Statement of Karen York, Staff Accountant, Scot Forge Company, Spring Grove, Illinois,
on behalf of the ESOP Association

Testimony Before the Subcommittee on Oversight
of the House Committee on Ways and Means

Hearing on Employee and Employer Views on Retirement Security

March 5, 2002

Thank you Dee, and I am also honored to be given the opportunity to speak for employee ownership and ESOPs before the Ways and Means Committee.  Let the record be clear, I am not one of the executives of the company where I work, Scot Forge.  I am Karen York, a staff accountant in the accounting department of Scot Forge.  Scot Forge is a 100% employee-owned ESOP S Corporation.  We are a near 110-year-old company, of 450 employees.  We began our ESOP in 1978, when our then owner transferred 20% of the company stock to our ESOP.  He had inherited the company from his father, and instead of selling to a competitor, he thought the employees who helped make him well to do deserved a piece of the pie.  Over time, our ESOP bought more and more stock until we became 100% in 1997.

If you wonder if our ESOP is providing a secure retirement system for our employees, I will quote some account balances for you: Lathe operator, $783,818; machine operator, $478.576; maintenance mechanic $881,073; forge shop supervisor $814,716; electrical engineer, $660,489; final inspector, $603,303; press operator $563,665; machine operator $597,207; and sales and customer service, $574.826.  Attached to our testimony is more success stories collected by The ESOP Association in less than 24 hours.  (Please see Exhibit 2).

I hope that these numbers will make you realize that when we hear that Congress, or the Administration, is saying that we employees at Scot Forge are dumb, and need to get rid of our Scot Forge stock, we in turn get pretty riled up, and get our employee owners involved with telling our representative in Congress to be careful.

But, I am not hear to just talk about the money side of employee stock ownership, because like Dee said, what is really before you are two policies—retirement savings policy, and a better ownership policy so that ownership is not the privilege of a few in this nation.

So, what does employee stock ownership through an ESOP mean to me, someone who represents the vast majority of Americans, who goes to work each day, puts in a good strong 8 hours, pulls in a paycheck, but who devotes much time and attention to my home and community?

At Scot Forge, it means a great deal.  It means many employees understand what our business is all about.  How we make money, how we might not make the money we had targeted in our budget, and why these results came about.  We understand how each of us, doing our job, tie into the entire company, and how each of us should feel ownership, and most of all responsibility for what we do, and responsibility for our actions impacting our fellow owners.

As an attachment to my formal statement is the transcript of a radio show that I did as a guest last summer talking about Scot Forge and our ownership practices. (Please see Exhibit 3).

In the transcript I talk about open book management, our ESOP committee, our involvement with employee owners from other companies, and why we believe good employee owners must participate in our democratic process, in order to improve and expand the opportunities for ownership that each Scot Forge employee has.  I call particular attention to our open book management, and say to any member of Congress who may say employees are manipulated by management because we are not educated, please come to Scot Forge.

I am more than happy to answer any of your questions, but before concluding, I know you might say, “Karen, you and your co-workers might have all of that money in the ESOP now, but what if Scot Forge went under, and then you would have nothing.  Wouldn’t that be a tragedy?"

Well,  I can answer that question right now.  One, I would point out that we have a 401(k) program at Scot Forge that we can participate in, and it has no Scot Forge stock in it.  But most important, I would rather live in a society where people like me can be owners in the companies where they work, where people like me can participate in our ownership structure, instead of just letting a few of the top people take the risk of ownership.  If employee ownership was more widespread,  we have a more democratic society, and a society with equitable wealth distribution, not inequity.

You know many of us who work at our Spring Grove plant live in a rural setting.  Many of the Scot Forge employees still live working the land, or raising cattle in our spare time.  Many of us have been exposed to the risks of farming since childhood.  We know that ownership means risk; we also know that it means hard work, and rewards.

As far as Scot Forge going under, well, we are not one of those go-go companies, or cyberspace companies. We make real products that we can see and touch, that are used in the basic manufacturing of our nation.  We know that this does not guarantee continued success for Scot Forge; but I would rather put my future in Scot Forge instead of some far away mutual fund manager, who has no connection to my world, who is listening to advice to buy companies I have no knowledge of, and companies that really do not care about my community and my co-workers.  I understand some of these financial experts who we are being told will take care of our money are the same people who kept telling everyone to buy Enron stock last year.

I’ll take my chances with Scot Forge.

Again, thank you.