The Stewardship Decision: How Mark Lee Led Baker Roofing to Employee Ownership

[00:00:01] Mark Lee: Selling to the employees made the most sense to me because
the employees know this business the best. They’ve invested their life’s work to it.
[00:00:10] Todd Kavanaugh: Hey there, and welcome to Under the Roof, the official
podcast of Baker Roofing Company. I’m Todd Kavanaugh.
[00:00:16] Matthew Elban: And I’m Matt Elban. We’re here to connect the dots
between field and office, leadership and crew, values and action.
[00:00:24] Todd Kavanaugh: In each episode, we dive into the stories, lessons, and
updates that matter to our team.
[00:00:31] Matthew Elban: From safety and career growth to company milestones and
good old-fashioned storytelling, it’s all about living out what makes Baker, Baker. Let’s
get into it.
[00:00:42] Todd Kavanaugh: Hey there, and welcome back to Under the Roof. I’m
Todd Kavanaugh, and I’m here with Matt Elban. Today, we’re sitting down with someone
you all know well: Mark Lee, CEO of Baker Roofing.
[00:00:53] Matthew Elban: Mark’s story is one that really defines what this company is
all about. From starting out on the roof crews over twenty-five years ago to leading the
company today, he has been at the center of some of the biggest decisions in Baker
Roofing’s history.
[00:01:08] Todd Kavanaugh: One of those defining decisions recently has been the
move to employee ownership. We’ll get into the origin story of the ESOP, Mark’s
philosophy on shared success, and what it means to steward a company that now
belongs to more than a thousand people.
[00:01:28] Matthew Elban: Welcome, Mark. We appreciate you being with us today.
[00:01:31] Mark Lee: Glad to be with you, guys.
[00:01:32] Matthew Elban: I always like to ask the first question: What is the last book
you read, and what did you take away from it?

[00:01:40] Mark Lee: I’m just getting started with a book called The Mission, which
was suggested in a magazine I read. It regarding the CIA; I’ve always enjoyed the
history of the CIA and how politics works. One I just finished, as an added bonus for
you, is Unscripted. It is the story of the Redstone family, the former owners of
Paramount and CBS. It’s a remarkable, though occasionally uncomfortable, story about
the interactions between family and stockholders. It’s a very interesting read, fairly
disturbing at times, and it’s part of the reason why I feel like corporate America has
some work to do.
[00:02:19] Matthew Elban: Fair enough. I bet there are stories in both of those that
keep you on the edge of your seat and pique your interest in the general philosophy of
how people make decisions and the reach of their impact. Thanks for sharing those,
The Mission and Unscripted. I’ll be adding them to my Amazon wish list for Christmas.
[00:02:39] Todd Kavanaugh: It’s growing with every one of these podcasts.
[00:02:42] Matthew Elban: That’s right. It is growing every month. So, Mark, you were
really the driving force behind exploring the ESOP option for Baker. Can you tell us
about the “light bulb moment” when you first thought this could work for us?
[00:02:57] Mark Lee: It really goes back to my peer group. I have a number of people
in my group who have looked at options for their businesses, and the origin of this
stems from the point of succession. If you look back at how Prentiss handled things
with John, Dylan, and me, Prentiss and Frank, I should say, it started well before we
became owners. It was a ten to fifteen-year process to develop us into being ready to
take on that responsibility.
Looking at ways to transfer the business to the next generation has been on my mind
because Prentiss started on this when he was about the same age I am now. That’s the
origin of exploring our options. I have friends who went through private equity options,
and one in particular who went through an ESOP transition. Having observed the
“before and after” of both the private equity world and an ESOP, I felt that the ESOP
was a better option for our company and our personality.
[00:03:57] Matthew Elban: Yeah, it seems to fit better with the culture of Baker
Roofing Company. I’m sure people have heard stories about private equity ownership
transitions and how those can sometimes be a detriment to a company. I’m excited for
what this ESOP leads us into and appreciative of the opportunity to help steward it.
[00:04:19] Todd Kavanaugh: Mark, I’ve been here a long time, but I think you’ve been
here a little bit longer. Just this week, we emailed out a nice picture of you with a

