An ESOP fable for Bob’s Red Mill

Bob and some of his new co-owners.

On a recent early morning at the Bob’s Red Mill company store in Milwaukie, Ore., numerous customers and employees approach founder Bob Moore. “I just wanted to tell you how much I admire what you’re doing,” one customer says, shaking Moore’s hand. “I just heard,” an employee says to his boss moments later. “What an incredible gesture."

On February 15, his 81st birthday, Moore announced he was giving his employees the company he started in 1978. Bob’s Red Mill, now with a workforce of 200 and status as of the nation’s largest providers of whole-grain foods, has created an Employee Stock Option Plan (ESOP). Moore will retain his twin titles of President and CEO, and he says that while day-to-day operations will not change, the ESOP will reward long-time employees for loyalty and hard work. “I’ve got people who have been with me 20, 30 years,” Moore says, dressed in his trademark yellow shirt, red vest and tam-o-shanter cap. “Nothing is guaranteed, but this is about trying to provide for them.”

Bob’s Red Mill, which produces more than 400 products, including a full line of certified gluten-free products and 50 certified organic products, has been a leader in triple-bottom-line business, with its facilities contributing zero waste to landfills.

“There is no study showing ESOPs are ‘greener,' but you’ll often hear people say they think ESOP companies are more socially responsible, and that often involves thinking about the environment and sustainability,” says Michael Keeling, president of the ESOP Association in Washington, D.C.

After peaking in the 1980s and 1990s, the overall number of ESOPs nationwide has declined in the last decade. But Keeling says that can be a sign of success as much as failure. “The key factor is when the employees leave the company, such as when they retire, you have to buy them out to retain the ESOP,” he explains. “The more successful the company is, the more valuable that ownership becomes, and the more pressure there is to sell. ESOPs tend to be good companies: more productive, more sales per employee. Thus they become nice companies for somebody such as a private equity company to buy.”

Ultimately, though, the initial move by Bob’s Red Mill to create an ESOP reflects different values. “This is a very attractive company from a sales standpoint, and I’ve had many offers,” Moore adds. Although as a private entity Bob’s Red Mill is not required to disclose financial information, in 2004 revenues were estimated at more than $24 million. Moore says company revenues have grown about 25 percent annually over the last decade.