TO SELL A LOBSTER: THE TALE OF THREE MAINE COMPANIES

Selling a lobster is a complicated business. Live? Frozen? Processed into value-added products? Three Maine businesses are taking different approaches to getting Homarus americanus to its final destination. A significant transition has occurred in Maine’s lobster world: Linda Bean’s Maine Lobster is now owned not by Linda Bean but by the employees of the company. Bean sold her interest in the company to her employees in May, 2016. Yet, to all appearances, everything is just the same. Except perhaps for the smile on president John Petersdorf’s face. “It’s a 401K plan on steroids,” he said referring to the new ownership structure. An employee-owned company, commonly called an ESOP (Employee Stock Ownership Plan), is nothing new. This form of corporate ownership has been around since 1974, said Richard Crossman, a member of the company’s board of directors and an executive at the Allen Insurance and Financial Agency. “Sargeant Construction in Old Town is an ESOP, as well as my company and Prock Marine . I’d say there are at least 100 companies in Maine that are ESOPs.” Linda Bean started her lobster company in 2007 at the age of 66. Her stated intent was to ensure that Maine lobster was processed and marketed in Maine by Maine people. The company, at first based in Port Clyde, quickly grew in size as Bean purchased additional property and wharves in Tenants Harbor and Vinalhaven. Bean processed her lobster into various value-added products, launched restaurants in Maine and Florida, and developed a strong on-line specialty food business. According to Petersdorf, about two years ago Bean began to think of retiring from the lobster business. She had diversified her company to include vacation rentals, wedding planning, maple syrup, even boat tours of the Port Clyde area. “Linda is committed to traditional Maine industries and to the continuation of the working waterfront. She wanted to transfer that dream to those who do that work for her, to solidify her legacy,” said Crossman. In 2015 Bean started the process to sell her company to the employees. A six-member board of trustees was set up to oversee the long-term health of the company. Those Board members have a fiduciary responsibility to the company; it is there that major decisions about the company’s future are made. The management team and facility workers, however, remained largely the same. The new ownership structure means that everyone who works more than 1,000 hours in a year for Linda Bean’s Maine Lobster is vested in the company. They receive a percentage of the company’s annual profit presented in a statement each year. That percentage, said Petersdorf, is based on a number of factors. The actual money is set aside in a fund; when the employee leaves the company, for another job or for retirement, that money is released to them over time. “The payout period is years which is a tax benefit to the employee,” Crossman said. The ESOP structure is also a great benefit to the company itself because an ESOP pays no state or federal taxes. According to Crossman, an S corporation 100% owned by its employees does not pay income tax on its profits. “Don’t ask me how that works,” Petersdorf said, throwing up his hands. “We hire a financial firm to manage the financial aspect of this.” From Petersdorf’s point of view, the new structure means that those who work for the company are those who care about the company. “There’s risk, that’s certain, but there’s the possibility of a return on your investment,” he said. “We’ve bought into the company with confidence that we can make it work. And Linda really deserves all the credit. She built these facilities and made the initial investments.” The company is sticking to what it knows: buying and selling live lobsters. Bean sold the processing arm of the company several years ago. Currently Linda Bean’s Maine Lobster has 75 customers and the volume of lobster passing through its holding tanks “is good,” Petersdorf said. He doesn’t foresee much changing in the next few years. “It will be business as usual. We are a new company, essentially, and I think we’ll be pretty conservative about outlays for a while.”