ESOP Advisor Hall of Fame Interview - Tom Roback

Can you tell us a little bit about your career?

Tom Roback: I basically got into the ESOP World kind of through the equity compensation door. I worked with Legg Mason and we were captive brokers for the stock plans for Whole Foods in the 90s. I enjoyed learning more about stock options and restricted stock and giving people some tax advice along those lines. Then I ran the stock plans for Investment Bank outside of Washington called FBR and that's when I really first learned about ESOPs. We pitched for some 1042 but mostly wrote research on a lot of small-cap stocks, and we would do the cashless exercises of stock options and restricted stock sales there. But this was around the time of Sarbanes Oxley and it became cumbersome to work with public companies so I enjoyed my first exposure to private companies. I met a guy by the name of David Binns when I was there. He was instrumental in teaching me ESOPs when I worked for him a couple of years later. 

Have you received any awards or honors as a result of your work with ESOPs?

I was on the board of the National Center for Employee Ownership. I was chairman of the board for a few years. I joined Blue Ridge ESOP Associates and did receive the Blue Ridge Award of Excellence in 2005. And I also got the National Membership Recruitment award for the ESOP Association last year.

What people have been most influential in your ESOP career?

Tom Roback: A lot of people helped me in my career. Number one, all the employees at Blue Ridge ESOP Associates. Too many to mention at Blue Ridge but the best part of our firm is our people. I did have some mentors along the way. I would say David Binns, who was at the Beyster Institute, really taught me ESOPs at a high level. Also, Martin Staubus. He's now retired, but he was a great teacher for me as well

What unique or different ESOPs have you been involved with?

In 2005, we took over the administration for Carquest Auto Parts, and in addition to their ESOP they had a Direct Stock Ownership Plan. Their ESOP ended up creating a lot of wealth - across the country, especially in the Carolinas there. They had something different called a direct stock ownership plan, and we were able to, with our technology team, put that online for them, saving them a lot of time and effort. It was a unique employee ownership structure and worked well for CARQUEST. We also brought their ESOP online. We built fully electronic distribution, diversification, dividend processing with them. That really was a of memorable client for us. They since have sold out to Advance, but they did create a lot of wealth in the southeast. 

Any ESOP transaction “war stories” you could share with us?

Tom Roback: As far as a transaction “war story” goes, Blue Ridge ESOP Associates' core is Plan Administration for ESOP companies, but we also do consulting and repurchase obligation forecasting. As far as challenges go, personal attention is at our core, and I think it keeps things from being too challenging. We have a lot of hard-working people who take care of the clients and don't want their clients waiting on things, and I think it has given us a good national reputation over the years. 

Could you talk with us about trends in ESOPs? 

Tom Roback: I've been with the firm here for 20 years. We've been around since 1988. As far as Trends in ESOPs, we have noticed that our clients and ESOPs in general have become bigger companies. So, I believe that the latest statistic is that over the last 10 years, there have been almost 30% more ESOP companies with over 100 participants.

I'd say most of that is really just through growth and these successful companies have been hiring employees and creating jobs in the community. We do have a few that have been doing acquisitions and that's made them bigger companies. That’s one trend that we have noticed with ESOPs. I continue to say that we've been talking about the pent-up demand with ESOPs - the silver tsunami for a long time. I do think we're chipping away and creating more awareness out there, but that's just going to increase, and that awareness is going to create more ESOPs over time.

Does recent legislation or Court decisions impact your role as an ESOP advisor?

Tom Roback: No, it really doesn't harm Plan Administration…there's secure 2.0. Certainly, it's changed the rules for us, but mostly very positive, and almost 100% of all new ESOPs outsource their administration, and I think that serves us well.

I have noticed that the ESOP Administration space is less fractured than it was two decades ago. There used to be a lot of competitors out there with just a few ESOPs. There is not that many of those anymore. So, I think I'm bullish on the future of ESOPs. I do think it's worth knowing about. Certainly, not every company looking for an exit is suitable for an ESOP. But I do think that awareness of employee ownership as an alternative buy/sell is getting out there more and more. I think that's a good thing, really, to keep jobs in the local community, and good, I think, for our overall economy.

What for you kind of makes the ideal company to move into an ESOP?

Tom Roback: It kind of depends who you ask on that. I think most people will tell you at least a million in EBIDA. I know there's some banks that will have a higher threshold there. We have some very successful clients that are 20 employees and very successful ESOPs. They’ve created great wealth for employees and have been very successful. But I have seen some of the smaller companies struggle with putting in an ESOP because there's usually one person that's doing a lot of different things -  Operations, HR, and CFO perhaps – so, I think an ESOP does make more sense the larger the company is.

Can you share a story how you helped a clients achieve an AHA moment of understanding what an ESOP can do for them?

Tom Roback: I will tell you that even before I joined Blue Ridge, there was a company in Washington that, honestly, we were a little leery of them putting in the ESOP because they had a cluster of employees that were about the same age (in their 50s), and it was a risk - with the repurchase obligation - that they were all perhaps going to retire around the same time. I have to say we were wrong in that they've been a successful ESOP. They sustain the ESOP and are very active in the employee ownership community. It’s been a successful ESOP for them.

What makes for a successful ESOP?

Tom Roback: Yes, I think I have one piece of advice. I’d say don't make it a secret. You spend a lot of time, effort, and money to implement an employee stock ownership plan. You want to make sure that you communicate effectively with your employees, and that takes work; it's not just a rollout meeting. So, there are best practices in that space, and I do think that if I did have to pick one piece of advice, I would say really communicating that ESOP to their employees and employee owners so they can be productive, enthusiastic, and motivated to grow the company.

What makes you enjoy working with ESOPs?

I value the relationships that I've formed over time in this space. I think it is unique. We've worked hard for our clients and seeing them happy and successful is definitely gratifying to me personally.

That’s the end of our questions. Is there anything else you’d like to add?

Tom Roback: I would just say. It's an honor to be recognized (by ESOP Advisor Hall of Fame). I do think Jack Veale is exceptional. He's a great guy. He's one person that I have enjoyed getting to know over the years, and I look forward to many years of keeping in touch with Jack and others in the employee ownership community.