couple of the guys from about twenty-one years ago. I’ve got my stories, I think
everybody has heard my “junior safety buddy” story by now, but you’ve worked your
way up from the crews to being CEO. What was one of those unexpected experiences
or stories that happened along the way?
[00:04:58] Mark Lee: Todd, when you bring that up, something pops into my head
from my days as a project manager. I was responsible for a reroofing project on a state
building that I passed for probably twenty years on my way home from downtown
Raleigh. It was summertime and a perfectly clear day, not a cloud in the sky and about
75 degrees. It was a perfect day for roofing. Then I got a phone call that there was
water all over the building, from the top floor to the bottom. I thought, “How is that
possible?”
I got to the job site and it turned out we had not done a very good temporary tie-in
because we expected the forecast to be good all week. One of those giant chillers on
top of the roof had backed up, and it was pouring water onto that roof like crazy. It was
a difficult lesson learned about the importance of doing a great tie-in regardless of the
forecast. It changed my habits, and I hope everybody hearing this will learn from that:
paying attention to details every day was the message I got. I don’t think I’ve ever had
that problem again.
[00:06:10] Todd Kavanaugh: I remember when I started decades ago in commercial
service, learning that water doesn’t only come from the clouds; other things leak. Mark,
we were having a conversation in your office the other day and you mentioned a friend
who had been through the ESOP process who inspired you to consider this for Baker.
What did you see there that made you think Baker Roofing employees deserve the
same type of opportunity?
[00:06:41] Mark Lee: It’s a good question, Todd. I actually serve on the board of that
company and have been a part of the ESOP there for the last five years. It’s been good
to see that the management team has stayed intact and the strategy has continued.
They continue to grow and get better with very little disruption to their day-to-day.
Their stock value is now in excess of what it was before the transaction.
It’s inspiring to see what’s happening over there, and I hope we can follow in their
footsteps. I’m excited about the ability for people who work here to see the fruits of
their labor in terms of retirement. That’s just important to me, instead of a third party
getting 90% of those funds, it goes to everyone. I think that’s a great thing for our
people to have access to.

[00:07:38] Matthew Elban: I think I can speak for everybody in the company in
expressing appreciation for that decision. Mark, when you first brought this idea to
John Matthews and Dylan Baker, what was that conversation like? Were they on board
immediately?
[00:07:59] Mark Lee: First of all, John and Dylan have been fantastic partners over the
years. We don’t always agree, but we are always respectful and I appreciate their
perspectives. Their insights are rich and thoughtful. The same goes for Prentiss, Frank,
and Woody; I’ve always appreciated their input and their agreement that the ESOP was
a good move for Baker.
The initial conversation was, “We’re interested; we’ll look at it.” I think they were curious
to know more. As they did, it fell into a common theme for us: we want to continue the
culture and the legacy that we were trusted to uphold. We want to remain involved
with the business. The ESOP allowed all three of us to do that, and we’re excited about
the decision.
[00:08:53] Matthew Elban: That’s a great answer.
[00:08:55] Todd Kavanaugh: We’ve had the opportunity to speak to Dylan Baker and
John Matthews about this, and now you. We’ve seen a consistent alignment on the
“why” between the partners. Mark, something that stuck out in our previous
conversation was you mentioning your disappointment in certain aspects of corporate
America today. What bothered you about the Paramount story, for instance, and what
did you want to do differently at Baker?
[00:09:37] Mark Lee: A lot of these companies do a great job, and if I sat in their chair,
I might make the same decisions. I don’t want to judge because it’s not my
responsibility. But in general, I think the responsibility of leadership, CEO, president, or
officers, is to serve. That means serving customers, employees, and the community.
I see a lot of greed portrayed in the news, sacrificing doing the right thing for money,
prestige, or power. The reality is I wouldn’t be sitting here today without the work of
those thousand people mentioned earlier and many more who have retired. It’s not
about me; it’s about us. Being a good steward of that responsibility is something I’ve
become very passionate about.
Prentiss asked us to make a promise to his grandfather to keep the company going, and
I promised him we would do the same. Part of that passion involves the people who
commit their careers and lives to Baker Roofing Company. I want to give them
something to be excited about, something they can be proud to tell their families they

