The ESOP Association Blog

Covering ESOPs and employee ownership

2010

The following items appeared in 2010.

January 2010

The following articles appeared in January 2010.

Monday, January 04, 2010

Happy New Year

We’ve been out of pocket during the holidays but wanted to wish everyone all the best for a happy 2010.

We have a lot to share in the coming year but wanted to take this opportunity to remind readers about the purpose of the Employee Ownership Blog and our goals. This blog is dedicated to fostering an open discussion about employee ownership while keeping readers informed of new developments in the community and on the legislative front.  We want to hear from everyone out there, not only in the comments but in posts. That means if you have something to say, a topic to discuss, a question even — let us know! Send an email to media@esopassociation.org and tell us what’s on your mind.

Also, don’t forget about the group on LinkedIn and the page on Facebook. Stop by when you have a minute.

Finally, we do want to thank all our readers out there that have made this blog the most popular site on The ESOP Association’s website. Couldn’t have done it without ya!

Best wishes for the New Year and here’s looking forward to a very engaging 2010!

Monday, January 11, 2010

Association Member Service for Identifying Outside Board Members

There is more and more interest in the ESOP community in having board of directors members who are not executives of the private ESOP company, and who also have experience in ESOP management and culture.

These persons are referred to as “outside” board members.

The interest in having “outside” board members arises not only from a growing realization that an ESOP company, particularly one owned 50% or more by the ESOP, is a hybrid corporate entity neither publicly traded with many shareholders nor truly private as the company has many persons who are beneficial owners, but also the very real fact that more and more plaintiffs’ lawyers are targeting ESOP companies for lawsuits that target what are really “board” business judgment decisions.

Because of these concerns and company interest, the Association receives phone calls asking for help in identifying potential “outside” board members.

The Association, for nearly 10 years now, has maintained, for its members, a Board Registry listing the men and women with membership status in the Association willing to serve as outside board members.

If interested in obtaining a copy, or in having your name added to the list, just contact Sharon Spencer, Sharon@esopassociation.org, and let her know. A copy of the Board Registry is available in the Members Only section of The ESOP Association’s website as well.

There is no fee required to use this unique ESOP Association member service.

Wednesday, January 13, 2010

ESOP Association Member Named 2009 Best Contractor to Work for by Plumbing & Mechanical Magazine

Midwest Mechanical Contractors, Inc. (an MMC Corp subsidiary), located in Kansas City, MO, and an ESOP Association member, was recently named the 2009 Best Contractor to Work for by Plumbing & Mechanical Magazine. You can read the full article, which is the January cover story, here.

In the article, Midwest Mechanical talks about the company’s ESOP and why it’s so valuable. The ESOP is just not another benefit but a real means of motivation for the employee owners.

Congratulations to MMC Corp on this honor!

Tuesday, January 19, 2010

EBRI Says Career Jobs Never Existed

A press release issued January 7, 2010 by the Employee Benefits Research Institute (EBRI) — a research institute in Washington, DC, which focuses on retirement, economic security issues, saving, and health — stated that the idea that in yesteryear most American worked for the same employer throughout their working years is a myth. It was all a romantic notion. You can read the full press release here – http://www.ebri.org/pdf/PR.862_07Jan10.Tenure.pdf.

When people and groups in the public policy sector talk about retirement, there tends to be a lot of discussion of ‘the good old days.’ Supposedly in the good old days, nearly everyone participated in a defined benefit (DB) plan, and no one ever changed jobs, making retirement this wonderful time of life to look forward to where there would be no money issues. Well, we’re coming to realize this idealization of the good old days is a myth. Studies have shown, and have been showing for years, that people do not stay at the same job for their entire careers.

We thought this new study by EBRI was important to mention here for this reason — when discussing retirement issues and public policy, it’s very important to look at all sides. No retirement plan is perfect but some companies are doing what they can to provide secure retirement for their employees. We’re always encouraging members of The ESOP Association to reach out to their members of Congress about the value of employee ownership and why it’s important to enhance and improve ESOPs. All the information you can present that shows the value of your ESOP, and what your company is doing, the better. And keep in mind, when a vested employee leaves a job where there was a defined contribution plan she/he is going to have her/his account go with her/him.

