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Corey Rosen

Corey Rosen

New NCEO Paper on Private Equity and Employee Ownership

In the last several years, there has been a growing trend for private equity firms to include broad-based employee ownership programs in their transactions. This trend has gained national attention, with stories on 60 Minutes, Freakonomics, the New York Times, and many other news outlets. The new paper Private Equity and Employee Ownership (PDF; also see the embedded version below) by NCEO founder Corey Rosen looks at the history of private equity and employee ownership in the 1980s and the current wave of interest among some large private equity firms in sharing ownership with employees.

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Corey Rosen

Supreme Court Declines to Review Denial of Attorney Fees to Defendants Where DOL Decisively Lost Case

In Su v. Bowers, D.C., No. 1:18-cv-00155SOMWRP (Oct. 14, 2024), the Supreme Court declined to hear an appeal of a January 7, 2024, Ninth Circuit ruling (Jan. 7, 2024) that the Department of Labor did not have to pay attorneys’ fees to the defendant attorneys in a valuation case the DOL decisively lost. In that earlier case, Walsh v. Bowers, et al., a court definitively ruled for the defendants against the DOL because the trustee had a sufficient (albeit short) amount of time to vet the ESOP transaction, had unfettered discretion to hire its own independent appraiser, and had negotiated the deal and even saved the ESOP money. Nevertheless, the Ninth Circuit reaffirmed an earlier ruling that “the district court did not abuse its discretion in denying attorneys’ fees. In hindsight, the Department of Labor’s case had many flaws. But the district court did not err in concluding that the government was ‘substantially justified’ in its litigation position when it went to trial. The government’s expert, despite his errors, arguably had a reasonable basis—at least at the time of trial—in questioning whether the company’s profits could surge by millions of dollars in just months.”

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Corey Rosen

NC, IN, GA, WI, MO Designate October as Employee Ownership Month 

Governor Roy Cooper of North Carolina has declared October as employee ownership month. Among other things, Cooper said that “employee ownership drives the creation of wealth and helps to close the wealth gap for North Carolinians, as employee owners are shown to have more than twice the retirement savings as their peers and greater financial assets overall.”

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Corey Rosen

Harris/Walz Campaign Promises to Promote Employee Ownership

In a recent policy statement, the Harris/Walz campaign became the first presidential campaign to explicitly endorse employee ownership: "In addition, Vice President Harris and Governor Walz will reform our tax laws to make it easier for businesses to let workers share in their company’s success, including through broad-based employee stock ownership, profit-sharing plans, and comparable arrangements, with appropriate guardrails to ensure these plans benefit and protect workers."

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Corey Rosen

Six Percent of UK Business Transfers Are Now to Employee Ownership Trusts

In 2014, the United Kingdom passed a law providing a tax exemption for business owners selling to an employee ownership trust (EOT). An EOT is somewhat similar to a U.S. ESOP, but unlike an ESOP, with an EOT the employees do not have individual share accounts and do not have any claim on equity when they leave the company. Instead, the trust is meant to own the company in perpetuity on behalf of the employees, with the employees getting a dividend or profit share each year. New data confirm just how successful this tax incentive has been in encouraging transfers to EOTs in the UK. According to the European Federation of Employed Shareholders, 1,756 UK companies have been transferred to their 124,000 employees via EOTs as of July 2024. About 6% of UK business transfers so far in 2024 have been through EOTs, as the graph below shows.

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Corey Rosen

New Report Identifies 53 Funds Focused on Investing in Employee-Owned Companies

A new report by Curt Lyon and Julie Menter of Transform Finance, Employee Ownership: Overview for Mission-Oriented Investors, identifies 53 funds in the U.S. and Canada that invest partly or entirely in employee-owned companies. Twenty-two of these funds focus only on employee ownership and target raising $1.6 billion to invest. The other funds, which target raising $3.8 billion, invest only some of their assets in employee ownership companies. Five funds focus just on ESOPs, while the others focus on non-ESOP equity sharing.

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