PCG Connect

Welcome to this special bonus episode. I had the honor of chatting with Mary Josephs, who is a current PCG board member, as well as the founder and CEO of Verit Advisors. Mary a nationally recognized expert in ESOPs with more than 30 years of experience. She's worked with literally hundreds of companies helping them transition into employee owned organizations. Join us as we get to know Mary, learn about our ESOP expertise, and how that expertise benefits PCG.

So let's dive in. Well, first of all, I wanna say it's really nice to finally virtually meet you. I I've always been yeah. I've always been in a branch or traveling. So how long have you been on the board now?

I think 4 or 5 years.

Okay.

Bill Massey was still CEO at the time that I joined the board.

Okay. I heard of this is a personal fun fact about you. I heard that you are a semi professional competitive ballroom dancer.

Is that true? The semi professional would not be true, amateur ballroom dancer.

Well, compared compared to me, I'm sure you're you're a professional professional.

It's been a really fun hobby for my husband and I after the kids were raised. We thought about we have to find something we like to do together besides raise kids. So we started ballroom dancing. And 5, 6 years later, we are the top amateur couple nationally for Fred Astaire.

Oh, wow. Yeah. That is awesome. So how why ballroom? Had either of you, like, danced when you were younger or

Absolutely not. We're both runners, which the the the skill in running is endurance and forward motion.

Mhmm.

So it has no help at all with respect to dance because dance is has a three hundred and 60 degree motion and doing different things at the same time. So it it's been really fun because we're not natural, so we laugh a lot.

Oh, that's so fun. So is it like a year round thing, or does it have a season? Like a sports? Or

It never ends. There's national competitions all over the country. You could probably do a ballroom dance competition any weekend you wanted, and you have to be selective, about what you're gonna set your goals on for that particular year.

Let's talk about my real question. Let's talk about the costumes. Where do you get the costumes?

They are so crazy expensive. At the ballroom dancing competitions, several of the companies that sell ballroom dancing competitions come and set up shop, and you can try on different dresses. I own 4 long dresses and 3 short dresses. So the short dresses are for rhythm, which is cha cha, rumpa, swing, mambo, and bolero. And the long dresses are for your traditional ballroom, like waltz, tango, foxtrot, and Viennese waltz.

Oh, that's awesome. So is there some fringe involved on the short

ones? Absolutely.

Yes. You're doing it right.

My instructor likes the fringe because he says it looks like I have more movement than I do because the fringe moves.

Yeah. So

he's like, it looks like you're moving in ways you still don't know how to.

So I wanna I wanna ask you,

just to

get to know you a little bit. So your background, it looks you're a big, were you born and raised in Chicago?

Mhmm.

Yeah. Tell me just a little bit about your background. I think you went to Marquette?

Yes. So I'm number 6 of 12 children. We grew up in Skokie, Illinois, and all attended, the Catholic school. So my brothers, 5 brothers went to Loyola Academy, and myself and my 6 sisters went to Merrilock High School. And I went to Marquette, I was gonna be a physical therapist.

It was one of the only schools in the country where you could get a physical therapy degree in 4 years. And the summer before school started, I looked at the curriculum, and junior year was 19 hours of science, and the program was 26 women. And the other thing I really wanted to do in college was study abroad my sophomore year, and it occurred to me I couldn't do that in physical therapy. So I called the school and said, hey. I'm just a little bit more sure that I wanna study abroad my sophomore year than I am sure that I wanna be a physical therapist.

And they yelled at me and told and told me I was the most selfish matriculant they had ever admitted to the school, and I didn't even know what the word matriculant meant. So, anyhow, I transferred into liberal arts program and started there, transferred to University of Notre Dame to study in France my sophomore year of college, which was amazing living in the Loire Valley and attending a French school. And I came back to Marquette and transferred into the business school Mhmm. Until my senior year where I wanted to take this class that now every school has these really special teachers that Yes. You know, everyone like, you should take that class while you're while you have that opportunity.

And I wanted to take it, and, the dean of the business school told me if I took it, I wouldn't be able to be a business major. So I transferred to the liberal back to the liberal arts school, and all this ends up with a French and economics major and a business minor. So my parents were so proud of me. I told them I was highly qualified to be unemployed in France.