Thursday, January 21, 2010

Fortune Magazine’s 2010 List of 100 Best Companies to Work For Features Employee Owned Companies

Fortune Magazine’s recently released list of the 100 Best Companies to Work For named several employee-owned companies among the ranks – a number of which are members of The ESOP Association.

Eight of the companies on the list are employee owned (highlighted names are ESOP Association members):

Robert W. Baird & Co.

W.L. Gore & Associates

PCL Construction Enterprises

Scooter Store

TDIndustries

QuikTrip

Publix Super Markets

Herman Miller

The full list of top companies can be viewed here.

According to Fortune, a company has to be at least seven years old and have more than 1,000 U.S. employees to be eligible. Fortune conducts an extensive survey of employees to name the top 100 companies. Two-third of the score is based on survey responses and the rest on a culture audit which includes information about pay, benefits, demographics, and communications practices, among other criteria. The Great Places to Work Institute created the survey used by Fortune. For more information on how companies are chosen, click here.

“Employee owned companies are out there doing exactly as intended, creating great places to work,” said J. Michael Keeling, president of The ESOP Association. “Our nation’s leaders should be looking to these companies and examining business practices and culture to help make our economy stronger.”

Tuesday, January 26, 2010

AACE Awards – 2010 Deadline Announced

The 2010 deadline for AACE Award entries has been set. March 1, 2010 is the last day to enter this year’s competition.

The brochure and guidelines are now available on The ESOP Association’s website — the AACE Brochure can be downloaded here and a link to the Employee Ownership Month Poster Contest is also available. All AACE Awards information can be found under Resources.

If you have questions, please contact Pat Barnes, AACE Program Manager, at PatBarnesArt@gmail.com or call 304-876-3624.

Thursday, January 28, 2010

Legislative Highlight — S. 1612

S. 1612, the Employee Stock Ownership Plan Promotion and Improvement Act of 2009, was introduced in the Senate on August 6, 2009 by Senator Blanche Lincoln [D-AR].

S. 1612 was co-sponsored by the following Senators:

Senator Maria Cantwell [D-WA]

Senator Saxby Chambliss [R-GA]

Senator Mike Crapo [R-ID]

Senator Johnny Isakson [R-GA]

Senator Patrick J. Leahy [D-VT]

Senator Mary L. Landrieu [D-LA]

Senator Sheldon Whitehouse [D-RI]

S. 1612 Summary:

One, S. 1612 would repeal the punitive 10% penalty tax on S corporations distributions from current earnings, also referred to as dividends, placed on the distributions from current earnings that are passed through to ESOP participants in cash.

Two, S.1612 would clarify that dividends paid by C corporations on ESOP stock are not a preference item in calculating the corporate alternative minimum tax.

Three, S. 1612 improves the 1042 ESOP tax deferred rollover provisions by (a.) permitting sellers to the ESOP of an S corporation to utilize the ESOP tax benefit referred to as the tax deferred rollover, or the so-called 1042 treatment; (b.) permitting proceeds received from a 1042 transaction to be reinvested in mutual funds consisting of operating U.S. corporation securities; and (c.) redefining what is a 25% owner, for purposes of IRC 1042, as a 25% owner or more of voting stock, or 25% owner or more of all stock of the corporation, instead of current law definition that owning of 25% of any class of stock is a 25% owner for purposes of IRC 1042.

And, four, S. 1612 would eliminate a bias against majority owned ESOP companies by making clear that a non-ESOP small businesses currently eligible for any Small Business Administration program is still eligible for the SBA program if becoming a majority owned ESOP company with the same characteristics it had before if it becomes a majority owned ESOP company. (A majority owned ESOP company is 50% plus owned by the ESOP on behalf of the employees.)

S. 1612 Status:

The bill was read twice and referred to the Senate Committee on Finance.

Importance of S. 1612 to ESOP Community: Like all pro-ESOP bills, a primary strategic reason S. 1612 is important to the ESOP community is that it is a tool that identifies who in Congress will be for ESOPs, by opposing negative ESOP proposals, as well as, supporting new, good ESOP laws.

