"You can't always take. You also have to give back."

December 3, 2012 8:26 PM

At age 70, and after 46 years of building Leuken's Village Foods into a three-store chain (two in Bemidji, Minnesota, one in Wahpeton, North Dakota), Joe Leuken is ready to retire. He could have sold the stores to the highest bidder. Instead, he's giving them to his employees.

On Jan. 1, Lueken's Village Foods, with two supermarkets in Bemidji and another in Wahpeton, N.D., will begin transferring ownership to its approximately 400 employees through an Employee Stock Ownership Program (ESOP).

Lueken said he had multiple offers to sell to large independent chains and might have gotten more money that way. But he and his family believe that selling to workers will be better for them, the business and this north-central Minnesota city of 13,000 people.

"My employees are largely responsible for any success I've had, and they deserve to get some of the benefits of that," Lueken said earlier this week. "You can't always take. You also have to give back."

posted by Lexica (36 comments total)

Sweet.
posted by Mezentian at 8:36 PM on December 3, 2012

The new CEO started in 1998 as the overnight janitor and got promoted up through every management position they have. Very cool.
posted by Pirate-Bartender-Zombie-Monkey at 8:41 PM on December 3, 2012 [20 favorites]

You know what is tragic about a situation like this? That it happens so rarely that it becomes BIG NEWS.
posted by oneswellfoop at 8:41 PM on December 3, 2012 [37 favorites]

What an incredible story.

As oneswellfoop said, we will live in a great world when this sort of thing is barely even a story anymore...
posted by rollbiz at 8:49 PM on December 3, 2012 [2 favorites]

Sometimes I wonder why I stay up so late, checking metafilter once in a while to see what you folks are posting... and....this is the reason....

You're right, oneswellfoop, it's sad that it's "big news" when this happens... but, like Arlo said, " And can you, can you imagine fifty people a day,I said
fifty people a day walking in singing a bar of Alice's Restaurant and
walking out. And friends they may think it's a movement."

It has to start somewhere, and part of me wants to believe that we've reached that point that a "movement" might be possible.

Good for Mr. Lueken, I suspect he will live the rest of his life with a smile on his face....
posted by HuronBob at 8:49 PM on December 3, 2012 [2 favorites]

Nice.

See also: Bob's Red Mill, previously
posted by neroli at 8:51 PM on December 3, 2012 [4 favorites]

Oh hey, I was hoping it was that Leuken's. Truly one of my favorite grocery stores and considering that a) I come from the land of Trader Joe's, Sprouts, and Gelson's and b) Bemidji has quite a nice co-op, this is praise indeed. You could definitely tell when you walked in the door that it was a well-run store.

I'm glad to hear that Mr. Leuken and his family are able to give the stores to employees rather than selling it off to Hugo's or worse yet, some national corporation.
posted by librarylis at 8:55 PM on December 3, 2012 [2 favorites]

And, another previously.
posted by HuronBob at 8:57 PM on December 3, 2012

"Good for Mr. Lueken, I suspect he will live the rest of his life with a smile on his face...."

And with probably plenty of money to enjoy his retirement, too. That's got to be worth more to most people than trying to squeeze out that last couple million before you die...right?
posted by rollbiz at 8:58 PM on December 3, 2012 [1 favorite]

This guy will never have to pay for another drink as long as he lives. Nor should he. What a champion.
posted by His thoughts were red thoughts at 9:06 PM on December 3, 2012 [4 favorites]

Oh, and it's worth mentioning that it's pretty clear he's got a lot of devoted friends, which is a hard asset to place a value on but is so fucking valuable.
posted by rollbiz at 9:07 PM on December 3, 2012 [4 favorites]

I always wonder what the Ayn Rand types say about things like this. On second thought, no, I don't want to know. Sorry I brought it up.
posted by eye of newt at 9:08 PM on December 3, 2012 [12 favorites]

Always nice to see that it is possible to succeed in business without being a sociopath.
posted by sarastro at 9:24 PM on December 3, 2012 [3 favorites]

