Moog Music Gives Employees More Control
By JOE COSCARELLIJUNE 10, 2015
At the Moog synthesizer factory in Asheville, N.C., on Tuesday, Michael Adams, the company’s owner and chief executive, wanted to share some life-changing news with the entire staff.
“I’ve sold half the company,” he told them.
Anxious silence descended among the tight-knit group, many of whom feel a familial loyalty to the business, which has been likened to Willy Wonka’s factory for electronic musicians.
Then Mr. Adams revealed the buyer.
“I sold it to you,” he said, to a relieved wave of whoops, applause and happy tears, according to employees present.
Siobhan Robinson, a production scheduler who started as an office manager 10 years ago, could only talk through her sniffles and giddy laughs. “This provides for my family; this is all we have,” she said.
The new employee-ownership arrangement is more than just happy news for the workers; it’s a victory for the small company, whose financial success has not always matched its cultural impact.
Moog Music, founded by Robert Moog, created, arguably, the most popular physical musical instrument since the electric guitar. Made by hand, Moog’s modular synthesizers are a pillar of modern electronic music, used by artists including Yes, Devo, Dr. Dre and the Beastie Boys.
But despite the instrument’s ubiquity and devoted following, the company has struggled as it tried to maintain its reputation as an artisanal, all-local workplace with employees who stay for years. Many remained devoted after Mr. Moog’s death in 2005 and even through lean periods with late paychecks.
Workers will now own 49 percent of the company through an employee stock ownership plan, Mr. Adams explained. He has set up a trust with no upfront costs to the employees, essentially lending the company the money to buy out his remaining 51 percent over about six years using pretax dollars, one advantage for Mr. Adams. (During his remaining time at Moog, Mr. Adams plans to devise a succession strategy.) Upon their retirement, individuals can cash out the shares they accumulated over the course of their employment.
There are currently about 7,000 such ownership plans in the United States, according to the National Center for Employee Ownership. Douglas Kruse, an economist at Rutgers University’s School of Management and Labor Relations with a focus in employee ownership, said such companies tend to have a stronger connection with employees and remain more stable through recessions. The risk for workers planning their retirements, he said, is that the company may fail, although companies owned by employees less likely to fail in general.
At Moog, 60 of 61 current full-time employees are eligible to participate in the plan. (Mr. Adams’s son, an employee, is not eligible.) The vesting period for most employees is six years — 20 percent each year after the first — while seven employees with at least nine years’ experience as of January 2014, including Ms. Robinson, are already vested. As a result of the plan, the company estimates that — should it continue to grow — a production employee who starts making $12 an hour could, with a decade of experience at Moog, receive a payout of about $100,000 at retirement age.
“This is like the ultimate pension plan,” Mr. Adams, 59, said in an interview.
It’s also Mr. Adams’s path to retirement. “I’ve been looking for a way to get out,” he said. “This is my exit strategy.”
“I could sell the company tomorrow to a strategic buyer or V. C. outfit,” Mr. Adams added. “But I think we’ll continue to grow, and I think that second 51 percent will be worth even more.”
Making Moog an employee-owned company will also fulfill a dream of the company’s founder.
Mr. Moog created the groundbreaking analog synthesizers of the ’60s and ’70s, but his niche company never quite found stable financial ground. When Mr. Adams came on as a partner in 2002, the company’s eight employees hadn’t been paid in nine weeks. Moog was two years late delivering its new product, the Minimoog Voyager, and “probably within a week or two weeks of just calling it quits,” said Mr. Adams, a mechanical engineer with manufacturing experience.
He implemented changes that helped lead to sustained revenue growth, at an average of 18 percent per year for the last 12 years, according to the company. Moog went from selling six products to more than 100, with the instruments ranging in price from a few thousand dollars to $35,000 for one top model, and added dozens of employees, who maintained an average tenure of nearly seven years. (While Mr. Adams declined to give Moog’s profits, he said employee stock ownership plans are generally recommended for companies with revenue surpassing $15 million.)
Mr. Adams recalled telling Mr. Moog in 2004, at one of the pair’s weekly lunches, that the company was now profitable. “He said, ‘I’ve never worked for a company that had the capability to provide for its employees and their families,’ ” Mr. Adams said.
Ileana Grams-Moog, Mr. Moog’s widow, said her husband floated the idea of an employee-owned business as early as 2001, but the company was struggling. “It was something he let go of reluctantly,” she said. “I can say for a fact that Bob would be absolutely delighted with Mike’s decision.”
The change will also help keep Moog in Asheville. “So often small companies are eaten up by larger ones, and then they change,” said Ms. Grams-Moog, who has no remaining financial stake in the business.
Since Mr. Moog’s death from a brain tumor, Mr. Adams has worked to maintain the open, collaborative atmosphere that Bob, as he’s still known to Moog employees, instituted. On the first Thursday of every month, the entire factory gathers for a presentation of current financials.
Such meetings will have a different tenor moving forward. “To be honest, those numbers didn’t mean much before,” said T. J. Mills, 34, a production employee who grew up in Asheville. “But they mean everything to me now.”