Mars chemical company transitions to full employee ownership
For decades, FBC Chemical in Mars remained a tight-knit, third-generation family business, founded and managed by members of the Hudac family. Today, the company is still a tight-knit family business, with one major difference — the company is now 100% employee-owned.
“The employees have even more of a vested interest in the success of the company, because their work will directly impact the value of their shares,” said Owen Hudac, sales manager for FBC and a third-generation family employee.
The transition took place late last year, at the behest of the six brothers at the head of the company: Lad, Dave, Pete, Chris, Gerry and Mark Hudac. The six, who range in age from 60 to 75, were either retired or on the precipice of retirement.
“Nobody can work forever,” Owen said. “It was a way for them to earn a retirement and not have to work in this business until the day they die.”
Many of the employees who inherited a part of the company had been with FBC Chemical for decades. The employee ownership model was a way of rewarding them for their loyalty while ensuring that their positions were secure.
“There's a lot of ways that folks can sell their businesses these days, one of which is selling to private equity,” Owen said. “We believe that can often ruin a culture and a lot of folks can end up losing jobs. A huge focus was protecting our employees and our culture.”
FBC Chemical is one of a growing number of companies across the United States transitioning to an ownership model known as the “employee stock ownership program.” According to a news release, more than 300 companies in Pennsylvania are either partially or fully employee-owned.
Under this model, employees are given shares in the company which can appreciate over time to many times their original value depending on the company’s performance. In some cases, this involves a leveraged buyout of the original owner’s shares through a bank loan.
While some ESOP companies are only partially employee-owned, FBC Chemical is 100% owned by the employees.
“It's almost like we're buying a house together, and that house is FBC,” Owen said. “And when you buy a house, you take on some debt, and as you pay down your mortgage payment, all of the participants in the ESOP will gain equity in their shares within the business.”
Some notable examples of either partially or fully employee-owned companies include Sheetz, Wawa, Publix, and the engine and transmission company Jasper.
Kevin McPhillips, executive director of the Pennsylvania Center for Employee Ownership, is dedicated to championing the model of employee ownership for companies across Pennsylvania.
“Employee-owned businesses are, on average, about 8-12% more productive than non-employee-owned businesses,” McPhillips said. “Wages for people age 24-35 are 33% higher, and they create real retirement.”
One of the benefits of the ESOP model is that all of the profits the company achieves are tax-free.
“The federal government and the state of Pennsylvania turn around and say, ‘Look, if you do this, you never have to pay taxes again on your profits for whatever portion is owned by the employees,’” McPhillips said. “There is nothing else in the tax code like it.”
“Our corporation will no longer be taxed at the federal or state level,” Owen said. “Those monies from tax savings will be a huge benefit to our business being able to reinvest into our employees, new hires, equipment expansions, acquisitions, you name it.”
FBC Chemical was founded in 1968 by Owen’s grandfather, Lad Hudac. Today, the company has six warehouses and 80 employees across Pennsylvania, New York and Ohio. Owen estimates that roughly 35 of those employees are based in Mars.
Although the company is now wholly employee-owned, the way decisions are made at FBC Chemical isn’t much different from any other large company in the United States.
“Like any other business, there’s a board of directors with elected officers that would make the high-level decisions,” Owen said. “Just like any other business, there's a president, a CFO, a VP of sales, a VP of operations.”
Moreover, Owen believes the tight-knit, family-oriented culture fostered over the decades is now stronger than ever.
“I would just say this is a doubling down of what we already had in place,” he said. “Everybody's highly vested in the performance of the company. A lot of folks are willing to go above and beyond their normal job duties, but we like to have fun at the same time.”
