About

GHPhipps Construction Companies (GH Phipps), established in 1952, transitioned its employee ownership structure over time, with the current Employee Stock Ownership Plan (ESOP) established in 2000, making it a well-established ESOP company. The ESOP covers approximately 218 overhead employees in professional-titled jobs, out of a total company size of about 450 people, which includes unionized skilled labor in the field who are not part of the ESOP. The ESOP is often viewed as a "completely free retirement program" and a significant incentive for long-term commitment.

1. Organization of the GH Phipps ESOP

The GHPhipps ESOP is fundamentally organized as a tax-advantaged retirement and wealth-building vehicle, characterized by high transparency and a clear governance structure.

A. Ownership Acquisition, Vesting, and Distribution

• Cost of Ownership: Employees are attracted to the ESOP because it is a "gift" and a "completely free retirement program"; employees do not have to buy into it.
• Vesting: ESOP accounts require five years to be 100% vested. The vesting schedule progresses over time (e.g., 20%, 40%, 60% from year one to year three). The incentive to stay is strong; one employee noted thinking about how much money they would be losing if they were to leave before being fully vested. Statistically, the company observes a "drop off at five years" once people become vested.
• Share Allocation: Share allocations and ESOP contributions are consistent across all eligible participants (director level and down) based on a percentage of eligible income. For example, in a recent year, all eligible employees received 25% of their eligible income contributed to their ESOP account.
• ESOP Logistics
  • The company’s goal is for employees to receive approximately 36% of their annual pay in additional income each year through ESOP share value growth and dividends.
  • Dividends are paid per share, based on company performance.
  • Employees are enrolled in the ESOP on their first day of employment.
  • 25% of eligible income is contributed to each employee’s ESOP account, determined by salary and tenure.
  • Employees become fully vested after five years.
  • An employee representative, elected by the workforce, serves on the board of directors.
  • The organization maintains a traditional hierarchy with four levels of decision-making.
  • The company interacts with a union as part of its broader labor relations structure.

B. Governance and Education

• Board Structure: The Board of Directors includes two elected employees (on off cycles), the CFO, the president, the controller, and a descendant of Mr. Phipps who is the general manager of Wyoming, as this inclusion is written into the bylaws. A former CEO also serves as the current chairman of the board.
• Employee Voice: While strategic decisions are made by leadership and broadcasted to the company, employees express feeling like they "have a voice". Employees can submit ideas or concerns through a form on the intranet, and executives, including the president, are receptive to discussing concerns with employees.
• ESOP Committee: An ESOP committee exists to promote the ESOP internally and is responsible for monthly communications, planning events (like the ESOP barbecue and celebrations during ESOP month), and organizing employee spotlights.
• Education: GHPhipps provides multiple tools and learning opportunities to help employees understand and engage with the ESOP. An ESOP calculator on the company intranet allows employees to track and project the value of their ownership, and ESOP statements are issued twice per year, with supporting materials available online. Employees receive ESOP education during onboarding, including a personalized meeting with the controller to review a sample statement and projections. Ongoing education includes ESOP 101 and Advanced ESOP classes, offered once or twice a year. Despite these efforts, the plan’s complexity can make it challenging for some employees—particularly those without a financial background—to fully grasp the details, leading to a need for simplified explanations and regular reinforcement. To promote transparency and engagement, the company holds an annual shareholders meeting to review performance and monthly “Phipps Talks” for company-wide updates and ownership discussions. Financial information is shared during these meetings but is not accessible outside of them.

2. Financial Benefits Offered to Employees

The ESOP provides substantial financial security through long-term retirement savings, competitive pay, and complementary bonus structures.

A. Wealth and Retirement Security

• Significant Contributions: The ESOP acts as a powerful retirement tool. One employee noted their first ESOP contribution was larger than anything they had put into their 401k in three years at a previous job. Another stated they have more money in their ESOP account than in their total savings.
• Financial Goals: The company's goal is to return a minimum of 36% of an employee's annual salary to them in the form of the ESOP contribution and their bonus combined. The ESOP contribution itself has recently been as high as 25% of eligible income.
• Reduced Financial Stress: The knowledge that retirement saving is being successfully managed by the company "reduces a lot of financial stress". This structure gives employees a "path" toward retirement, even if they started saving late.