That's all. So what was the what was the class with the professor that you just had to do?

It was a, poetry class of James Joyce. You know, and it might sound really dry, but everything's about how somebody with passion presents it to you and can unravel something that felt like I would never have done that on my own. And Right. The class was a joy because everyone who was in there really wanted to understand it and this, this teacher just had a way of bringing it to life.

That is so true. The, the class like that for me in school was, actually a visiting professor. He came every 2 years for 1 semester, and he was from Chicago. I can't remember. Maybe it was Loyola where he taught, but he was Shakespeare.

It was a Shakespeare class, and he was so into it. It doesn't matter what the subject is, like you said, if you're passionate about it.

So it would bring it alive for you and and seed in you and appreciation that's really rich.

I love it. So how did you then you say you graduate. Obviously, you did more than being an unemployed person in France. So what was what was your first, job and then how did you get more involved, in the business side and eventually ended? We'll talk about ESOPs.

So I got really lucky. The Continental Bank at the time was running a training program where they were actively seeking liberal arts graduates because their theory was that the business people who supported the commercial lenders didn't understand what the problem statements were. So they thought if we hired liberal arts majors and train them on sort of the business technicalities that they would be better support partners to the bankers. It was an amazing experience. I had 6 months of training in accounting and marketing.

I actually they they taught me computer programming and systems and everything, and the class was such an elite group of graduates, undergrads, because the testing to get into it was really rigorous. So that was the most amazing training experience. I ended up in the international banking division at for the computer programming. For some reason, I thought that because of my French background, it would be fun to be in the international banking division. Yeah.

Miscalculation was that it was computer programming in 19 1984, and so it was a little too dry for me. So this would be my less my lesson in coaching to anyone. If you don't like what you're doing in your job, do really well at it because that's your launch pad for opportunities and references to your next opportunity. So I said to myself, if I can't find something I like to do in business at an organization as large as Continental Bank, then business probably isn't my path. Yeah.

So I was fortunate to transfer into another 6 months training program called the credit training program, and learned underwriting a credit for businesses. Very shortly thereafter, I found my passion, which was privately held businesses. And the stories, the commitment, the cultures, I just love it. And the opportunity to be able to support these men and women who, at some point, took terrific risks to create, something bigger than themselves, I still find extraordinary.

What year was that when you first were exposed to the employee owned business aspect?

So the private business owner aspect was circa 1985, and I started working in one of the lending groups and bumped into an ownership transition conversation. And from that learned about ESOPs and did the first ESOP at the bank in 1986. And to me, it was so fun on so many levels. They're intellectually and analytically very complicated, which lends to sort of my math background and capability, and yet there's so much, psychology and other considerations, what the industry is, who the people are, what the family wants, that putting these puzzles together, what I found very exciting.

Yeah. When because you mentioned the risk aspect, and so I wanna connect the dots for people listening because, you know, part of our history, we talk about the forefathers here, the the group that split off and, from Owens Corning and then eventually started performance contracting, but then they made the decision to make it, you know, employee owned. So can you talk a little bit about the risk of exactly what they did and why it was significant?

So I had the privilege of being part of that conversation when you moved from being a partial ESOP to a 100 percent ESOP. And this is the funnest part of my job, the privilege of standing alongside executives, founders who have a different vision. Almost every time we work with a group of founders, thinking about what they wanna do with their company, a few people could make more money on that particular day by selling the company compared to doing an ESOP. By selling to an ESOP, everyone's gonna do fine and they'll be treated fairly, but you have the opportunity to drive exponentially more wealth over a long tenure of time to people you'll never even meet. And it takes a vision and a value system to choose that path.

Yeah. It's selfless because the people that are deciding this are actually giving up potentially a lot more money to themselves.

Absolutely. That's absolutely true, especially in businesses like yours where you're coming from a partnership to employee owned, sometimes in an industrial company where there's a one founder, and the market's not gonna pay a lot for your business. It might not be as big of a difference as it could be in a in a situation like yours.