Specifically the 10% early withdrawal tax in passing through S dividends to ESOP participants results in an S ESOP having little cash flow enhancements for less than 100% ESOPs. In addition, where the ESOP is just one of multiple shareholders, distributions to pay tax to the non-ESOP shareholders that remain in the ESOP, literally transfers the ESOP status, as cash becomes more than the value of the ESOP stock.

It is important to permit sellers of S stock to take advantage of code section 1042, as there continues to be a waste of resources in conversion of a C to S to enable 1042 treatment.

And it is very wrong to deny a small business owned by an ESOP to be denied SBA status and preferences. This unjustified SBA position often results in a small business with SBA preference losing that preference if ownership is transferred to the ESOP.

February 2010

The following articles appeared in February 2010.

Tuesday, February 02, 2010

Budget Calls for Tax Increases of $1.1 Trillion over Next 10 Years

It’s a big deal in D.C. when the President, no matter whether Democrat or Republican, publishes his budget recommendations for the upcoming fiscal year, which begins on October 1.  [In other words, the budget proposal released on February 1 is for the Federal Fiscal Year 2011, which begins on October 1, 2010.]  Everyone reads it over carefully, particularly proposals to alter tax laws.

The ESOP Association has been consistent over the past two years noting that the ballooning deficit would lead to the same scenario we saw in the 80s. Beginning in 1982, Congress passed and Presidents Reagan, Bush, and then Clinton, signed into law new tax increases.  The overwhelming majority of these tax increases were called “loophole closers.”  And we cannot forget that for many cynics of ESOPs who hold important positions on Congressional staffs, and in the Administration, all ESOP tax incentives are “loopholes” at worse, and wasteful tax expenditures are best.

So while we can be pleased that this recently released budget by President Obama does not propose any change in laws impacting ESOPs, it should be noted that it calls for tax increases equaling $1.1 trillion over 10 years.  Some of the proposals are very controversial, and they will be rejected by the House Ways and Means Committee and the Senate Finance Committee.  For each tax increase proposal rejected, or if you prefer revenue raiser or loophole closer, the Committees will look at other ways to increase taxes by going after tax preferences, loopholes, etc.  In the 80s, that act of looking for something else often led a tax committee member to be persuaded by professional staff to put a negative ESOP tax proposal forward to “pay for” rejecting another tax revenue raising proposal.

And of course, next year there will be an additional set of revenue raisers proposed.

Very good, very pleasing that ESOPs were not targeted in the 2011 budget proposal; but the atmosphere is fraught with an increase taxes wind, and every advocate of ESOPs has to be on her and his toes in making the case, on the local level, that employee ownership through ESOPs is good for the local community, the employees, the company, and overall the nation.

We won more than we lost in the 80s, and the same can be true in the second decade of the 21st Century.

Thursday, February 04, 2010

2010 Shared Capitalism through Employee Ownership Award

The application period for the 2010 Shared Capitalism through Employee Ownership Award is now open. For more information about the award and the application process, please click hereThe application deadline is Friday, April 16th.

The Center for Business Education at the Aspen Institute (Aspen CBE), in partnership with the Foundation for Enterprise Development and the Employee Ownership Foundation, is pleased to announce the second annual award for promising dissertation research at this pivotal point in history when the corporation is being redefined: the Shared Capitalism through Employee Ownership Award.

The purpose of this award is to identify innovative research in business or business-related disciplines that is concerned with the impact or effectiveness of shared capitalism and/or broad-based ownership strategies in combination with participative and empowering workplace practices. Most importantly, this research should have the potential to significantly advance understanding on what employee ownership means for employees, firms, management-labor relations, unions, shareholders, productivity, entrepreneurship and innovation, economic development, and/or the health of communities  The recipient(s) will receive recognition at an awards ceremony hosted by the Aspen Institute to be held in New York City in the fall of 2010, introductions to professionals and/or professors in the winning students’ fields of interest, and a stipend in the amount of $1500.  No budgetary restrictions will be placed on the use of these funds. Awardees are asked to provide a one paragraph update on their dissertation research to the sponsoring organizations at the mid-year and one year point following receipt of the Award. The sponsoring organizations will, at the discretion of the Awardees, arrange mentorship opportunities with scholars working in a similar field of research.

