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Part 1 of 2
In May 2018, I wrote “A World Class Corporate Culture,” a BizTimes column about Pewaukee-based Harken Inc., a yacht equipment company.
Harken is the premier brand of sailing products in their market. Their culture and core values, embodied in their core values statement, set them apart from their competitors.
The Harken Weather Mark:
- “Keep the well-being of your people first!”
- “Make the best products at a fair price.”
- “Service your customers beyond their expectations.”
- “Never lose your sense of right from wrong, the basic judgment taught by your mother and father.”
Harken was founded in 1967 by brothers Peter and Olaf Harken. Olaf passed away in 2019. Today, Harken is a global company, so the announcement in September that Harken had sold its business to its U.S. employees through an ESOP (Employee Stock Ownership Plan) trust makes perfect sense.
I’m a big fan of ESOPs, and there are many very successful ESOPs in Wisconsin today. They include Kwik Trip, Woodman’s Markets, Owner’s Edge, and Kesslers Diamonds. To explain the details, here’s the first of two columns highlighting my interview with Harken CEO Bill Goggins.
Q: How did you originally come to Harken?
A: “April Fool’s Day 1999. I was working at a marketing firm at the time and saw my boss job hunting online. I took that as a sign it was time for me to look for my dream job. I am passionate about sailing, so I cold-called Harken. I spoke to Art Mitchel, the company’s director of operations, who is sometimes referred to as the ‘Third Harken Brother.’ We met the next day and hit it off immediately. I didn’t even have a resume. I was hired shortly after that and started on April Fool’s Day.”
Q: When did you become CEO?
A: “I was promoted to U.S. president in 2009. At that time, our global CEO was stationed in Italy. After he left, we formed a six-person corporate governance team, with three leaders from Italy and three from the U.S. Once we started down the ESOP path, I was named global CEO in 2020. One of the factors giving me confidence in our future success is we have an outstanding leadership team. No egos in the boardroom.”
Q: When founders decide it’s time to sell their company, especially a successful company, they have lots of choices. Private equity, strategic buyers, etc. So how did the Harken family come to the decision to sell the business to the employees?
A: “Our advisor, Art Mitchel, had been encouraging us to develop a succession plan for several years. Of course, we had many, many suitors who were interested in purchasing Harken. But it never felt right to sell the company to a third party. In addition to Art, it was really important that Harken had excellent trusted advisors including John Jensen, our CFO, who really understood the needs of the family. John developed a list of seven criteria that were important to the family based on their feedback.”
The family’s seven priorities for selling:
Here’s the list, but keep in mind they are not in a priority order.
- Outside investor influence
- After-tax sale value
- Influence on culture
- Ongoing support of existing management team
- Future role of the sellers
- Ongoing support of the employees
- Loss of control
While money is always a factor, it was NEVER the only factor, and it wasn’t even the most important consideration. As the list evolved and was being evaluated, the ESOP always met most of the family needs.
It can be difficult to get a true understanding of the benefits of an ESOP, since many investment bankers and attorneys don’t like ESOPs or don’t understand them.
So this was Harken’s ESOP path. In Part 2, I’ll explain what it takes for ESOP success.