Parts & parcels.

• Author: Mildenberg, David
• Position: O. Temple Sloan, General Parts Inc

Temple Sloan spread the wealth, turning more than 400 of his employees into millionaires. But liquidity issues forced him to sell out to what's now the biggest U.S. auto-parts retailer.

O. TEMPLE SLOAN JR. has led the boards of the nation's biggest bank and second-biggest home-improvement retailer as well as the state's largest real-estate investment company. Then there's his day job. In 1961 he started what became General Parts International Inc. in Raleigh. He handed off day-to-day control of the company, whose primary business is Carquest Auto Parts stores, to his son, O. Temple Sloan m, in 2004 and oversaw its sale for $2 billion to Roanoke, Va.-based Advance Auto Parts Inc. in January. Now part of a public company, General Parts dropped off this year's North Carolina 100 ranking of private companies (page 46), on which it had been No. 1 from 1997 to 2009. Sloan, 75, devised a way to share wealth with his workers. In comments edited for clarity, he explains how employee ownership aided his company's success--and caused its demise as a family-owned business.

IT WASN'T MY VISION TO SELL. It was my vision that the company operate for another generation and maybe more. But the world changed. We had an employee stockownership plan that owned one-third of the company and our managers and sales team owned a third. We had 9,000 shareholders, and at the end, the family only owned 35%. That's the way we built the company. We thought the way to build a very people-intensive, service-intensive business was for the key people to own a percentage. It worked for us. We went from $600,000 of annual sales to $3 billion. We made a lot of people wealthy, and a lot of people made us wealthy. The system worked. It was a motivator to people. More than 400 millionaires came out of the company. It's an unusual story.

The problem was that in an ESOP when someone leaves you, or a stockholder retires, you have to redeem their stock. It became a huge cash-flow issue. The redemption period used to be 15 years, but the government took it down to five years. That makes the ESOP almost unworkable...