The application form and eligibility requirements can be found on the Aspen CBE website. All questions should be directed, via email, to Justin Goldbach at justin.goldbach@aspeninst.org.  Please refer to the “Shared Capitalism Award” in the subject line of your email.

Thursday, February 11, 2010

Good Developments in Worrisome Times

 The following post ran in the January 2010 issue of the ESOP Report as the Washington Report. We are re-printing the article on the blog.

Setting aside the horrible developments in Haiti, concerns over Islamist extremists not giving up the goal of killing as many Americans as possible, which triggers young American men and women being in far away places getting killed and maimed, and instead looking at what is the core reason for The ESOP Association’s banding together thousands of people wanting to further employee stock ownership, there were positive developments for ESOP law in Congress the last month of 2009.

Starting with the Senate, just before it left town on December 24th, three Senators, led by Senator Bernard Sanders [I-VT], introduced two non-tax, but pro-ESOP bills, S. 2909 and S. 2914. Given that in August Senator Blanche Lincoln [D-AR] had introduced S. 1612, primarily proposing pro-ESOP tax law changes, these two new bills widens the ability to garner more Senators to say, “I am for ESOPs.”

[Both bills are summarized on the Association’s website, and the website is a doorway to complete legislative information on all legislation of the 111th Congress through the site’s Capital Links button under Government Affairs. In general, S. 2909, titled the “Worker Ownership Readiness and Knowledge Act,” is to provide state programs to encourage employee ownership and participation in business decisionmaking throughout the U.S. S. 2914, titled the “United States Employee Ownership Bank Act,” is to provide for the establishment of a Federal lending program for certain ESOPs and employee-owned co-ops in the U.S. Department of Treasury.]

A bill such as S. 2909 was first introduced in the U.S. Senate in the late 80s by Senator Jeff Bingaman [D-NM], but did not resurface until Senator Sanders’ action.

When Senator Sanders served in the House of Representatives, he introduced a version of S. 2914 in two Congresses, first in 2004. There was a hearing on the bill, and both the Chair of the Association at that time, George Ray, now a Life Service Award member, and President Keeling testified on the legislation, along with ESOP participants from Vermont ESOP companies.

But just as important as the specifics of the bills is that Senator Sanders has been joined by three other Senators in endorsing the bills. They are Senators Leahy [D-VT], Brown [D-OH], and Menendez [D-NJ]. While Senator Leahy has been a champion for ESOPs for sometime, co-sponsoring S. 2909 and S. 2914, it is the first time that Senators Brown and Menendez have said to the world at large, “We are supportive of ESOPs.”

In the same vein, over on the House side in December, seven members came forward to co-sponsor pro-ESOP legislation, which was introduced earlier this year, and about which there was a December 2009 newsletter front page cover story.

Joining as co-sponsors of the pro-S ESOP tax proposed bill, H.R. 3586, were Congressmen Barney Frank [D-MA], Bob Goodlatte [R-VA], Bill Pascrell [D-NJ], and Gary Peters [D-MI]. Congressmen Frank and Goodlatte have in prior Congresses signed up publicly for pro-ESOP legislation, but Congressmen Pascrell and Peters are taking their stand for ESOPs publicly for the first time.

And signing up on the House Concurrent Resolution reiterating that the House still supports ESOPs were Congressmen Peter Roskam [R-IL], Bill Posey [R-FL], and Earl Pomeroy [D-ND]. Congressmen Posey and Pomeroy publicly signed up to co-sponsor ESOPs the first time, although in fairness, Congressman Pomeroy has been very positive in visits with North Dakota ESOP companies for over a decade.

Another big plus on these new “champions” in the 111th Congress for ESOPs is two of them, Congressman Pascrell and Congressman Pomeroy, are members of the House Ways and Means Committee, where 90 to 95% of the ESOP laws are considered for improvement, or curtailment.

As with most things in life, there are observers of the Washington, DC legislative process who are cynics about members of Congress co-sponsoring legislation, as it does not guarantee that any one of the members will be “working” to protect or expand the policy embodied in the proposals when behind closed doors so-called crunch time comes.