How many ESOPs, I guess, have you been involved with, you know, over the years would you say?

Oh, 100. I would guess 4 or 500. It's about it's been what I've had the privilege to do for my whole career. Originally, I was on the commercial lending side and started the commercial lending practice at LaSalle Bank where they let me convert it into a national practice well before LaSalle was national. Today, when you look at BMO, Bank of America, 5th, 3rd, JPMorgan, Wells Fargo, and so on, all these banks have copied the what we built at LaSalle and created dedicated financing teams for companies that have employee ownership, and that makes me really proud.

I started this off saying we were trailblazing this episode because it's the first one. We're using new technology. What a perfect person. You're used to you're used to wearing that hat. So how did you you mentioned you were around, when we made the decision to convert to a 100%.

Was that in a consultant basis, or what was your role at that time?

Time I was a commercial lender. So what I realized was I was doing the consulting for for the banking clients, and I really liked that part of it. So over the next it took a while years. What we did at LaSalle was also revolutionary. We'd have the commercial lenders talking to a business owner about maybe taking some money out.

We'd have the m and a team talking to a business owner about selling their business, and that to a certain extent still exists today. A private business owner, it's hard for them to find a holistic adviser about what they wanna do. The ESOP people tell them to do an ESOP. The m and a people tell them to sell. The commercial bank bankers tell them to just take money off the table.

So at LaSalle, we launched this different approach, and I came into the m and a group. And we would approach business owners in a very objective unbiased way to help them solve their problem versus sell my product. And it was unbelievably successful. So when Bank of America bought us, I was brought into the bank the investment bank on Wall Street, a place I never thought I was gonna be when I decided to go to France versus do physical therapy.

Yeah. No kidding. So who approached you to be on the board, and how did how did all of that come about?

So I'd stayed in touch with the team at Performance Contracting and which we do with all of our clients. We view it even as a long term relationship. And Greg Weemers gave me a call one day and asked if I would meet with it was Bill Massey, Alan, and Greg, flew into Chicago, and we had dinner. And I just loved the transparency. My view on on boards, it's very technical term, is that that it has to be a a fit fit.

And by that, I mean, you have to think about what capabilities, qualities, experiences to add to your board that would be complementary to what already exists. So as your as a company is looking to where they're going, what capability would be accretive to the conversation that's already happening? And then secondly, there has to be a a vision, mission, and values fit.

Mhmm.

Right now, I'm on a couple women on boards committees, and so many people are just trying to get on boards to, sorta have a retirement gig. And I don't I don't think it really works that way. I think, you know, if by some grace, the experience and capabilities and style that you have is complimentary to what the company's needs are at that point in time, that is a great connection. And it could it could change over time as the companies where they look at their gaps and do your strategic planning and whatnot. You might see a different gap, and it's all good.

If you can be able to be there for a period in time that's helpful to continuing, to grow the company, that's awesome.

Yeah. I I love that. It kinda goes back to what we were talking about professors that are passionate about what they're teaching. It's the same thing. You're more effective as a board member when you align.

Correct.

What is it about this company that you most align with?

So when we worked on the transaction going from partial to a 100%, I was involved in it so I had an appreciation for it, kind of the size and scope of the company then. To me, I think 10 years later, and see where the company had gone and grown to and evolved was extraordinary. No? And yet it still retains that vision, mission, and values. A very hard thing for successful businesses to do is to retain culture as you grow, and that's a lot of prioritizing it.

And not just saying you care about these values, but really living the values, highlighting the values, and being the values at the top of the house.

So what do you you know, we just we had our leadership our leadership conference, not that long ago. And one of the things we're talking about, you know, is how do how do you retain that as you get bigger? Right? How what keeps you you? Is there anything specific?

You've been around for a while. You've met a lot of different people. Are there any behaviors or personality traits that you would say are indicative of this company?

I love the humility of the of the leaders, the humbleness of all the people that it takes to execute your operating plan, and the importance of each back to the puzzle, each piece, large or small, that it takes for the outcomes to exceed wildly exceed expectations, including your, union workers. Like, every person who touches performance matters, and and that's a that's a lived value. It might start with that focus on safety. I mean, that that priority on and careism, not just check the box on on safety, it means you matter every time you walk into the office or walk onto the project.

