H-E-B, one of the largest private retailers in Texas, is granting 55,000 of its employees an equity stake in the grocery company. The news of the employee stock grant plan spread following a meeting involving H-E-B corporate leaders, including Chairman and CEO Charles Butt via video, on Friday at the Henry B. Gonzalez Convention Center.
Starting Monday, employees are meeting with store managers about the plan in which an eligible worker would get a grant valued at 3% of his or her salary on Jan. 1, 2016. A 3% stock grant would given to each eligible worker every year, but the percentage could depend on the company’s performance.
According to company officials, the stock grant will be supplemented with $100 in stock for every year of an employee’s continuous service completed by the end of 2015. The goal is to build up that grant value to 15% total ownership stake in the retailer. Presently there is no timeline by which H-E-B seeks to achieve that milestone.
Reporting an annual revenue of $23 billion, H-E-B officials are celebrating the 110th anniversary of the founding of the company by Charles Butt’s grandmother, Florence, in 1905 in Kerrville. The grocer currently has 318 Texas store locations and 52 in Mexico. Butt and his family will continue on as the company’s primary owners.
In order to be eligible for the equity program, an employee must be at least 21 years old, have finished a minimum of one year of service and have worked at least 1,000 hours in a calendar year. By this criteria, 64% of the retailer’s 86,000 Texas employees will become H-B-E stockholders come Jan. 1.
Company officials told the San Antonio Express-News that they hope the stock plan gives employees a deeper sense of pride in their company and their job performance, and that customers could share in that same spirit. Employees are symbolically referred to as “partners” within the corporation.
Dya Campos, media affairs director H-E-B’s San Antonio/West region, said a privately held company offering its employees an opportunity for part ownership is rare in the industry, especially for retailers. But the Butt family has long been committed to the idea of letting H-E-B employees have equity.
“The Butts family has been wanting to be in a position to be able to do this,” Campos said. “We feel our partners are part of our family.”
Workers who do become eligible for stake after the plan’s initial launch will have two other chances each year to join: Jan. 1 and July 1.
U.S. law prevents H-E-B’s 9,000 employees in Mexico from participating in the new plan. Additionally, the company will not ask workers to contribute to the plan but the stock cannot be sold or traded. A worker who leaves H-E-B can cash in the stock grant only at the end of the following year. Retirees and disabled employees could receive the benefit right away, as would surviving family members following an employee’s death.
Campos said meetings among managers and employees began promptly at 8 a.m. in stores where the average workforce numbers between 300 and 400 people. She added that reaction among employees has been especially strong and positive.
“The No. 1 reaction has been gratefulness. There have been lots of tears, lots of joy,” Campos said. She cited one employee at the H-E-B at Bandera and Loop 410 who has worked 41 years for the retailer.
“When you add in the 3% of salary and the $100 for every year you’ve worked, that’s a nice chunk of money to start off with the plan,” she added.
The employee equity plan also reflects the growth of H-E-B and its regional dominance despite a strategy by Walmart, the world’s biggest retailer, to counter or even overtake H-E-B at almost every competitive turn in Texas and Northern Mexico, the latter’s home turf.
H-E-B is one of the most renowned, visible corporate entities in Texas. Aside from its basic business operations, the grocer’s self-marketing has grown popular even with San Antonio Spurs fans, who look forward to commercials starring Spurs stars hawking H-E-B products. The community outreach extends into in-store health and nutrition programs for all kinds of customers. The company also often partners with local non-profits on community projects.
Expansion and renovation of older stores, the planned establishment of a downtown market, and the development of H-E-B Plus stores, have helped the local grocer to retain a 52% market share in the San Antonio area. Meanwhile, Walmart has expanded its number of local Supercenters and grocery-focused Neighborhood Markets. And H-E-B has been seeking more locations to expand its portfolio.
“H-E-B has experienced lots of growth over the years and we’ve faced increased competition,” Campos said. She added that Charles Butt and other company leaders rely on a philosophy that everyone, from corporate office to individual stores, keep striving to improve themselves and the retailer as a whole to ensure continued positive growth.
“It’s what Charles Butt has referred to as ‘restless dissatisfaction’,” she also said.
Forbes this year ranks H-E-B as the nation’s 15th largest private employer. Charles Butt remains one of the country’s wealthiest people, ranking as the fourth richest person in Texas in the 2015 Forbes 400 with a net worth of $10.7 billion. Forbes also has noted that Charles Butt donates 5% of pretax profits to charity.
Glassdoor, a nationwide job search and recruitment website, announced this past June of this year that Charles Butt finished third with 96% employee approval in a survey of Top 50 highest rated CEOs at companies with 1,000 or more employers.
H-E-B is joining the growing ranks of retailers where employees have an ownership stake. According to the nonprofit National Center for Employee Ownership, 10 U.S. grocery chains are majority-owned by workers. Publix, a Florida-based grocer dominant in the Southeast, is the largest with 1,106 stores.
*Top image: Winell Herron, H-E-B Group vice president of Public Affairs and Diversity, poses for a photo. Photo by Scott Ball.