While a member of Congress co-sponsoring a bill that a private sector group likes does not guarantee that the member will vote to protect the group’s interest in a difficultly negotiated committee bill to raise taxes for example, it is evidence that he or she is more than likely to be an ally in the crunch. For example, let’s assume that the Senate Finance Committee is to raise taxes by $150 billion, and the Administration has made 25 proposals to raise the taxes, and one is to cutback on an ESOP tax benefit. There will be among the 24 other proposals some tax benefits that are near and dear to the men and women who have co-sponsored Senator Lincoln’s bill. Will they, behind closed doors, fight against the ESOP proposal, or will they stand aside on the ESOP proposal in order to protect something among the other 24 near and dear to their state’s interests? One never knows ahead of time. But someone who has publicly declared for ESOPs by co-sponsoring a bill promoting ESOPs, is more likely to stand for ESOP behind closed doors than someone who has not publicly indicated support for ESOPs. This observation is true in the House as well, and is the key point of TEA’s strategy that the best defense be a good offence in the legislative struggles.

So, why is all of these new and renewed support for pro-ESOP bills from members of Congress important? Well, back to the big picture—Congress and the Administration will soon be raising taxes to close the Federal deficit, as was the case in the 80s. And, as was the case in the 80s, cynics about ESOPs working in key staff positions for Congressional committees, and in key Federal agencies that regulate ESOPs, will propose cutting back, or eliminating ESOP tax incentives. So, crunch time may be around the corner, and the ESOP community will urge its publicly declared champions to stay the course for ESOPs.

Tuesday, February 16, 2010

The Congressional-Company Visit Kit: Practical Steps for Unparalleled Results

What You Need to Know

Part 1

 The ESOP Association will be running every Tuesday for the next seven weeks, tips for putting together a Congressional Company Visit. All of the information that will be featured in these excerpts is available on the Association’s website – http://www.esopassociation.org. The full Kit is available on the homepage under News. Today we are featuring – What You Need to Know, Part 1.

 Foreword

            Please note, if and your co-owners follow the enclosed steps to obtain a visit of a member of Congress, or his or her top staff person, to your company, and you let The ESOP Association know, we will supplement the following document with a short report on the member of Congress who will visit your company.

The report we will supply will tell you what prior record, if any, the member of Congress has on ESOP issues. The report will tell you what committees in Congress the member serves on, and what relevancy, if any, those committees have to ESOP laws. The report will tell you what the public record says is that member’s prime interests as a legislator, and the major, if any, legislative initiatives the member of Congress is involved with. Finally this report will share any interesting data about the member who will visit your company that is relevant to her or his service in Congress, and/or issues.

For example, the report might contain information that the member of Congress was a small business person before going to Congress. This fact would be interesting in that most ESOP companies, and probably yours, are small, privately held businesses. The report might have information that the member recently served in the military. The report might have information that his or her predecessor was a strong supporter of ESOPs. The report might have information that she or he was a lawyer in a law firm that does ESOP legal work.

In other words, The ESOP Association stands ready to give you the most up to date information and ideas for a successful visit by a member of Congress to your company, which is our most important, and most powerful lobbying tool.

[Note: The reference to Member of Congress includes a member of the U.S. Senate, or U.S. House of Representatives.]

             Introduction: This document establishes why having a member of Congress visit an ESOP company, your ESOP company, is the most important government relations activity you can undertake, and sets forth steps for arranging a visit, what might be done during the visit, and what is the follow-up to the visit.

Fact: The ESOP Association’s members have advocated for ESOPs with members of Congress since 1980. There is one fact that has been consistent the entire time: This fact is that the most effective activity in obtaining the support for ESOPs from a member of Congress is having that member of Congress visit an ESOP company. The company visit is more effective than a visit in the member of Congress’s home office and certainly more effective than visiting with a member of Congress in Washington DC. (Note, when using the term “member of Congress,” included is a Senator.)

To make the factual case—since 1982, no member who has visited an ESOP company in his or her Congressional District or State has failed to take the pro-ESOP position. At worse, one member, who visited an ESOP company in 1985, took a neutral ESOP position after having taken a position not in favor of ESOPs in 1984. In fact, most members of Congress who have visited ESOP companies have become ESOP Champions, or even ESOP Super Champions.