Absolutely. It it'll be interesting, as we look back to see the, perfect storm that we had to do all at the same time, like the timing of making safety first and and, you know, going a 100% ESOP and all of these things. It'll just be something interesting to study in the future.

Yes.

So specific to this board, I know you sit on other boards, what committee I think everybody on the board oversees different committees. So can you talk a little bit about which committee you, lead and your role in that?

That would be my pleasure. So I'm on the audit committee. And another thing I really appreciate and value about PCG is the openness to continuous improvement and conversations. And, so just developing and evolving in a way that's very supportive of the organization. So that's been fun, and we've put, we've reviewed the audit committee charter.

We've put key goals and cadences on our meetings and the why of why we're doing what we're doing and the how we document it. And why would you do that? Well, it is a really good corporate governance action and, management routine to have these processes and procedures and documentation in place to protect the overall organization. Audit committee's general function, this is too general, but it's really overseeing risks of the organization. Like, having a red antenna out all the time, like, what are risks that we are or aren't thinking about?

It's obviously being involved in choosing the auditors and overseeing that there's not conflicts of interest or anything like that going on in the annual audit procedure, and then looking at other things that could be risks to the organization.

Okay. So how often does the board meet? And then how often does that committee meet?

So the board meets 4 times a year, and the audit committee will meet twice a year, 2.25, not to get too mathematical. So, our, the 0.25 is in December where we hear from Forvis and get the feedback of the annual audit. And that's just a review of the financial statements. In January, we will be having a more wholesome meeting and management routines around an annual check-in on that. We get a report out from internal audit, and check-in on internal audit and their resources and how they're doing.

And then in July, we have a look at what the the budget is and some management routines around other initiatives of the audit committee.

Thank you for explaining that. I think people are so interested on what makes us tick. So that was perfect explanation on that.

You know, in commercial banking, they had this line, and and this really applies to an audit committee or to an organizational value, is you spend so much time getting new clients or writing new loans or driving business. And another thing that contributes to your earnings, which contributes to your value, is making sure you don't lose it. So make the making sure you don't lose it is obviously safety, is everything the audit committee does, is managing expenses, not spending money you don't need to spend. And so, like, think of the audit committee being part of that management routines of of not losing money in ways that you could have prevented.

Well, thank you very much. Personal a personal thank you very much for me, and I'm sure other people listening. You mentioned earlier about, you know, any good board, you're looking for skills and gaps and what's missing. So, obviously, when you came on and you have, a lot of experience with ESCA as well. So can you tell us a little bit about, what you do with, ESCA there?

So that's the employee owned s corporations of America.

First of all, thank you. I I believe myself and the other senior professionals that are on the advisory board of ESCA are in awe and gratitude of the tremendous company support for ESCA. It's so important. So ESCA is our premier lobbying organization. They're in DC.

They're trying to make connections between the congressman on particularly the Ways and Means Committee and the senators on the Senate Finance Committee, people who make decisions on tax policy. It's really important for for performance and the other ESSA members to keep the tax benefit of being a 100% ESOP owned s corporation, which means you don't pay taxes. We have a terrific year coming up next year in 2025 with the expiration of the Trump tax cuts. So it's as important as ever to make sure that our congresspeople and our senators know how incredibly important and valuable this tax benefit is and the value it's driving for retirement savings, for companies growing, for jobs, and for overall corporate sustainability. So I have been so proud to be on the ESCA advisory board since it was founded in 2,001 when the s corp ESOP came into place.

Dennis Long, who sits on my board, was the founding member of ESSA and chose Venn Strategies, which is, the the company under which ESSA sits.

And so I think, you know, we've had questions before. It's a bipartisan. It's for both sides. Correct?

Amen. This is one of the ESOPs are one of the most functional things happening, maybe the only functional thing happening in Washington, and that is by design and efforts like PCG and other escalators that were very intentional that our issue is employee ownership, and it's nonpartisan. Both democrats and republicans love it for different reasons. I think everybody loves the jobs that stay in their community.

