Taylor Guitars, the El Cajon company whose high-end instruments are played by such stars as Taylor Swift, Zac Brown Band and Jason Mraz, is making headlines, but not with a new instrument.
On Monday, Taylor co-founders Bob Taylor and Kurt Listug announced they have transferred complete ownership of the company to its nearly 1,200 employees. The Employee Stock Ownership Plan, or ESOP, marks an unprecedented new chapter for the 47-year-old company, which in 2019 manufactured 170,000 guitars and had worldwide revenues of $122.4 million.
In April 2020, Taylor was ranked as North America’s 15th largest supplier of instruments in an annual industry study by Music Trades. Taylor’s workforce is spread out across factories in El Cajon and Tecate, at its European distribution center in The Netherlands and at its African ebony farm center in Cameroon, although laws in Cameroon will prevent those employees from participating in the ESOP.
Taylor’s move makes it one of a very few prominent music instrument companies to transfer full ownership to its employees.
“I don’t think ESOPs are right for every company,” Listug, the company’s CEO, told the Union-Tribune Monday afternoon. He spoke during a joint phone interview with Taylor and master guitar builder Andy Powers, who became a co-owner of Taylor in 2019.
“But an ESOP is good for people who want to stay involved with their company,” Listug, 68, continued. “And it’s good for people who care about their business and care about helping their employees grow their wealth. As far as we know, this is the first time an ESOP has been shared with workers at a company in Mexico. Our workers there can really use the (financial) help.”
Taylor, the company’s 66-year-old president, agreed, adding: “All our employees love working to better the company, so we don’t have to have a culture change here to make a successful ESOP.”
Listug and Taylor both stressed that maintaining Taylor’s independence was a key factor in their decision. An ESOP is a type of tax-qualified defined contribution plan, through which employees receive a retirement benefit linked to the company’s future equity value. As with an IRA or a 401(k) plan, ESOP shareholders do not pay income taxes on any domestic derived income until they retire or if they make a pre-retirement withdrawal.
“Kurt and I have always tried to plan ahead at this company,” Taylor said.
“From the time we were really young, we knew we would get old and either retire or die. For the past 10 or 12 years, we’ve been wondering: ‘How do we create a succession plan?’ The choices we thought of — including selling to a private equity company or bringing in a strategic partner — didn’t sit well with us.
“About seven years ago, Kurt began to look into ESOPs and the structures of them. He got excited about them, and an ESOP is right up my alley as well, so we really want this to work.”
At Taylor Guitars’ El Cajon facility, Clinton Jackson works on a guitar made out of urban wood.
(Courtesy photo )
The announcement of the ESOP comes at a time when Taylor has unprecedented demand for its meticulously crafted instruments, with 125,000 guitars now on order. On a single day last month, Listug said, the company received orders totaling $17.4 million.
“We had things we wanted to accomplish before we pulled the trigger on the ESOP,” Listug continued.
“We wanted to pay off all of the company’s loans for our Tecate factory, the distribution center we created in Amsterdam 10 years ago, our ebony center in Africa, and other loans. And we accomplished that at the end of 2020, which was our goal, although when COVID-19 hit and our plans got derailed, we thought there would be no way we could do it. But we did.”
Taylor and Listug both spoke with palpable passion about their homegrown company, which they co-founded in Lemon Grove in 1974 and gradually built into one of the world’s most prestigious guitar companies.
They noted that no changes will be made to their company’s management structure, operations policies or practices. And both hailed Powers for playing a pivotal role in Taylor’s evolution since he came on board in 2011.
“I’ve been building guitars for 30 years, but I’ve got another lifetime of work to continue doing it and am thrilled to do it here at Taylor,” Powers said. “We can build these amazing instruments, which are the love of my life, with this great team.”
While Listug has delegated many of his daily duties and plans to do more work remotely online, neither he nor Taylor plans to leave the company they built and love anytime soon. Taylor plans to focus on the company’s groundbreaking environmental programs which focus on global sustainability.
“Guitar companies last forever,” Listug said. “Even if you shut down, someone else will buy your company name and start it up again. So, you better hold on very tightly.”
“I have a joy in being here,” added Taylor, who said the company’s employees were similarly joyful after today’s ESOP announcement. “They were like: ‘This is wonderful! We don’t understand what it means yet, but it’s wonderful’.”
“It’s a once in a lifetime opportunity,” Listug agreed.
“For a person working for a company like Taylor, you can imagine that a lot of people don’t even know what an ESOP is. It has a chance of making an essential impact on their financial futures and providing support for their families for future generations.”
Taylor Guitars at a glance
Launched: Oct. 15, 1974, in Lemon Grove, with a $10,000 loan from friends and family
Co-founders: Bob Taylor and Kurt Listug
First out-of-town sales: 1976 at various guitar stores in Los Angeles
First year to turn a small profit: 1983; by 2014, the company’s annual revenues had grown to nearly $70 million
First breakthrough, qualified: In 1985, Prince played a purple 12-string Taylor guitar in his “Raspberry Beret” music video, but would not allow the company’s name to appear on the guitar
Breakthrough, unqualified: In the 1980s, Bonnie Raitt, Leo Kottke and Jeff Cook of the band Alabama began playing Taylors. Subsequent Taylor players include Taylor Swift, Ben Harper, Justin Bieber, Lilith Fair founder Sarah McLachlan, Zac Brown Band, Jewel, Shawn Mendes, Black Sabbath’s Tony Iommi and San Diego Grammy Award winner Jason Mraz. In 2010, Taylor debuted a limited edition Jason Mraz Signature Line of nylon-string acoustic guitars.
Price range of Taylor Guitars: $398 to more than $20,000, per instrument
Staff in 1986: 12
Staff today: More than 1,200
Company’s net sales in 2019: $122.4 million
Factories: In El Cajon and Tecate
Number of Taylor Guitars made in 1984: About 520
Number of Taylor Guitars made in 2019: Approximately 170,000 (up from 130,000 in 2014)
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