The ESOP position of members of Congress who were exposed to ESOP advocates during DC visits by those advocates does not match the track record of those who have visited with an ESOP company in his or her home district or state.

In sum, if you want to have your member of Congress support pro-ESOP positions, the most effective step you could take would be to arrange a visit by that member of Congress to your company.

Tuesday, February 23, 2010

The Congressional-Company Visit Kit: Practical Steps For Unparalleled Results

What you need to know

Part 2

The ESOP Association will be running every Tuesday for the next seven weeks, tips for putting together a Congressional Company Visit. All of the information that will be featured in these excerpts is available on the Association’s website – http://www.esopassociation.org. The full Kit is available on the homepage under News.

 First Steps

            The ESOP advocate will first want to contact the person who is the so-called District Administrator if the Congressperson’s main district office in your area, or the Office Director if the Congressional office near you is a satellite office of his or her primary district office. Given that Congressional personnel frequently change, it is not fatal to not know name of the person. The name is usually on a member of Congress’s web site, or call The ESOP Association. Congressional staff change rather often, thus it is not unusual for a website to be out of date. If you know the staff person’s name, use it. A Senator has one main state office, and several regional offices as a rule. If her or his main state office is near you, you will ask to speak to the state Administrator, and if a satellite office, the Office Director.

In seeking an appointment through the District or State office, the best tactic is to call first to nail down who in that office might handle the member’s schedule when s/he is home. Set forth below is a suggested telephone script.

“Congressional Office Phone Answering: Hello, [Congress][woman][man][Senator] [name] office. May I help you?”

ESOP Advocate: Yes, I am [name] and I work for [name of company]. We are an employee-owned, or ESOP company. We are located over on [street address, community, etc]. (Tip: Make it vivid where you are located in order to create a visual image. Remember, the person you are talking to probably has driven by, or has heard of your company – you are speaking to a fellow local citizen.) As an employee-owned company, we are required to comply with several federal laws and thus we are subject to being judged by Congress as to whether we are complying with the intent of those laws. I would like to speak to someone about having [Congress][woman][man]/[Senator] [name] visit our company in the near future and meet our people.

Congressional Aide: [Name] handles the [Congress][woman][man]/[Senator’s] schedule whiles/he is in the [district] [state]. I will see if s/he is available.

Person Handling Schedule: Yes, this is [name]. May I help you?

ESOP Advocate: Yes, I am [name] and I work for [name of company]. We are employee-owned, our [number] employee owners are more than aware that our employee ownership, through an ESOP, is subject to federal law, particularly Federal tax and retirement laws. We are located over on [address].

We would like to invite [Congress][woman][man]/Senator [name] to our company to see what we are doing and how the employee ownership program, through our employee stock ownership plan, or ESOP is benefiting our people and company. We would be honored for such a visit, and of course, we would at that time take a brief moment to highlight some of the key issues pending before Congress that might affect our employee owners negatively.

Congressional Aide: Well, I do not have the schedule for the [Congress][woman][man]/

Senator’s next visit to our area, and I would have to review you invitation with him. It would be helpful if you would make your invitation in writing.

ESOP Advocates Response to This Response: Yes we intend to formalize our invitation in writing, and were seeking input on where the letter should go and to whose attention.

Congressional Aide’s Response to This Response: Okay, please send the letter to [name of Congressperson/Senator, at this office, marked to [my][name of someone else’s] attention, setting forth the information you just gave on the phone here. Or, if the schedule is handled out of DC, Well the schedule is handled out of DC, and write the [name of Congressperson/Senator at his/her DC office, and make it to the attention of his/her scheduler [name].

ESOP Advocate: I appreciate that information, and we will get out that letter today. Your time and attention to this matter is very much appreciated.”

Note:  Since the anthrax attack on Congress, letters are tested and gassed before being delivered to a Congressional office. This process can take up to one week. But emails and faxes are frequently ignored if arrangements are not made ahead of time to email or fax a staff person directly. So when discussing the formal written invitation, ask if you can email it directly to the person handling the member of Congress schedule. If you are not given a specific person’s email address, rely on a letter. If faxing, only fax to the person who has told you, “I will expect your fax.”

