Extensive Employee Control
NORTH COAST BRASS AND COPPER CO. CASE STUDY CATEGORIES:
Union Led: For ESOP benefits to make positive change in corporate culture and profits, the employees need timely education and information about the ESOPs benefits to them
Employee Stock Ownership Plan (ESOP): ESOP purchase from divesting parent company retained jobs for several years, but inability save money by changing culture led to sale to foreign company.
In 1987, the 535 employees of Chase Brass, the sheet metal division of BP America, Inc., were about to lose their jobs to a plant closing. The division made copper and brass sheets used largely for auto and electrical manufacturing. BP America indicated an openness to a deal with division employees, and on Jan. 29, 1988, the workers began to experience life as owners of the newly renamed North Coast Brass & Copper Co.
Labor unions representing workers in the plant have four seats on the nine-member board of directors, management has two seats, and labor and management jointly select three outsiders to the board. At the time, Attorney Deborah Groban Olson, who assisted the employees with the buyout, indicated that North Coast probably had more immediate employee and union control in its governance structure than any other employee buyout of its size.
The purchase price for North Coast was significantly lower than the liquidation value. The workers financed the deal with $30 million from AmeriTrust - $22 million in revolving credit and an $8 million employee stock option term loan. After about 5 years, the company was purchased by foreign owners from the employees.
