Fastener Industries is one of America's premier 100 percent employee-owned companies. It has secured a solid place in the market by becoming the foremost manufacturer of industrial fasteners. These include weld nuts, weld screws, and related leveler assemblies for use of original equipment manufacturers in the metal working industry.
Their products can be found in virtually every piece of equipment, both consumer and capital good, produced throughout the developed world. "Give me five minutes in your home or office," claimed Rich Biernacki, former president and CEO of Fastener industries (now retired), "and I'll find some of our nuts and bolts. Just about anyone who puts things together with metal could be an account of ours."
This is the sort of basic manufacturing that the United States has been losing to low-cost foreign competition for years. Yet Fastener Industries has secured its market by concentrating on its efforts to become the premier low-volume specialty producer of precision weld fasteners. This is a market that inexpensive Asian manufacturers have not entered. The company has about 125 employees, and annual sales of around $20 million.
Based in Berea, Ohio, Fastener Industries was incorporated in 1905 as the Ohio Nut and Bolt Company. Fastener (which still trades under the Ohio brand name), has long been a successful manufacturing concern. Owned by the Whelan family since 1928, the company was always considered a good place to work. It was consistently profitable, and offered employees above-average wages, bonuses, and benefits. One of these benefits was a 35 hour week for production workers, with pay higher than that received by the typical 40 hour week workers for other companies.
In 1979-80, the family decided to sell out. Biernacki, who was at that time the treasurer, approached the Whelans with the idea of selling the firm to its employees. "It made sense to me that ownership should be shared," says Biernacki. "After all, it was the productivity of the employees that was responsible for our profits. And by sharing ownership democratically, I figured the company could improve on its already successful track record. And in fact, it has."
When the idea was presented to Fastener's employees, the majority greeted the concept enthusiastically. They voted to utilize their profit-sharing monies for the purchase of the company's shares, and converted the profit sharing plan to an ESOP to buy part of the company. The company itself borrowed money to buy the remaining shares from the family. As the company repaid the loan it contributed shares to the ESOP. Combining this approach with other financing arrangements, the employees gained full control of the company in 1980.
Many outside observers have called Fastener "a model ESOP." New employees participate in the ESOP after one month of work and are immediately 100% vested in their accounts. The ESOP allocates the stock according to pay, but salaries are so close that no one employee owns more than 4% of the company. Fastener production employees work 7 hours per day and earn wages higher than the industry norm. The Fastener corporate by-laws provide full voting rights to the employee-owners, who elect the company's five-member Board of Directors. In turn, the directors name a five-member committee to administer the ESOP. Employees are eligible participants after one month's work at the company, and are immediately 100% vested. Voting is done on a one-share/one-vote basis, and ownership of the company is widely diffused.
Upon termination or retirement, Fastener's employees may take cash or shares. Most distributions have been lump sums, with the average pay-out in the $90,000-$100,000 range. In order for the employees to make the best financial decisions upon receiving the ESOP distribution, the company provides up to four hours of free consultation with financial consultants. Employees may sell their stock back to the ESOP up to 15 months after leaving Fastener. After that the ESOP is no longer required to repurchase stock, although it maintains the right of first refusal.
Employees are kept informed about the business side of the company through a series of regular meetings and one-on-one discussions with managers, board members, and corporate officers, including the CEO. Each worker meets with the company president once every 6 months with about 10 other randomly selected employees. Plant managers meet with employees monthly. Managers consult with employees about machinery purchases and other decisions.
All of Fastener's plants have plant managers, but other supervisors are few. Each employee is responsible for his own machines or area, and most take their duties seriously. Fastener Industries has no labor unions and all employees are salaried.
The company has always been profitable. Because it had a solid profit-sharing plan in effect for many years, the employees were able to buy a strong, going concern without putting any cash on the table. The employees did, of course, have to turn their profit-sharing funds into Fastener shares, but this move has paid off handsomely. According to company figures, each share values more than tripled in value in the six years following the ESOP conversion.
How do Fastener's employees feel about being the owners of their company? A walk through one of the plants is enlightening. "For me, it's basically like having my own business," claimed one of the plant managers. "Not only do we all work harder, we've seen our work mates retire with sizable sums of money, and that's a tremendous incentive." "With the ESOP, just about everybody has the opportunity to grow to their full potential," added a tool and die maker and ESOP Committee Member. "Apart from the financial rewards, we now feel that our advancement is based on our achievement, not just the whim of an owner or supervisor."
Because it's a worker-owned company, Fastener imparts a cooperative mentality not often found in conventionally-owned for-profit corporations. "We're all in this together and we're all accountable to each other," as one worker-owner said. "It's our money we're spending, and our investment we have to protect. When something doesn't work, we're all involved in fixing it, because if the problem isn't solved, we're the ones losing money."
As Rich Biernacki, now retired as head of the company, declared, "When people work for somebody else, the natural tendency is to center on one's self interest. That used to be the case at Fastener. But now I think, that is superseded by concern for the welfare of the ESOP. We're all in this together, and together we have to make it work."