are a part of. Our platform as a service business is a great opportunity and a blessing
for all of us to work in this industry and to serve as we are asked to do.
[00:11:26] Matthew Elban: The idea of being a servant leader really resonates with me.
I haven’t necessarily seen a ton of that in corporate America, but it’s something I’ve
always appreciated about working here at Baker.
[00:11:49] Mark Lee: I’ll add one other thing regarding our fundamentals. We had an
instance not too long ago involving a new hire with some authority whose behavior did
not fit our culture. I was so proud that we had people willing to speak up and say, “I’m
not sure this fits what you intended.” I don’t know if that would have happened ten
years ago.
Earlier in my career, there were situations where people did not speak up, and that
bothered me. I took it personally, it meant I hadn’t created an environment where it was
easy for people to tell me the truth. I need to get better at that. I’m happy to see that
our communication of expectations is reaching a tipping point where being challenged
or corrected is the norm. That’s not just my responsibility; we need your help to see
things that are broken so we can fix them.
[00:12:59] Matthew Elban: The ESOP structure you guys have chosen is pretty unique.
Many companies don’t voluntarily share ownership. What drove you personally to want
Baker to take this specific path?
[00:13:22] Mark Lee: As most of you know, I have two sons in the business. In a family
business, you have to think through whether you want your kids to be in control one
day. Part of the decision was acknowledging that we are at a size and maturity level
where skills, work ethic, and capabilities should trump bloodlines.
Going to an ESOP was what we felt was right for the company. As we move into the
next hundred years, our objective is that the best people, those who work hard and
earn it, will be responsible for the company. That is open to everybody. If you aspire to
the next level of the business, we should create paths for that to happen.
[00:14:15] Matthew Elban: It sums up to “opportunity.” You’re giving folks an
opportunity to succeed, grow, and be in ownership. It’s exciting.
[00:14:25] Mark Lee: I’d also add that the market is currently good for this. There is a
lot of ownership transition happening across the country. I think our story will play well
with customers and future recruits. It signals to existing employees that it’s worth
investing in this vision.

[00:14:52] Todd Kavanaugh: This transition is a great opportunity for employees, but I
also think it will be good for our customers. We’ll be able to remain agile and meet their
needs.
A fun thing I’ve noticed on Teams or Zoom calls is how often Baker employees
introduce themselves and mention being here for twelve, eighteen, or twenty-five
years. People outside the organization are always amazed at the tenure of the average
Baker employee. As you said, it’s not just about executive leadership; it’s about
everybody on the team sharing in success. What does it personally mean to you that
these long-term employees will now get to share in the organization’s success in this
new way?
[00:16:34] Mark Lee: It’s gratifying. I think of a conversation I had with Ernie Garbett.
We have folks who dedicate their careers to us, working on ladders in the heat and
cold. As you get older, that physical work becomes a challenge. Having the ESOP,
alongside our 401(k) matches, allows people the freedom to change roles or retire with
financial security.
I’m appreciative of the people who trust us with their careers and families. We are
aware that our talented people have choices and are being recruited elsewhere. We
feel compelled to continue treating people well, paying them well, and improving our
benefits to remain competitive.
[00:17:46] Matthew Elban: It’s interesting you mentioned recruiting. I’ve spoken with
recruits recently who mentioned they heard we are now an ESOP and specifically want
to be a part of that. The news is getting out, which is exciting. Mark, you mentioned
feeling a different kind of responsibility now as a CEO compared to when you were an
owner. Can you walk us through that shift?
[00:18:35] Mark Lee: When we were just partners, John, Dylan, Prentiss, Frank, and me,
our decisions primarily impacted us from a stock standpoint. It feels much different to
know you are now accountable to 1,100 people.
I don’t want to compromise long-term strategy for short-term financial objectives. One
thing I dislike about publicly traded companies is how the quarterly earnings cycle
often eliminates long-term thinking. I spoke with someone recently whose company
was forced to make cuts because the stock wasn’t doing well, even though it might
hurt next year’s performance. I don’t want us to turn into a “money-only” mindset.
Strategy requires investment, and people development requires patience. However, the
accountability factor is there too, I can’t let things go that I might have ignored in the