So what's the biggest threat to it to, employee ownership or the I guess, the s corps, really?

So my career in ESOPs, which spans decades, historically, when tax benefits were retracted so there used to be a tax benefit where banks got a special discount on interest income if they lent to a NESAP. When that was retracted, it actually cooled the

A bank.

Ease up activity by banks, but there's been a grandfathering. So, you know, I'm not a prognosticator, and I'm certainly not a policy expert. So in a worst case scenario, if, there was ever that they they retracted the s corp tax benefit, I feel very confident with all the work and lobbying that's, taking place that the p the companies that are 100% ESOP owned s corporations or RS corporations would be able to retain that benefit. So you could take a tiny breath, but but the big the big issue is treasury scores the cost of providing this tax benefit, and our view is that they scored the cost to tax income to the government way higher than it should be and than it is in reality. And what they don't do a good job of is say, okay.

So we're paying a $1,000,000,000,000 by not getting we're foregoing receiving a $1,000,000,000,000 in taxes, and that might even be the number. It's really big. The math that we all feel is very true is let's use performance contracting. You were a way smaller business when you did your ESOP. So because of the growth, when all these employees retire with very generous retirement accounts and and retirement security, as you pull the proceeds out of your retirement account, you will pay ordinary income at that point in time.

Generally, ordinary income's higher than capital gains that would have been paid. But when you do that math over time, we think of it as a tax deferral and not a a tax give up. But that's a lot of math to explain to a staffer for you know, a 23 year old staffer working for some congressman, and then they're not there next year and we have to explain it again. So Yeah.

It's not that we don't pay tax. It's just it's deferred Correct. To when it's collected. So having been around a lot of the, ESOP community and working with partials, fulls, what how do we measure up to other companies?

You are extraordinary on so many metrics. I've thought about that before, and I think a lot of it goes back my observation or feeling is I think a lot of it goes back to your founders. And having spun off from Owens Corning, your founders were experienced savvy business people. So more often, an ESOP company is founded by an entrepreneur or a single person, and they don't have all those processes and procedures in place. When you're take internal audit as an example.

Your internal audit department is exceptional on every level to any other ESOP company I know. I've sat on boards where they don't have internal audit, and they outsource it. And that there's no way that can be as effective as having the intentionality and commitment to what you have. So some of these processes, procedures, and management routines that was sort of inculcated into the DNA of your founders has provided an infrastructure and foundation to enable you to to grow and and retain excellence.

Well, Steve Martin and team are grinning ear to ear right now for the shout out, and and I think that's really important. I don't think anyone necessarily looks forward to their internal audit coming to town, but in the long run, I think having it internal is worth looking for what are the what are the trends that we're seeing, and then how do we correct it.

Correct.

So selfishly, that's that's what they're doing. They're they're helping all of us stay in between the lines.

How do we not lose money? I love it.

What other boards are you on currently, if you wanted to talk about that a little bit?

Sure. Manson Construction, it was a 4th generation family business. And, again, it's that same aligned value of how do we stay private and protect the values that the family had for 4 years. Super cool company. They do, beach reclamations, docking, dredging, keep our waterways safe, and their primary client is the Army Corps of Engineers.

Incredible workforce. If you work for Manson, you, like, go out on a boat for 2 weeks, then you come home for 2 weeks. So it's a tremendous commitment, and the employee ownership alignment there is extraordinary. And, again, safety is really important when you're working in the waterways. So it's a really it's another large successful, ESOP company.

I was on the board of Hisco Industries, another lot 25 year ESOP company, and we ended up selling, which was something they never ever thought they would do. It was sort of we're gonna be private for life. And I feel it was a very special process to be part of because we knew that the core value was to stay private and to do right by the employees, and to step through so carefully that we never lost the opportunity to stay private. And at the end of the day, the internal board members and the CEO felt that the employee owners would be better, over time and more opportunity given some of the changes that were happening in the industry as the access to technology and the complementary nature of the product. So it was sort of bittersweet.

Yeah. When that happens, but I'm glad I was part of the process and understand how to make it not happen if you don't want it to.

