Journey to an ESOP & Beyond
ESOPs are gaining traction. In the "Journey to an ESOP & Beyond” podcast, Doeren Mayhew's Jason Miller and Makenzie Wirth explain the process of the ESOP transaction and address ESOPs from a business owner's perspective. They illuminate the simplicity of ESOPs and debunk common misconceptions that ESOPs are immensely costly and complicated.
--
“Doeren Mayhew" is the brand name under which Doeren Mayhew Assurance and Doeren Mayhew Advisors, LLC and its subsidiary entities provide professional services. Doeren Mayhew Assurance and Doeren Mayhew Advisors, LLC (and its subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Doeren Mayhew Assurance is a licensed independent CPA firm that provides attest services to its clients, and Doeren Mayhew Advisors, LLC and its subsidiary entities provide tax and business consulting services to their clients. Doeren Mayhew Advisors, LLC, DM Payroll Solutions, Doeren Mayhew Capital Advisors and their subsidiary entities are not licensed CPA firms.
Journey to an ESOP & Beyond
EP7 - Understanding Equity Beyond Money: Business, ESOPs, and Ownership
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
In this episode, Jason and Makenzie discuss the true meaning of equity, beyond financial payouts. They break down equity in terms of fairness, company ownership, home equity, and long-term value, and explain the responsibilities, risks, and mindset that come with owning equity. Learn how equity represents control, alignment, risk distribution, and strategic planning — key concepts for business owners, ESOP participants, and employees with a stake in their company. Whether you’re looking to understand ESOPs, employee ownership, or equity in business, this episode provides practical insights into why having a stake matters and how it shapes decision-making and culture.
Understanding Equity Beyond Money: Business, ESOPs, and Ownership
Episode Summary
In this episode, Jason and Makenzie discuss the true meaning of equity, beyond financial payouts. They break down equity in terms of fairness, company ownership, home equity, and long-term value, and explain the responsibilities, risks, and mindset that come with owning equity. Learn how equity represents control, alignment, risk distribution, and strategic planning — key concepts for business owners, ESOP participants, and employees with a stake in their company. Whether you’re looking to understand ESOPs, employee ownership, or equity in business, this episode provides practical insights into why having a stake matters and how it shapes decision-making and culture.
Key Topics Covered
- Equity beyond financial payouts: fairness, ownership, and property.
- Understanding control and governance in equity transactions.
- How equity distributes risk and affects personal balance sheets.
- The long-term perspective and cultural signaling of equity.
- Equity as a strategic tool for alignment, retention, and succession.
Transcript
Editorial note: This transcript has been lightly edited for clarity and readability while preserving the original meaning of the conversation.
Introduction
Jason Miller: Welcome back, everyone, to the Journey to an ESOP & Beyond podcast, where we make all things related to Employee Stock Ownership Plans accessible and understandable. I’m your co-host, Jason Miller, and I’m here with Makenzie Wirth. Today we’re talking about everyone’s favorite word—equity—and how to think about it beyond money. We’ll break it into 4 or 5 pieces and explore what equity means in ways that aren’t strictly monetary. Makenzie, what do you think?
Makenzie Wirth: I think that sounds great. We have a lot to uncover here.
The Three Standard Definitions of Equity
Jason Miller: If you look up “equity” online, there are three main definitions:
1. Equity as fairness—things being just or fair, often used politically.
2. Equity as value—the value of shares issued by a company, which is what ESOP advisors and founders usually focus on.
3. Equity as property—like home equity, used in lending and investments.
Two of these are monetary, and one is non-monetary. How else should we think about equity today?
Makenzie Wirth: Equity isn’t just a payout. There are other factors, risks, and considerations when you become an equity holder—even if it’s synthetic equity. Today, we’ll cover equity through control, alignment, time horizon, and the consequences of ownership.
The Thesis: Equity as More Than a Payout
Jason Miller: Equity isn’t just the monetary benefit of ownership. There are governance, alignment, long-term mindset, and risk considerations.
Makenzie Wirth: These pieces help shape behavior and mindset, and they matter for both founders and employee-owners.
Equity as Control
Jason Miller: Let’s talk about control. Selling a majority equity stake raises questions about what transfers beyond money. Control involves governance, decision-making authority, and risk responsibility.
Makenzie Wirth: When relinquishing majority control, you might ask: Who sits on the board? Who has voting rights? Who makes major decisions? Who absorbs the risk?
Governance and Influence
Jason Miller: Governance is often misunderstood in ESOP transactions. Trustees usually aim to protect employees without disrupting the business. Control includes decision-making authority, risk mitigation, and responsibility. Absolute control differs from influence; you can remain influential even without ownership.
Makenzie Wirth: Those with less than majority control can still adopt an ownership mindset. Equity separates financial payout from governance and influence.
Equity as Risk Distribution
Jason Miller: Equity also represents risk. Public stock carries limited personal risk, while private ownership exposes you to broader financial consequences. Selling part of your company can de-risk your personal balance sheet by transferring some upside and downside to others.
Makenzie Wirth: Ownership shifts the mindset from “this is my job” to “this is my company,” which is powerful for employee ownership.
De-risking the Personal Balance Sheet
Jason Miller: De-risking involves shifting financial exposure away from personal holdings while still participating in upside potential, making it a key strategic consideration in transitions such as ESOPs.
Makenzie Wirth: Understanding the distinction between personal financial risk and company risk helps owners make better strategic decisions.
Equity as a Time Horizon
Jason Miller: Equity creates a long-term perspective. Owners think 3 to 10 years ahead, unlike employees who focus on near-term compensation.
Makenzie Wirth: This fosters alignment between employees and owners, motivating people to consider sustainability and the future of the business.
Equity as a Culture Signal
Jason Miller: Equity also signals culture. Granting real or synthetic equity communicates value, alignment, and long-term commitment.
Makenzie Wirth: It frames stewardship, responsibility, and care for positive outcomes. Employees help preserve and enhance value beyond financial gain.
Equity as a Strategic Tool
Jason Miller: Equity is a strategic tool. It shapes culture, behavior, retention, and succession. Money alone cannot always achieve these outcomes.
Makenzie Wirth: Structuring equity optimally ensures alignment, risk distribution, and cultural signaling are preserved post-transaction.
Structural Manifestations
Jason Miller: How these elements manifest structurally depends on plan design—synthetic equity, warrants, dilution considerations, and other mechanisms determine how control, risk, and alignment are maintained.
Makenzie Wirth: Thinking about these structural elements helps inform the optimal design for all parties involved.
Closing Thoughts: Planning for Tomorrow
Jason Miller: If you only think of equity in terms of today’s value, you miss its purpose for tomorrow. Teaching others about equity beyond money prepares for sustainable transitions and long-term alignment.
Makenzie Wirth: An ESOP-owned company inherently supports these objectives. Understanding the non-monetary aspects of equity helps guide transitions while preserving control, culture, and strategy.
Jason Miller: Share this episode with a friend concerned about losing control in a transaction. Thank you for listening, and we’ll see you next time on Journey to an ESOP & Beyond.
Final Takeaways
- Equity extends beyond financial gain; it embodies fairness, ownership, and property rights.
- Control, governance, and influence are central to understanding true equity.
- Equity carries risk, impacts personal balance sheets, and fosters long-term thinking.
- Equity participation enhances culture, alignment, and stewardship.
- Structuring equity thoughtfully preserves value, influence, and company culture over time.
Resources & Next Steps
- Explore additional Journey to an ESOP & Beyond episodes.
- Interact with the team at www.JourneyToAnESOP.com.
Listen to the Episode
🎧 Journey to an ESOP & Beyond