past. We are all feeling the pressure to balance what we tolerate versus what we take
care of.
[00:20:20] Todd Kavanaugh: This leads to a word I’ve heard you, John Matthews, and
Dylan Baker use: “stewardship.” We’re all stewards now. Can you speak to how the shift
to ESOP changes the concept of stewardship for all employees?
[00:21:00] Mark Lee: Stewardship means taking your responsibility to a level where
you can’t just do things out of convenience. You have to make hard decisions. You have
to balance patience and empathy with stewardship. In the past, some of my decisions
might have been too narrow; stewardship is about working toward the greater good
rather than the individual good.
[00:21:52] Todd Kavanaugh: I love history, specifically the Roman Empire. Part of their
military success was their strategy of locking shields together in a phalanx. If one
person fell out, the whole thing could fall apart. Stewardship is a similar responsibility,
we have a responsibility to the person to our left and right to do our jobs well. It’s not
just a financial thing; it’s about doing the right thing for each other.
[00:23:04] Mark Lee: For me, stewardship also means acknowledging that the correct
decision is not necessarily in my personal best interest. True stewardship is reached
when you make the right choice for the company, even if it’s uncomfortable or has an
unideal financial impact on you personally. I want to challenge myself and others to
consistently ask, “What is the correct decision for the greater good?”
[00:23:54] Matthew Elban: Stewardship is about taking care of something and leaving
it in better condition than when you found it. Humans often want to make the easy
decision, but ease and convenience can get in the way of being a good steward.
[00:24:25] Todd Kavanaugh: Mark, if you could fast-forward five years, what does
success look like for us as a team?
[00:24:52] Mark Lee: Number one for me is that our culture is maintained and our
identity doesn’t change. I want our reputation in the marketplace to be as good or
better than it is now, and our employees to remain engaged and enthused. If we
achieve that, the financial part will take care of itself.
[00:25:17] Matthew Elban: For any employee who might still be skeptical, wondering if
this sounds “too good to be true,” what would you want them to know about your
intentions?

[00:25:51] Mark Lee: Eventually, every owner sells, whether to a family member or an
outside party. Selling to the employees made the most sense to me because the
employees know this business the best. For them to reap rewards similar to what we
have reaped as owners is the right thing to do. People who commit their careers to us
are extended family.
I prefer our employees to capture that equity value rather than a stranger. There is a
movement in the country for privately held businesses to go this route. In all
transparency, there are also huge tax advantages to being an ESOP that help create
value for employees at a faster rate.
[00:27:07] Matthew Elban: Our consultant mentioned that there are only between six
and seven thousand ESOP companies in the United States. It’s a privilege to be a part
of this.
[00:27:27] Mark Lee: I think it will grow; I spoke to our consultant yesterday about
several more taking place in North Carolina.
[00:27:37] Todd Kavanaugh: Mark, you’ve essentially “bet” Baker’s future on the belief
that people perform differently when they have ownership. Why are you confident in
that belief?
[00:28:06] Mark Lee: In our industry, I’ve seen businesses bring in outsiders to lead,
and it hasn’t been helpful. Experience and longevity are unique advantages in roofing.
Betting on the people who understand this business and what we’re trying to
accomplish makes total sense.
Strategically, our five-year plan to grow through repairs, service, reroofing, and
restoration is well-positioned. Our only limiting factor is having enough people to do it.
I think the ESOP helps attract the people we need.
[00:29:14] Matthew Elban: We need people for all positions, in the field and on the
administrative side. Mark, is there one story from your time at Baker that still makes you
laugh?
[00:29:37] Mark Lee: My favorite story involves Frank Baker and a church. Many years
ago, we bought a gravel machine to remove rock from a roof. We were removing and
replacing ballast at a church. Frank was in a job site meeting while our guys were
putting the rock back on the roof.

The guys had the idea that if they put the gravel-blowing machine in reverse, it would
put the rock back faster. They turned it on, and it started shooting rock out like a
machine gun, taking out the church’s stained-glass windows. Frank couldn’t get them
to stop fast enough. We ended up replacing the windows and Frank had to throw a
barbecue party for the guys at the General Contractor. I can still see Frank walking out
of that trailer; he had a little “passion” that day.
[00:30:41] Matthew Elban: Another example of “at a loss if we must.”
[00:30:46] Todd Kavanaugh: Thank you for carving out time for us, Mark. Before we
go, what are you currently listening to or streaming?
[00:31:19] Mark Lee: Music-wise, I’m a Teddy Swims fan. On Netflix, I’m watching the
series about the Cowboys.
[00:31:29] Todd Kavanaugh: I’ve heard that’s really good, regardless of whether you’re
a Cowboys fan.
[00:31:39] Mark Lee: It’s entertaining and brings back memories of a tough ride.
[00:31:45] Matthew Elban: That’s it for this episode. Thank you, Mark, for sharing your
heart behind the employee ownership story.
[00:31:57] Mark Lee: Thank you, Matt. Thank you, Todd.
[00:31:59] Todd Kavanaugh: To our listeners: keep the conversation going. Talk to your
teams about employee ownership; it’s something we’re building together.
[00:32:09] Matthew Elban: Don’t forget to follow the podcast and share it with your
crew. Remember: we shall do good work at a profit if we can, at a loss if we must, but
always good work.
[00:32:21] Todd Kavanaugh: That wraps up this episode of Under the Roof. Thanks for
being part of the Baker Roofing family.
[00:32:47] Matthew Elban: See you next time.