Yeah. Exactly. Full circle on how on how that all works. What's your favorite part of your job?

So my I have the best job in the world. So I started my own firm in 2015, 2009. It's been 15 years right now. Bank of America decided to focus on large corporate during the financial crisis, So they fired everyone in middle market investment banking except me. So I'm sitting here in Chicago, by myself, and I'm literally, if not the only, one of the only women managing directors.

My whole career and passion is around privately held middle market. They were going to do large corporate. Like, I didn't wanna do it. So I told them I was retiring in exactly 15 years ago today, and, they tried to not get me to retire. And, I told the woman who is, like, president or head of the commercial bank, I said, if you ran the investment bank, I would stay.

And that was never gonna happen. So I went to one of my mentors and said, I'm thinking of starting my own business. And Hill Hammock said, Mary, you've been doing it for the last 10 years. How can I help? And it's been a joy because I've been able to forge a culture similar to PCG that doesn't exist readily in the investment banking world, and that includes caring about the client first, not pushing product, long term relationships, teamwork, no sharp elbows, not who gets credit.

It's we we win, lose as a team, and our team all has that same intellectual curiosity, attention to detail, quality, and excellence. And it's been really fun.

I am writing right now. No sharp elbows. I I I love everything you just said. The name of your company too is Verit Advisors. Is that correct?

Yes. It's Veritas, honest, truthful advice, and that's a core value of ours. Compared to the industry, like, the m and a banker is gonna tell you to sell your business. In ESOP, people do the same thing. You should do an ESOP.

No. It is not normal procedures for a business owner to have somebody really sit and listen and understand the pros and cons and help them understand the pros and cons of different alternatives. And, from back to when I first started in banking, I really just love those conversations.

Very much. I guess I'll ask you now. Is there anything, you wanted to talk about that I haven't touched on yet?

Do you know I knew Jason for 5 years, however long I've been on the board. Mhmm. And never knew he was a professional baseball player. I I'm like, how could that happen? I should have known the first time I golfed with him, and I'm a very beginner golfer.

I mean, he was, like, so good. That should have been a a a sign, but, you know, that's a shout out to Jason's character and humility. Like, it's not what defines him. And, what defines him is doing the right thing, doing the best for PCG, and living your your values.

So how did you find out? How was this bomb dropped on you, Mary?

I know. Somebody else was mentioning it, and I'm like, what? It's Yeah. You know, the when I think of from being at Notre Dame or Marquette, which weren't big 10, but who the student athletes were, and they they often come with big egos. And so, like, that's just not how Jason presents himself, and it's a wonderful characteristic about him.

Yeah. It is. Well, I you talked about, fit fit and just this conversation. I appreciate you and, you know, you're a great fit for the company.

Thank you. It's a joy. It's really a joy.

And I should have I should have said, this at the very beginning, but another feather in your cap is you are our very first female board member too.

Yes.

So I can say personally as a a female that's been here since 2000, it was a big day for all of us. So Thank you. Thank you. Yeah.

Thank you. It's a pleasure.

Okay. With that, I think I think we can wrap it up.

Thank you so much. Is this what you wanted? Perfect. Okay. We were

per yeah. So much. You answered so many, I mean, even questions that I had. I think people are really gonna like it.

Okay. I, I imagine that Deneen's the one who kinda whispered about the ballroom dancing.

It wasn't.

Do you

want do you want it was Scott Beckley.

Oh, because we were Scott and I were talking about fitness and getting into a fitness routine and whatnot. So I was telling him that's what Jeff and I were doing. That's right.

Are we talking about the same Scott Beckley here?

He's you know, we gotta have goals.

That's right. It's funny. So I'm on the corporate advisory group with Scott, and, yeah, this morning I pinged him and I said, hey, I'm talking to Mary this morning. Do you have any questions that if you were, you know, on the podcast that you would ask her? And he gave me a few, which I I asked.

And then, towards the end, just kind of as a throwaway comment, he gave me that little nugget. And I was like, you buried the lead there. So very cool. Well, we appreciate it. Thank you so much, Mary.

Thanks. Bye bye.