The partners at Charter Construction had long agreed on a plan for when company president Peter Saladino retired. But as that time drew nearer, they began to wonder if the transition strategy that had worked when company founder Frank Firmani passed the leadership reins to Saladino was still the right one for the Seattle-headquartered company.

“It was becoming more difficult to find the next person to buy in as the value of the company grew,” said partner Eric Jackson, who also serves as vice president in charge of Charter’s Oregon operations.

After examining a list of possible ways the transition could be structured, Saladino, Jackson and their third partner, Brian Johnson, reached a decision. Late last year, Charter Construction announced it had started the shift to an Employee Stock Ownership Plan, or ESOP.

Switching to an employee-owned model is gaining popularity as a choice for companies, especially those in the manufacturing and construction industries. More than 7,000 U.S. companies – with more than 13 million total employees – were identified by the National Center for Employee Ownership as operating as ESOPs in 2015. One-third of those companies were in the construction and manufacturing industries, according to an analysis of the NCEO data conducted by the University of California, San Diego.

For Charter, the model offered several benefits, starting with providing a way to attract and retain high-quality workers. About 40 percent of the company’s profits each year end up going to taxes, Jackson said. With an ESOP in place, that money would go instead into a trust overseen by an independent trustee. The trust would purchase company stock that would then be distributed among eligible employees. The more time employees spent with the company, the more shares they would acquire – along with becoming fully vested.

The decision to move to an ESOP model was just the first step in the process for Charter. Approximately one year before announcing the change to its approximately 230 employees, the company brought in law firms with expertise in ESOP transitions, whose lawyers then held in-depth interviews with Charter’s partners and other key employees to determine whether an ESOP was the right approach for the company.

The lawyers wanted to make sure, for example, that the partners weren’t using the ESOP as a way to step away from the company quickly. Fully implementing an ESOP model within a company can take at least five years – even as many as 10, Jackson said. A company looking at a one- or two-year transition window may not be a good candidate.

In the case of Jackson and Saladino, although the two men can see their retirements on the horizon, Jackson said they’re both still several years away from leaving their positions with Charter.

The lawyers also were looking at whether an ESOP approach fit with the company’s culture. For Charter, that was an easy question to answer.

“Treating employees like owners, it was something we were already doing, so it felt like a natural transition,” Jackson said.

Because the ESOP model can be complicated at first, Jackson said it’s important to give employees time to “wrap their minds” around the concept.

“The most important thing during a transition to an ESOP is to minimize change,” Jackson said. “You need to give employees time to realize that nothing really changes. They’re just going to eventually have a huge financial benefit in addition to their paychecks.”

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The Washington Park condominium complex, built in 1965 in Southwest Portland, is undergoing a renovation. The exterior of the 11-story building at 2211 S.W. Park Place is getting new windows and new metal and stucco siding. The general contractor for the project is Charter Construction and the designer is Forensic Building Consultants. Work should wrap up in spring 2011.

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Repair work is in progress at Lake Oswego High School. More than 150 windows at the school are being removed and reinstalled, and some masonry work is being performed around the openings. Charter Construction is the general contractor and Architects Barrentine Bates Lee is the designer of the renovation for the Lake Oswego School District.

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Work is nearly finished at the Lofts at Beaverton Round. The mixed-use building at the corner of Southwest Crescent Street and Hall Boulevard is getting an upgraded building envelope that features new metal siding, windows and doors. The renovation is being performed by general contractor Charter Construction from a design by Western Architectural.

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A new exterior is being constructed at the Lofts at Beaverton Round. Metal siding is being installed on the mixed-use project at the corner of Southwest Hall Boulevard and Crescent Street in downtown Beaverton. New windows and doors also are being installed. Charter Construction is the general contractor and Western Architecture is the designer of the renovation project.

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The exterior of the Four Seasons Condominiums in Portland’s Goose Hollow neighborhood is being fully stripped and reclad. New windows and sliding doors also are being installed in the seven-story building at the corner of Southwest Main Street and 20th Avenue. Charter Construction is the general contractor and Kilburn Architects from Seattle is the designer of the renovation project that should be completed this spring.

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