We wanted to perpetuate the company.”

“It’s the perpetuation of a company that has a culture and a value system that we think is a competitive advantage and will attract high performing, high quality people who thrive in an environment like that,” said his son, Tom Boldt, who is chief executive officer.

An ESOP is essentially a trust that holds company stock for salaried employees. Those employees can take the money when they leave or retire.

“It’s the kissing cousin of a 401(k) plan,” said Michael Keeling, president of the ESOP Association, a nonprofit organization based in Washington, D.C.

An ESOP is also a succession step for private companies, one of many options companies can take in planning for the future.

“The company could go public, sell to a competitor, sell to a private equity company or liquidate,” Keeling said.

The choice to create an ESOP is very attractive to many family-owned companies, he said. “Their legacy in the community will continue. Their loyalty to the employees is rewarded. They (owners) will be able to continue to participate in the company.”

While the top three executives at the company — the two Boldts and president Bob DeKoch — say they have no plans to retire anytime soon, they knew they had to create a succession plan for the inevitable handover down the road.

Oscar Boldt is 91 and Tom is 63. The next generation of Boldt family members are in their teens and early 20s.

“There was nobody in the family ready at the time to take over,” said Oscar. “Construction is a very dynamic business. You can lose your shirt in a week. You can make it in 100 years if you’re lucky.”

In the ESOP, employees will receive their first statement at the end of the year that shows their proportionate shares based on the company’s value and profitability.

After 15 years, Boldt will have transferred 70 percent of its stock to its staff. About 500 salaried employees will receive a 45 percent share and 12 executives will receive a 25 percent share. The remaining 30 percent will go to the Boldt family and a supporting organization at the Community Foundation for the Fox Valley Region.

The ESOP was not actually the family‘s first choice in charting the company’s future.

“We’d discarded the idea because we’d heard a lot of bad things about ESOPs,” said Tom. “They do fail. There are no guarantees.”

They first decided to sell the company and made a list of 10 potential suitors, including some competitors, that would be capable of buying their company.

“There was a meeting we had where we said, ‘Before we go much further on this, how does that feel? How would we like to sell the company to XYZ company?’ We said we were not so sure about that,” Tom said. “Once you give the acquiring company the keys, it’s no longer your culture and your environment and your history that prevail. It’s the acquiring company’s. You might not have a say and you might not have any meaningful involvement.”

An acquiring company might eliminate jobs or move the company from the Fox Cities.

They abandoned the idea of selling and circled back to the ESOP.

“An ESOP works as long as a company continues to be profitable and is able to maintain customers and maintain key employees,” Tom said. “It has to be able to handle the ups and downs of the economy.”

They knew other ESOP companies struggled because of debt.

“What is unique about our company is we have no debt at the moment. We’re in our highest year of sales that we’ve ever had,” Oscar said. “The absence of debt is tremendous.”

“We think the ESOP and MSOP help solve the question of future leadership. This will allow us to develop another generation of leaders from within the company,” Bob DeKoch said at the time of the ESOP’s announcement in October.

An ESOP was also their best chance at maintaining the company’s values, which are rooted deeply in the midwestern soil even though the company has offices and works around the country.

“If you look at our wall, the words in gold say, ‘Honesty, integrity, hard work and the love of construction are what we value,’” Oscar said. “We don’t know how others interpret that or whether that would play out the same way. We don’t think it would. As an example, we give half of our profit away in any year.”

That includes “incentive comp, 401k matches and philanthropy,” said Tom.

The company’s 401k dollar-for-dollar match is currently suspended while it funds the first few years of the ESOP. The company might resume the match in several years if profits allow. Meanwhile, employees can still contribute to the 401k, but they do not contribute their own money to the ESOP.