'I'm Not Worried': Moog CEO Mike Adams on Giving His Company to Itself
"When I started, nobody would've even wanted a piece of the company." Things have changed at Moog Music.
Today we learned that Moog Music, the iconic shop where founder Bob Moog produced some of the most influential synthesizers and electronic instruments in music history, had given itself... to itself.
CEO Mike Adams decided, following the wishes of Moog before he passed away in 2005, to give ownership of the company back to its 62 full-time employees.
Said Dr. Ileana Grams-Moog, Dr. Moog's widow, in a statement: "Bob and I consulted an expert in worker-owned businesses in 2001, but weren't able to make employee ownership at Moog a reality. Bob would be thrilled that Mike Adams realized this shared dream 14 years later."
In an interview with Billboard, CEO Mike Adams outlined the process and the culture that led to that landmark announcement this past Tuesday.
The statement says this was your decision?
Yes, of course.
When did the process start?
I'll put it this way -- the seed was planted a long long time ago, in a conversation with Bob. In earnest, the actual contacting of the whole slew of professionals that are involved in making something like this happen began in Oct. 2014.
That's surprisingly recent. Can you walk me through the process a little?
It started by contacting a professional group that does these things. I don't remember exactly how I got in touch with them, but they ended up sheparding the whole process, and were critical in finding the right trustees, lawyers, a bank, third party administrators. These things are pretty complicated.
I don't have any partners, don't have anybody to consult with on these types of things, so I had to hire some outside professionals. So that might be why it went so quickly.
The main thing that had to happen was an audit -- we had that done at the end of December in 2013 -- if you're a privately held company you have to establish a value, and that has to be done through audit by an outside partner. That basically is a rectal exam - anything hidden, crazy inventory issues, whatever -- so we went through that whole process.
Once you have that basis, you contact the other parties. This is where brand equity comes into play. Besides the other advantages to having a company called Moog Music, there were a lot of banks who wanted this business. We had 14 proposals to finance this. So that was a very competitive financing procedure. We had 5 trust companies. The way this works is that the trust actually represents the employees. So when the stock gets allocated to the employees, that's stock that's already been sold to a trust, and the trust holds that stock. So we picked the trust, picked the bank, and had the due diligence done by the valuation firm. It's a very big transaction.
Was the announcement to the employees on Tuesday (June 9) a surprise to them?
Very surprised. The staff, the people who report directly to me, had known about it for a couple months. My controller knew about it from the very beginning. So we had some time to plan the communication. Because of the business that we're in, we're used to holding secrets. That usually has to do with development, not this kind of thing.
So we were able to surprise them. It was very emotional.
What did that scene look like? I bet it was pretty remarkable.
Stunned silence to begin with -- I just sort of... you know, the company culture is ideal for this. We've been treating these people as if they were owners of the company -- I wouldn't say since I started, since when I started you didn't want to be an owner of this company -- but over the last ten years.
The purpose back then was to make people feel like they understood exactly what was going on. The secondary purpose was that if people left the company and wanted to start their own business, they would understand some of the basic parameters that goes into that.
The byproduct of all that was that they all feel very vested in the company. There's not only the emotional ties to Bob that a lot of them feel, and to the instruments -- but we fostered a culture here that makes people feel like they have ownership. Now they do have ownership. It's a dream come true for many of them. They have no other life line There's a lot of people who have been here five, six, seven, eight, nine -- one guy's been here 20 years.
There is no 'plan b.' If this doesn't work, they didn't have any backup plan. Now for them to be vested in the company financially, really will make a huge difference in the lives of the employees here.
Do you know of any other music companies that are employee-owned?
I don't. My examples for this were guys outside of the music business. New Belgium brewery. A couple others you'd never have heard of. I'm sure Moog's not the only music company that fosters the kind of devotion to the product that we have, and our founder.
It's not a scheme that will work for everybody -- you have to be a tightly knit company. I own the company outright. There were no other partners to debate this with.
It also has to be profitable, growing and at least $15 million in annual revenue. To be blunt about it, you have to have an owner who'se willing to wait and take the risk on getting a payout of the business. The value of the business. It's going to take 10 years for this thing to fully come to fruition.
You seem fairly relaxed about it, considering the bet you've made.
Yeah, you know. I've been doing this for 13 years. When we started nobody thought we'd make it a few months. When Bob passed, nobody thought we'd make it through that.
If we continue to perform well, it should be a very positive outcome not only for me, but the people who helped build it.
I'm not worried.
What do you think has been instrumental to the steady growth?
It goes back to the reason we did this -- Bob, he kind of set his DNA into the company. Especially in the engineering department, where the mission is to continue to make great tools for musicians. The guys over there, led by Cyril Lance, who Bob personally identified, they just continue to crank out great stuff. As long as we keep doing that, I think it's going to be good.
Even through the recession of 2008, we hung right in there. Music, as you know, is something that people lean on even harder in tough times.
The main message here is respect for the people who make things happen, and respect for our customers, who continue to honor us by buying our gear.