The benefits of employee owned businesses are manifold. They don't ship their own jobs overseas. In hard times they are more likely to take reduced salaries or hours than lay off their coworkers, thereby reducing the strain on public services. They are less interested in producing flashy quarterly numbers for The Street than making decisions that will secure their investment of time and labor in the company for the future. Labor/management conflicts are rare (We have met the enemy and they are us. --- Pogo). The salary discrepancies between management and labor tend to be far narrower. Employee owned businesses are neither rare nor noncompetitive. A simple inverse linear correlation between corporate tax rate and percentage of employee ownership could transform the economy (admittedy a personal pipe dream). And don't tell anyone but once you reach 51% employee ownership the entity is, by the classical definition, socialist...
posted by jim in austin at 9:25 PM on December 3, 2012 [37 favorites]

Now that's what I call a Real American Hero™, or at least, one type I'd like to see more of.

And seriously, I think of how good I felt when my Secret Quonsar wrote back saying that they'd loved their present. That was the best I'd felt all week. This guy will be feeling that good for the rest of his LIFE. Or at least he should. Not only did he give back to the people who'd helped him get the work done, he mentored them. There needs to be more of that.
posted by smirkette at 11:21 PM on December 3, 2012

I love this story. Thank you for posting it.
posted by book 'em dano at 11:32 PM on December 3, 2012

"You can't always take. You also have to give back."

How do I report this fellow to the House Un-American Activities Committee?
posted by MattMangels at 1:07 AM on December 4, 2012 [1 favorite]

Chant: "Ph'nglui mglw'nafh McCarthy R'lyeh wgah'nagl fhtagn"
You'll need some friends and some sort of sacrifice.
Do you know anyone on welfare?
posted by Mezentian at 1:24 AM on December 4, 2012 [2 favorites]

In the UK John Lewis did this back in 1929.
posted by Lanark at 1:40 AM on December 4, 2012 [3 favorites]

I always found Bimidji the most unlikely-sounding name for a town in, of all places, Minnesota. I only know it because I watched TV out of Duluth for 6 years.
posted by Goofyy at 2:00 AM on December 4, 2012

Bimidji sounds African.
Where the heck did it get its name from?
posted by Mezentian at 2:22 AM on December 4, 2012

Where the heck did it get its name from?

From the original inhabitants, I guess. And that would be the Ojibwe, according to Wikipedia.
posted by Alnedra at 2:25 AM on December 4, 2012 [2 favorites]

Bimidji sounds African.
Where the heck did it get its name from?

Seconding "from a Native American language, possibly with mispronunciations."

I once knew a travel agent who could not convince a client that that town was not named "by Jiminy"

All that aside, hurrah for worker-owned businesses!
posted by GenjiandProust at 2:44 AM on December 4, 2012 [1 favorite]

Thanks. I went to check Wiki, but it didn't seem to be showing me anything.
Ojibwe looks African too. Of course, I am more familiar with African place names than American native names.
posted by Mezentian at 2:48 AM on December 4, 2012

Ahhh, Bemidji. Home of the Bemidji Jazz Fest, which for teenaged band nerds from Winnipeg was always an opportunity to spend a weekend hot-tubbing and cross-border shopping. One might question the practicality of holding such an event in Bemidji in the middle of February, but we were Winnipeggers, the cold didn't phase us. Trips to Bemidji were when I learned about some of what the Bad Kids did, though I was a certified Good Girl. Pot and beer (smuggled across the border on the tour bus) were in some other hotel room, but my friends and I felt naughty enough with our ice cream (which we stashed in a snowbank outside). I hear the name Bemidji and so many fun memories come flooding back.

And Wahpeton? That's one of those town names you have to repeat over and over again as you drive through it. So fun to say.
posted by wallaby at 3:42 AM on December 4, 2012 [3 favorites]

It's 6 AM, I'm sleep deprived, and I'm going to talk about Americanist linguistics whether or not you give a poop.

Bimidji sounds African.
Where the heck did it get its name from?
Ojibwe looks African too.

Yup. Basicallly this is why that amateur linguistics technique of deciding that two languages are related because you can find words that look similar is crap. The number of noises you can make with your mouth for things is really pretty limited, and eventually things are going to overlap just by random chance. Sound changes in Ojibwe from the original Proto-Algonquian have pushed its phonemes in the same direction as many sub-Saharan African languages, but that's just an accident.

