The September 30, 2009 Employee Ownership Update is online and discusses the following:

• Five of Fifteen Top Small Workplaces in 2009 Are Employee Ownership Companies
• EBSA Assistant Secretary Phyllis Borzi Says ESOPs a Priority
• New Directory of Professionals to Help Employees Deal with Their Equity Grants
• Efficient Markets: My Own Definition
• NCEO Starts Search for New Executive Director in 2011
• A Personal Note on My Upcoming Change of Roles at the NCEO

In early 2008 we shared a DOL perspective of What a DOL Auditor is Looking For When Auditing an ESOP. The Update discusses how the EBSA Assistant Secretary of Labor told an audience that she will be making ESOPs a top priority:

Phyllis Borzi, the Assistant Secretary of Labor of the Employee Benefits Security Administration (EBSA) in the U.S. Department of Labor, told the audience at the ASPPA/DOL Speaks conference on September 17 that she will be taking a hard look at both compliance and enforcement issues for plans the U.S. Department of Labor covers. While major issues will be delayed remittances of contributions to 401(k) plans and criminal prosecutions for embezzlement of plan funds, ESOP valuations will also be one of the priorities.

The Update also discusses how, like last year, 33% (5 of 15) of the Top Small Workplaces 2009 are employee owned and provides a brief profile of each company:

Analytical Graphics: This 263-employee aerospace and defense software company in Exton, Pennsylvania, uses its profit sharing plan to invest in company stock. One unusual perk is that the company offers free breakfast, lunch, and dinner. Families are welcome to come by. Employee ideas are solicited through quarterly town-hall meetings. Fridays, employees have "Storytime," where they can shares stories of their work with other employees.

Bailard Inc: This 49-employee Foster City, California, private investment firm allows employees to buy stock with loans from the company or, in some cases, from customers. An internal market helps provide liquidity. The company is currently looking at other ownership options as well. The offices have no doors, and every morning at 9:05 the staff gathers to discuss company news and projects. An open-book policy even extends to salaries.

Heavy Construction Systems Specialists, Inc: This 106-employee construction software company in Sugar Land, Texas, was an NCEO Innovations in Employee Ownership Award winner for the unique way it combines an ESOP with stock appreciation rights (SARs) targeted at new employees to give them more parity with more senior ESOP participants. The company is very open-book, with regular opportunities for employee input into decisions. It also has an extensive wellness program, including a jogging trail and gym on site.

Skyline Construction: This 50-employee San Francisco construction company became ESOP-owned in 2005. The plan includes unionized employees. The move to an ESOP brought a major cultural shift to a highly inclusive management style. It practices extensive open-book management and has regular meetings to discuss workplace issues. Each fall, one employee from each department attends a two-day strategic retreat.

Another employee ownership company, this time a non-NCEO member, was named one of the winners. Railroad Associates Corp. is a Hershey, Pennsylvania-based railroad engineering and contracting company with 33 employees. Its employees own 40% of the company through an employee ownership plan. The company does not hire middle managers to handle field calls from job sites but rather pushes decisions down to front-line employees.

We shared two of the Wall Street Journal profiles in Top Small Workplaces 2009 – Profiles of Two ESOP Winners. Here are the other three profiles from the Wall Street Journal's Top Small Workplaces 2009 article:

ANALYTICAL GRAPHICS INC.

BUSINESS: Aerospace and defense software

BASED: Exton, Pa.

FOUNDED: 1989

EMPLOYEES: 263
2008 REVENUE: $49.2 million

How do you figure out what perks will make your employees happier? Here's a trick: Listen to them. That's the approach taken by Analytical Graphics, an aerospace- and defense-software developer. Paul Graziani, chief executive, says he and his co-founders didn't have a strong vision when it came to formulating workplace practices or perks. But they let employees guide the way.

Several years ago, the company began offering snacks around the office and occasionally providing catered meals for meetings. The meals were so popular—partly because there are limited restaurant options in the area—that the company explored hiring a food-service company. Today, an on-site caterer prepares free breakfast, lunch and dinner for all employees on workdays. Families are welcome to stop by and eat, or employees can take meals home.

Some less expensive perks also do a lot to show the company appreciates its employees' hard work, Mr. Graziani says. About 10 years ago, the company began installing washers and dryers in its offices, after some younger employees said they had trouble finding time to do laundry. A dry-cleaning service also picks up and drops off clothes during the week.

