ESOP Advisor Hall of Fame Interview - Vaughn Gordy

Please share with us a brief history of your career.

I grew up in a suburb of Pittsburgh and graduated from Penn State University with a degree in accounting. I joined the U.S. Air Force in 1968 and served five years as a C-130 pilot, including two years in Vietnam, where I was awarded the Distinguished Flying Cross.

Following discharge from the military, I joined Coopers & Lybrand, now PriceWaterhouseCoopers. In 1975, I joined Dell Fastener Corporation in Pittsburgh as Controller, where I negotiated my first ESOP.

However, instead of the ESOP, Dell Fastener was acquired by Trans Union Corporation. They moved me to New Jersey, where I became Controller of the Graver Water Company subsidiary, a manufacturer of water treatment systems for nuclear power generation stations. In 1980, I was promoted to Group Controller over five subsidiaries for Trans Union’s Water and Waste Treatment Divisions and moved to Chicago.

I became corporate controller after the Pritzker Family’s Marmon Group acquired Trans Union in 1981.

In 1984, I joined A.G. Becker Funds Evaluation Group as Vice President of Strategic Planning. A.G. Becker was acquired by SEI Corporation (SEIC), where I worked in trust system sales until 1992.

While at SEI, I graduated from Northwestern University’s Kellogg Graduate School of Management with an MBA.

In 1995, I became Chief Operating Officer of Pin Dot Products, a manufacturer of wheelchairs and customized wheelchair cushions for severely involved individuals.

Following the sale of Pin Dot two years later, I joined Comerica Bank-Illinois Trust Department where I negotiated my first ESOP transaction as trustee. Comerica Bank-Illinois was acquired by LaSalle Bank, where I was put in charge of the ESOP trustee business.

In 2005, after being acquired first by ABN AMRO and then Bank of America, the ESOP Trustee business of LaSalle, was sold to GreatBanc Trust. There I progressed from Senior Vice President to President to Chairman and CEO.

I retired from active employment at the end of 2014 and now serve as non-executive chairman of the board.

What individuals have most helped and/or influenced your career?

Many individuals have been helpful to me during my time in the world of ESOPs. On the legal side, Jerry Kaplan, Bill Merten, David Ackerman, and Greg Brown really taught me the business. For valuation support, I would mention Bob Socol, first at Willamette and then at Stout. Early on, Ben Beutell at Houlihan was also very helpful.

For about 20 years in a row, until COVID, Bob Socol, Dennis Long, John Kober and I would meet in Arizona or Florida for a long weekend of golf and camaraderie. Three of us plan to continue that tradition while recognizing Bob Socol’s passing.

Have any of your ESOPS been unique or different?

One unique ESOP was Homeland Grocery Stores in Oklahoma, where the employee union participated in and benefited from the ESOP.

I would also mention STV Corporation in New York. This is an engineering firm, and they were hired to manage the reconstruction of the World Trade Center following 9/11.

Any “ESOP transaction war stories” that were challenging, that you could share?

ESOPs are generally challenging and difficult for trustees as there are competing interests among the seller, the buyer and the employee/participants. I remember the Brookshire Brothers transaction, which took two years and was restructured three times. It remains a successful ESOP and their in-house counsel and I remain good friends to this day.

I would also mention due diligence for BC Rogers, which required wearing plastic gowns to watch chickens being slaughtered.

AMSTED Industries in Chicago was a long-time client. At one point, I had to demand that their board of directors fire their CEO. This also happened with WM Barr in Tennessee.

One of the challenges at LaSalle Bank in Chicago was that the bank also had an active practice lending into ESOP transactions. However, the policy was that LaSalle could not be both the trustee and the lender. Several times, Mary Josephs and I would find ourselves bidding on the same ESOP transaction.

What trends are you seeing in ESOPs?

The ESOP transaction world seems to ebb and flow with the scrutiny level of the U.S. Department of Labor. Since about 1978, ESOP trustees have been trying to make sense of “proposed” regulations. Congress has mandated the DOL to get regulations in place but they are still dragging their feet.

GreatBanc came to an agreement or protocol with them several years ago that became a working model for the ESOP trustee business. Our board gets a report at every meeting that the protocol has been complied with for every transaction.

What makes for a successful ESOP, and as a result makes you enjoy working with them?

The motivation for creating an ESOP is often a major factor in a successful ESOP outcome. Sellers who are motivated by the long-term success of their company and its employees usually will have a successful ESOP. All parties to a successful transaction must be very careful about the level and the structure of the transaction debt. GreatBanc has found a few advisors that are overly aggressive with transaction debt. These can lead to transactions that are not in the best interests of the company or the participants.