Alumni Feature – Greg Daugherty ’01
As business owners take steps to preserve what they’ve built, Greg Daugherty ‘01 has the experience to guide them, using employee ownership strategies to ensure a thriving legacy for generations. As a partner in the Columbus office of the business law firm Porter Wright, Daugherty specializes in crafting business succession plans—particularly, employee stock ownership plans (ESOPs), employee ownership trusts, and related equity arrangements.
He vividly remembers one of the first times he worked with a business owner. “What really piqued my interest [in this area] was after the fact. After the business owner completed the transaction, maybe a week or so later, he invited all his employees out to a conference center for a breakfast and told them to invite their families because he had a really big announcement to make about the company.”
The employees were nervous, wondering if the company was being sold. When Daugherty arrived to help explain the process, they were wary about the presence of a lawyer. He reassured them that it was a good surprise. The owner started to make the announcement, saying something like, “Everybody, I’ve sold the company—to you, the employees. Congratulations! You’re now employee-owned!”
This unforgettable moment kept Daugherty in this area of business law. For those new to this topic, he simplified how ESOPs essentially function:
- The company borrows money to buy the owner’s shares of stock in the company.
- Those shares are contributed to a trust managed by an independent trustee.
- Each year, employees earn an allocation of those shares to their own accounts within the trust.
- As the company pays off the debt, employees’ shares increase in value (similar to how the equity value of a house increases as the mortgage is paid down).
- When employees retire, the company buys back their shares, creating a retirement benefit.
- These shares are reallocated to current employees, thus sustaining the plan continuously.
Daugherty added, “so if you work at a company like that, you know, for many, many years, you could end up with a very generous retirement benefit because you still have your 401(k) plan. It’s not like you, as the employee, paid for the stock.” Employees also vest shares based on how long they’ve been with the company.
ESOPs have been gaining popularity in recent years, Daugherty said, because of the many baby boomers who started their business in the 80s or early 90s—and who are reaching retirement age—but either are unable to find buyers for their businesses or do not have children who want to continue to own the businesses.
“They could sell to private equity, and that’s not a bad way to go, if they’re looking to just retire, be done with the business. But for a lot of these people, their companies are like another child of theirs, it’s their legacy, and they want to ensure that the business is going to survive long after they’re gone,” Daugherty explained. “They may have a lot of employees who’ve been there a long time, and so becoming employee owned is a way for them to preserve the culture or preserve the legacy of their business.”
A business with about 15 to 20 employees and an approximate valuation of around $5 million could consider transitioning to an ESOP, according to Daugherty. This rule of thumb could also depend on the industry and other factors, and there may be tax benefits.
As more business owners face succession planning issues, Daugherty sees employee ownership as a practical and increasingly relevant option because of the benefits that ESOPs provide to business owners, their companies, and their employees. For the business owners, ESOPs provide tax and financial planning opportunities. For the companies, ESOPs provide tax benefits not available to non-ESOP-owned companies, and ESOPs also help preserve the culture and legacy of a business. For the employees, ESOPs help allow them to earn a portion of the wealth that they helped create in the company. In short, ESOPs help preserve the values that made the business successful in the first place.
Getting to Know Greg
Greg Daugherty ‘01 graduated from Miami University with a double major in accountancy and economics. He then attended The Ohio University Moritz College of Law, completing his J.D. and interning with Porter Wright, joining the company full-time upon graduation.
On the value of an accounting degree in the legal field
“Law schools value a diversity of undergrad majors from their incoming classes.” Greg was one of only two people in his class (of just under 200) to have an undergraduate accounting degree.
“Right after I was hired full-time, one of the senior associates said the accounting degree carried a lot of weight—in their mind, it was almost the equivalent of having an MBA.”
How a Miami education shaped his approach to challenges
“The most common answer to a question is ‘it depends’—when someone asks whether this or that will work. Even with the financial accounting rules, when you get to the more senior-level classes, there’s still some gray areas, and reasonable people can take different positions on things. And I’ve found this way of thinking developed even more in law.
“You have to understand your client’s goals and assumptions, present a few different approaches they can take, depending on their risk tolerance and how much authority they have, and let the client make some of those decisions. But ultimately, you’re giving them information to make a business decision.”
Best Miami memories
Two big themes included being part of the Honors program—enjoying their social activities and seminars—and participating in intramural hockey. “None of us had ever played hockey before, but it just was like, hockey’s big here. When else are we ever going to do it? So I might as well give it a try. And it was a lot of fun.” His team’s success grew through the years; by senior year they had a winning record of 5 and 2.
In his spare time
Daugherty enjoys hiking, visiting his family in Sandusky and South Carolina, and going to the Columbus Blue Jackets and Ohio State games.