Some things that are distinctive of Native North American languages, that seem to span across wildly different language families:

1. No distinction between voiced consonants (like b) and voiceless (like p). You may see different letters used in spelling, but when you listen carefully, the sound difference is whether there's aspiration (an h sound) along with the consonant, not whether the vocal cords are vibrating. (I think Chinese is this way too.)
2. Preaspiration. The h sound comes before the consonant. In English we tend to pronounce an h after voiceless consonants at the beginnings of words. (It's what makes Europeans speaking English sound like they are saying "dime" instead of "time" -- not enough aspiration on the t.)
3. Affricates. The ch and j sounds in English. Suprisingly few languages have them globally, but they are everywhere in Native America.
4. Glottalized consonants, also called ejectives. These are consonants that you say while pushing up air out of your voicebox rather than your lungs. These are all over North and South American languages. Probably the hardest thing for non-Native-speakers to learn. (West African languages tend to have the opposite: consonants pronounced while dropping your voicebox, so it sounds like you're swallowing.)
5. Massively long verbs that agree with subject and object and indirect-object, and incorporate all sorts of other grammatical information (like tense or negativity) and bits of meaning (like adverbs). These mega-verbs are really kind of complete sentences. Extra words in the sentence just fill out the meaning.
6. Gender (in language) is not male-vs-female, but animate-vs-inanimate. (Animate = people, animals, things that can move on their own.)

Also, while Bemidji is Ojibwe, Wahpeton is some kind of Sioux.
posted by Harvey Kilobit at 4:00 AM on December 4, 2012 [12 favorites]

Can anybody shed some light on the particulars of how the ESOP works? I'm having some trouble wrapping my head around the particulars of the scheme.

Firstly, the Leukens seem to claim that they'll actually make some money off of this deal. How is that?

It also appears as though the shares can only be owned by current employees, and that the ESOP must buy back the shares when the employee retires. Where does the ESOP get the money to do that? How are the shares valued if they effectively cannot be traded?

Do the employees primarily benefit from ongoing dividends, or the final buyout when they retire?

What happens if the company's workforce changes significantly in size? Do the shares somehow get redistributed? Are additional shares created? If the company grows rapidly, do the old employees end up owning an disproportionately large share of the pie?
posted by schmod at 7:26 AM on December 4, 2012 [2 favorites]

schmod, those types of things are usually handled in the corporate charter, and I'm most certainly not privy to the details in this case. However, I can answer some of your questions more broadly.

Firstly, the Leukens seem to claim that they'll actually make some money off of this deal. How is that?

By "them" I imagine you're referring to the Leukens family? It's because the corporation will be using cash or debt to buy stock from the Leukens family in order to distribute them to the employees, just as a competitor would as if they were going to buy the Leukens family out of the store.

It also appears as though the shares can only be owned by current employees, and that the ESOP must buy back the shares when the employee retires. Where does the ESOP get the money to do that? How are the shares valued if they effectively cannot be traded?

The shares are valued by the company's assets plus expected net income for a certain future period.

The corporation would either use cash on hand to buy the employee out, or would have to borrow money to buy the employee out. Typically, companies who are employee owned will have a trust set up in order to handle the financial details and to keep a pile of cash or cash-equivalents sitting around that are used in this specific case.

Do the employees primarily benefit from ongoing dividends, or the final buyout when they retire?

I imagine that some dividend will be distributed based on net profit, but it'll be up to the employees, the company, and the charter to decide how that happens. There's certain ramifications if they simply cut a paycheck for a bonus vs. the capital gains tax on stock dividends, and the employees will probably end up voting for that.

More importantly, since the corporation must buy the stocks back from the employee if the employee is terminated, this provides a form of severance and/or a retirement benefit.

What happens if the company's workforce changes significantly in size? Do the shares somehow get redistributed? Are additional shares created? If the company grows rapidly, do the old employees end up owning an disproportionately large share of the pie?

Again, this is elementary to anyone who's ever studied a shareholding corporation and can easily be googled or wikipedia'd -- there are instruments already in place to balance and change ownership, both in federal law and convention.

