Corey Rosen
DOL Commits to Regulatory Process for ESOP Valuation Guidelines
Update: On August 25, 2023, the DOL announced that the proposed rules will be released by the end of the year.
Employee Ownership Blog
Lindsay Isaac
Communicating ESOP Literacy
On April 12, people from 23 employee-owned companies gathered online to talk about business literacy, stock value, and ESOPs for employees. Beginning with some thought-provoking ideas from volunteer leaders of the Finance Working Group and from NCEO staff, the group split up into breakout rooms to talk, peer-to-peer, about challenges and solutions to improve business literacy at their respective companies.
Corey Rosen
Canadian Budget Creates Structure for Employee Ownership Trusts
The Canadian government’s proposed 2023 budget creates a framework for employee ownership through employee ownership trusts. The budget states:
Corey Rosen
NY Bill Would Create State EO Center, Eliminate Cap Gains Taxes on Sales to EO Companies
New York Assembly bills A1920 and S962 would create a state employee ownership center to be housed at a university to provide outreach, education, and training on employee ownership, including ESOPs, worker cooperatives, and businesses that otherwise have a majority of their voting stock owned by employees. No specific funding is stipulated in the bill. It also provides that companies considering a transition to employee ownership can apply for loan assistance from the New York State business development loans. The loans could be funded through a public authority trust fund that could allocate up to $100 million in initial funding for this purpose. The bill does not contain a specific appropriation for this process, however. New York already authorizes public authority trusts funds for other purposes.
Corey Rosen
British Retailer the John Lewis Partnership Explores Moving Away from 100% Employee Ownership
The John Lewis Partnership, an iconic British retailer, is considering outside investors for the first time, a move that would dilute its 100% ownership through an employee ownership trust. John Lewis operates the John Lewis & Partners department store chain (34 stores) and Waitrose supermarkets (332 stores) and has 80,000 employees. The company had a loss of £78 million last year, and faced even tougher years during the peak of the COVID-19 pandemic. Inflation, a weaker British economy, and supply chain issues have added to ongoing problems.
Corey Rosen
New NCEO Data on the Costs of ESOP Litigation
A new NCEO study found that, over the last 10 years, 68 private company ESOP court cases had results in settlements or judgments that cost the defendants a total of $385.5 million. The average payout per employee in these cases was $14,400 per participant. If these costs were spread out over all private company ESOPs, this would average about $6,200 per year per company. Of course, that is not how these amounts are paid, but it provides context to compare what companies and/or ESOP trustees pay per company in fiduciary insurance.
Corey Rosen
Company Stock in Bank Retirement Accounts Takes a Hit Following Silicon Valley Bank Collapse
Employee retirement plan holdings in company stock in banks have declined in the last two decades, but employees at Silicon Valley Bank (SVB) and several other banks saw significant losses following SVB’s implosion, according to analysis in a March 13 article by Pensions and Investments. SVB had a combined ESOP and 401(k) plan that held about 19% of its assets in 2021 (the latest data available), valued at about $245 million at that time. Several other bank retirement plans were significantly invested in company stock, including Zions Bancorp, which held 23% of its assets in bank stock as of the end of 2021. Its stock fell 36% from March 8 to March 13. Many other banks have between 5% and 10% of their assets in company stock. Recent federal action will probably ameliorate the sort-term losses in stock price for most of these banks, but SVB employees are not likely to recoup their losses.
Corey Rosen
Tennessee Employee Ownership Bill Passes Key Committees
The “Employee Ownership, Empowerment, and Expansion Act” (SB0085 and HB0154) has unanimously passed authorizing committees in both houses of the Tennessee General Assembly. The bill would provide a feasibility assessment and implementation tax credit for ESOPs, worker coops, and employee ownership trusts (EOTs) of up to 50% of the first $100,000 for ESOPs and $25,000 for worker coops and EOTs. It also would make employee-owned companies eligible for the same contracting preferences as minority-owned, woman-owned, service-disabled, veteran-owned, and disabled-owned businesses. It also directs the state to create an outreach program with existing resources to educate minority business owners about the law. Funds for the bill now have been included in the upcoming budget from the governor, and fiscal committees in both houses must approve it.
Corey Rosen
Employee Ownership Efforts Move Forward in NJ, MO
New Jersey Governor Proposes Funding for Conversion to Employee Ownership
New Jersey governor Phil Murphy’s proposed 2024 budget includes $6 million in funding for conversions to ESOPs, worker cooperatives, or employee ownership trusts. The proposal came out of a Wealth Disparity Task Force created in 2021. Modeled after a law in Colorado, the funding program would provide partial support for feasibility and other transaction costs. The proposal will have to receive authorization from the New Jersey legislature. Details on the funding are not yet available but should be when the governor delivers his budget address on March 7.