In 1958, Jack Ackerman and Larry Windley, two adventurous underwater divers and the founders of Maui Divers, discovered commercial black coral beds off the coast of Maui. In 1959 Maui Divers started manufacturing and marketing Hawaiian black coral jewelry.
In 1992, the company was solicited for sale. Maui Divers also looked closely at creating an ESOP in the company. In 1997, Congress passed a law allowing S corporations to set up ESOPs. In addition, special tax incentives were available for the S corporations that set up an employee ownership plan. These changes in the tax law supported the driving force for establishing an ownership plan within the Maui Divers, which was to provide liquidity for the investors who wanted to sell some of their shares and an incentive for employees.
As a result, Maui Divers established its employee ownership plan in 1997. The employee ownership plan in Maui Divers was established through a leveraged ESOP in which the company utilized a bank loan to purchase the shares from the investors. At the end of the deal, the stockholders received approximately $3.2 million. ‘We looked at other options but establishing an ESOP was the only way to provide our employees with additional benefits and that’s what we went for.’
Despite its employee ownership plan, Maui Divers is still a company that operates by traditional management rules. It appears that the company has succeeded in integrating the traditional command and control system with ESOP’s open management system. Although the top management of Maui Divers makes and implements the decisions, employee owners are highly encouraged to make suggestions concerning issues related to responsible accounting.
As the result of pursuing the open-book business model, Maui Divers became increasingly transparent with respect to its financial reporting since the inception of the ESOP. The company management shares financial results with the employees during routinely held quarterly meetings.