Taking stock: Diversified Plastics’ employees invested in company’s success, literally

Retirement brings with it a lot of major decisions, especially for company owners who've grown a successful business over many decades like James Dow, founder, President and CEO of Diversified Plastics Inc. While there are many options, the one that Dow chose to continue the success of his 35-year-old company was to sell to the employees through an Employee Stock Ownership Plan (ESOP).

Diversified Plastics
From left to right, Annette Lund, James Dow and Roger Vang.

"Knowing that someday I would eventually retire and have to sell the company, the most obvious direction would have been to sell to an outside organization," Dow stated in a prepared release. "But, I found that prospective buyers had no desire in continuing the company. Their only interest was our customer list and equipment, which meant that in all probability, our employees would be out of work."

An ESOP was the best option for the continuation of Diversified Plastics as a successful company, providing continued employment for the employees. "Our employees are like family to me and who better to lead the new company forward than the people who helped make it what it is today," said Dow.

While the employees took ownership on Nov. 1, 2011, Dow will remain as president. "The changeover has been smooth," said Annette Lund, vice president of the company. "We're in the middle of a five-year plan and are continuing to follow those long-term goals. It's very important to us to have a seamless transition and maintain continuity for our customers as well as our employees." 

Dow began his retirement planning eight years ago and attended an ESOP seminar to learn more about the program and his options. Working with the company's CFO, Roger Vang, they began exploring the possibilities of an ESOP strategy, but determined the company wasn't quite ready at that time. After a few more years of substantial growth, Dow revisited the ESOP idea and decided they were ready to move ahead in making Diversified Plastics an employee owned company.

To establish the ESOP and purchase the company from Dow, a trust, with company stock, was set up in the name of the employees. "We automatically vested all the employees who were here at the start of our 2011 fiscal year," said Vang. "Going forward, any new people will be vested like a typical 401K vesting schedule and base salary will determine the trust assets distribution schedule.

Diversified Plastics, a custom injection molder specializing in high-precision components for medical devices, filtration, aerospace and a variety of other industries, was founded in 1977 by Dow and William J. Cullen. Cullen retired and is no longer active in the company. The company started production with 13 employees and three injection molding machines in a 2300-sq-ft rented manufacturing space.

Today, Diversified Plastics has grown to more than 50 employees and operates 16 injection presses ranging from 55-550 tons in a 45,000-sq-ft facility. In 1984, Design Tool & Engineering Inc. was added as a wholly owned subsidiary of Diversified Plastics to build and maintain the company's molds. In addition to molding and moldmaking,

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