Luekens has already said that stocks will initially be distributed on the basis of position in the company and the years of service, and additional ownership will be bestowed based on years of service and promotions. You could run into a situation easily where a cashier that's been there for 30 years could own more of the company, percentage-wise, than a new executive. This is an excellent situation to have, and I'm pretty sure that this kind of situation is written into the charter. So, yes, employees who have been there longer will end up holding a disproportionately sized piece of the pie both in voting and in practice.

As the company grows, new shares will be created either by creating new shares or splitting existing shares. It depends on the charter of the company and decisions made by management. Adding new shares reduces the cost of every share, which means that in theory every individual loses money. Splitting shares leaves older shareholders with the same amount financially, but increases the count of unowned shares. Typically, it requires a vote of shareholders to create new shares, while a split may or may not require a vote. Also, typically in employee owned corporations, the trust that maintains the cash to buy out employees who leave will also hold the excess shares, and depending on how the trust is set up they may or may not vote them.

What's interesting about these cases from a business point of view is that the employees have a direct incentive to keep profits high, expenses and headcount low, and management has an incentive to not rock the island because they can get voted off of it by a significant count of shareholders. To me, an employee-owned company is the perfect model to have a profitable company that outlives it's founder.
posted by SpecialK at 10:20 AM on December 4, 2012 [5 favorites]

I always wonder what the Ayn Rand types say about things like this. On second thought, no, I don't want to know. Sorry I brought it up.
posted by eye of newt

They say "OMG Twentieth Century Motors!!!!" and give each other knowing winks.
posted by COBRA! at 10:24 AM on December 4, 2012

SpecialK: "By "them" I imagine you're referring to the Leukens family? It's because the corporation will be using cash or debt to buy stock from the Leukens family in order to distribute them to the employees, just as a competitor would as if they were going to buy the Leukens family out of the store."

So, they're not actually giving the store away? They're just selling it to the employees?
posted by schmod at 10:34 AM on December 4, 2012

I hope this is the future of capitalism. When workers are also the capitalists, you theoreticall could get the benefits of competition while preserving the protection and economic reward for workers.
posted by Mental Wimp at 11:18 AM on December 4, 2012

Wahpeton!

A town (I grew up in ND) I have not thought about in years.

It's Wah-peh-ton, for those not sure of pronunciation. At least that's how we said it in Mandan, another Sioux-named town.
posted by Windigo at 11:55 AM on December 4, 2012

How do I report this fellow to the House Un-American Activities Committee?

http://help.foxnews.com/index.html
posted by juiceCake at 12:30 PM on December 4, 2012 [2 favorites]

Is it just me or do Minnesotans always seem to be the nicest of all Americans?
posted by Jess the Mess at 5:44 PM on December 4, 2012

They're not just nice, they're Minnesota nice.
posted by BinGregory at 6:34 PM on December 4, 2012

So, they're not actually giving the store away? They're just selling it to the employees?

Well, I imagine that Mr. Leukens desires something to retire on, if he doesn't have it already. ;) Since I don't have any knowledge about the deal, I can't tell you exactly how it's structured, but usually my understanding is to make it legal there needs to be an exchange of financial interest for the stock that the Leukens family holds. It may be that he's selling the amount of stock he holds in the corporation back to the corporation for a dollar all told or for one cent a share. They may have changed types of stocks and he may retain a percentage of ownership that is non-voting that returns to the company on his death, and the company issued a new class of stock that has voting rights and is bound to employment. He may retain a seat on the board and therefore retain a certain amount of interest in the company based on his years of service as CEO per the new charter. I don't know, and none of the news articles give the particulars of how everything is structured.

But in general, yes, for all intents and purposes he's sold his business (even for a nominal sum) to the employees. There's nothing that's bad about that; it's simply the way that business is done so that he can't get senile later on and say "hey, they stole it from me for nothing!" ... "no, sir, you have a bill of sale showing that you traded your interest in the company for a dollar." It just doesn't make for great headlines if it says that he sold his company to his employees, "giving" is so much of a better headline around the holidays.

The end result is still that you have a healthy, small, employee-owned company that will give it's employees greater rights and privileges than 90% of americans enjoy.
posted by SpecialK at 6:42 AM on December 5, 2012