Employee Ownership Blog

At the recent NCEO/Beyster Institute Annual Conference, Dr. Laura Nash of Harvard Business School talked about her recent book, Just Enough: Tools for Creating Success in Your Work and Life (John Wiley & Sons, 2005).

In Smith v. Delta Airlines, No. 1:04-CV-2592-ODE, (N.D. Ga., 3/31/06), a federal district court ruled that fiduciaries of Delta Airline's ESOP did not have a duty to diversify out of Delta stock even though the company was under great financial pressure.

Employee stock ownership plans (ESOPs) are popping up in lots of unexpected places. For instance, two of the companies attending the NCEO/Beyster Institute annual meeting were schools.

The NCEO/Beyster Institute Conference in St. Paul drew a record 770 attendees. A highlight of the conference was the first annual Employee Ownership Innovations Awards.

Virginia has joined North Carolina and Minnesota in allowing professional corporations to form ESOPs. There are, however a number of requirements. First, the law applies only to accounting, engineering, architecture, land survey, and interior design firms. Medical and law practices are excluded.

A study by Bear Stearns has found that S&P 500 companies granted 20% fewer options in number and 22% less in value in 2005, while NASDAQ 100 companies reduced the number of options by 14% and the value by 16%.

In an unusual lawsuit, former employees of King & Prince Seafood are charging that a change in ESOP distribution rules to pay out former participants three years after departure instead of five violated ERISA's anti-cutback requirements.

House-Senate conferees have made little progress in reaching a compromise on competing versions of retirement plan bills. Rules for pension plan funding and third-party advice for 401(k) plan participants are the widest areas of disagreement.

IRS Commissioner Mark Everson told the National Press Club on March 14 that tax reform is not a high priority for the Administration or Congress, and that the Administration, in particular, shows no interest in moving on the proposals set forth in the President's Advisory Panel on Federal Tax Ref

As of February 1, 2006, there is a new IRS determination letter procedure for qualified plans such as ESOPs and 401(k) plans. The new program requires that plans submit a determination letter to the IRS every five years based on an employer identification number used for federal tax purposes.

Broad-based employee ownership is still in its infancy in most European countries, but there is growing interest in the idea. Two new papers from a recent seminar led by Erik Poutsma of the Nijmegen School of Management in The Netherlands highlight the developments.

The "Employee Ownership 100" list will be published in the July-August 2006 issue of the NCEO's newsletter for members.