The company solicits a lot of ideas from employees in annual surveys and quarterly town-hall meetings. Frequent communications among employees, Mr. Graziani says, also foster team spirit. Each Friday during an all-staff lunch meeting, the company hosts "Storytime," where employees from various departments talk about their projects and the work they're doing for clients. Storytime particularly helps employees who aren't software developers understand and feel energized about the work Analytical Graphics does for the military and government agencies such as NASA. After a space-shuttle launch, for instance, an engineer might explain to all employees how the company helped with the mission, using TV or video clips for illustration.

Jessica Warwick, a 31-year-old sales administrator, says the company is always soliciting feedback and encouraging employees from various departments to mingle and share information. Storytime, she says, is particularly useful to her because she better understands what the software developers do. "It makes everyone feel a little more compelled to contribute because you know your company is doing good," she says.

BAILARD INC.

BUSINESS: Private investment firm

BASED: Foster City, Calif.

FOUNDED: 1969

EMPLOYEES: 49
2008 REVENUE: $16.2 million

With workers today changing jobs all the time, companies seek ways to keep top performers. Very few retain employees as successfully as Bailard, a San Francisco Bay-area investment firm. The company boasts an average employee tenure of 13 years—the longest of any of this year's Top Small Workplaces winners. One reason, says co-founder and Chairman Tom Bailard, is the firm's "high trust" culture and strong belief in employee development.

A key ingredient of Bailard's success: open communications. Offices don't have doors, as a way to encourage conversations between employees and deter secrecy. Every Monday morning, the staff gathers for the "9:05," a meeting where they discuss company news, investment markets and internal projects, and introduce new employees.

Even salaries are no secret. Any employee can find out other employees' salaries by asking the chief financial officer.

All this transparency stifles the office politics plaguing so many workplaces and keeps managers accountable. "As a manager, if you know that your compensation decisions are essentially going to be public, you have to have pretty strong conviction about any decision you make," Mr. Bailard says.

Open communications also facilitates internal development. Junior staffers are encouraged to bring up new ideas, ask senior staffers questions and pursue projects in areas of the company that interest them.

Matt Johnson, 31, started as an entry-level investment associate in 2001 and now is vice president of Bailard's health-care investments. As a young worker at the firm, Mr. Johnson says he got to work with clients, putting together investment reports, and deal with "pretty much every department." He realized he enjoyed investment research, and started forging relationships and seeking project work in that area of the firm.

"Here you get to wear all the hats," he adds. "It's very entrepreneurial, so you really feel like you have a hand in the day-to-day operation."

RAILROAD ASSOCIATES CORP.

BUSINESS: Railroad engineering and contracting

BASED: Hershey, Pa.

FOUNDED: 2000

EMPLOYEES: 33
2008 REVENUE: $7.5 million

Michael and Jack Kennedy grew up working for their father's railroad contracting business. So, when the brothers started their own contracting firm—which repairs railways in several northeastern states—they weren't lost for ideas.

One of them: Reduce workplace bureaucracy and push decisions down to front-line employees. Rather than hire middle managers to field calls from job sites and make decisions, the brothers handle calls themselves and urge site workers whenever possible to solve problems on their own.

Not having that layer of middle management improves communications and employee accountability—and saves the company $500,000 annually in salaries and other overhead costs, estimates Michael Kennedy.

But employees must be trained well enough to make decisions and take initiative. Railroad Associates—also known as Trac—provides a lot of on-the-job training to new employees, often through on-site mentoring and various courses. In addition, the company just rolled out an intranet system that employees can access via laptop to get information, including job budgets and scheduling information, to help them make better decisions.

Aligning employees financially with the company also creates an ownership mentality, Mr. Kennedy says. Trac provides an employee stock-ownership plan, through which nonmanagement employees own about 40% of company stock. Each year, employees are eligible for an individual bonus capped at 50% of their pay based on three things: customer feedback, safety records and whether they finished projects on time.

The Kennedy brothers also try to win employee commitment by treating workers like kin—which means offering great benefits and scheduling flexibility when they have family or school events to attend. For one thing, the company pays 100% of health-insurance costs for employees and their dependents.

Brian Hiltz, the 32-year-old truck driver for the company, recalls a couple of years ago when his young daughter needed back surgery in Philadelphia. Rather than dock his vacation or sick time, Michael Kennedy told him to take off all the time he needed. They'd decide how to compensate for missed work later on.

"He covered for me that entire week while I was off," Mr. Hiltz says. "How often is the president of the company going to jump in and run a tractor trailer for a week?"