Suggested Letter of Invitation for a Company Visit

Name of Member of Congress/Senator

Local Address/or DC is so instructed

City, State, Zip

Dear Representative/Senator [name]:

On behalf of the [number] employee owners of [name of company], located in [name of city] I spoke with [name of person you spoke to] about your visiting our company when you are home.

We are proud of our employee ownership through an employee stock ownership plan, or ESOP and we also know that Federal laws govern the program. We are also aware that pending before the Congress is both positive ESOP proposals and negative ESOP proposals.

We believe that the best way to judge the value of employee ownership is to see and meet those who are working with the ESOP in a company, and who are participating in the ESOP at a company.

We would be honored to host you at our office as your schedule permits and hope you can make time to meet with us in the near future.

As we know demands on your time are high, and you receive many requests for visits and appointments, we hope that you and your staff would not mind our checking on the status of this invitation in the weeks ahead. All of us would be honored to have you come.

Your consideration of our request is greatly appreciated.

Sincerely,

Name: Tip: having several signatures on this letter is helpful.

cc: [Name of Person Who You Talked To On Telephone]

Note: If you have made arrangements to email or fax, the message is the same as the above letter.

How to Find Congressional Contacts

1. You can call The ESOP Association, and the information will be provided; or

2. Go on The ESOP Association’s website, www.esopassociation.org and click on “Government Affairs.” Once on Government Affairs, click on “Capitol Links.” Once there, you can click onto the website of the U.S. Senate and U.S. House of Representatives. You can get the list of members, once you have yours, click to her or his website for addresses, telephone numbers, or often staff names. (Note, soon this site will have software for direct contact, or letter writing to these offices.)

3. Use the Congressional Handbook provided by The ESOP Association.

Thursday, February 25, 2010

Kudos to Oklahoma

In a year when membership has remained stagnant, the number of ESOP Association members from the state of Oklahoma has grown.

Take a look at the chart at left which highlights the growth of OK company members. We looked in our files and since 1995, membership of OK companies has grown steadily. Why? Well, we don’t really know why. The Membership Department does track how a group or person hears about the Association on application forms, but it doesn’t provide full insight, just a glimpse. OK is part of the Southwest Chapter, which is composed of several states, and does not have a dedicated state Chapter of its own.

It’s stumped us but we are more than happy to take this opportunity to say hello to our members in OK and welcome them as part of the Association.

March 2010

The following articles appeared in March 2010.

Tuesday, March 02, 2010

The Congressional-Company Visit Kit: Practical Steps For Unparalleled Results

What you need to know

Part 3

 

The ESOP Association will be running every Tuesday for the next seven weeks, tips for putting together a Congressional Company Visit. All of the information that will be featured in these excerpts is available on the Association’s website – http://www.esopassociation.org. The full Kit is available on the homepage under News.

This week — Best Time for a Visit

While it might be a truism to say, “anytime,” or “better late than never,” the fact is that having a member of Congress visit your company is best when there is NO ESOP government relations crisis. Waiting to interact with a member of Congress when there is a crisis means that the ESOP issue will be one of many issues that might be before the member for decision. And of these non-ESOP issues she or he may be more familiar with and has probably already taken a position on these issues. Such a situation means the ESOP issue might go way down the list of importance to that member of Congress.

So the best time to arrange a visit with a member of Congress is when there are no crisis ESOP issues to be decided by Congress, or in other words, NOW.

Specific Time: The best time for a Congressional visit would be during Employee Ownership Month at one of the company’s EOM events, during October.

In odd numbered years, October, during the week, is not compatible for most Congressional company visits since Congress tends to be meeting the entire working week that month, except for the long weekend of Columbus Day, or, sometimes during a Jewish Holiday, which of course varies year to year.

In even numbered years, which are election years, October is a good month to try to get a Congressional visit, since Congress more often than not, recesses for the entire month of October before the early November general elections.

But the fact is that many companies do not have special events during EOM, and often, if the events are scheduled, they would not match the member of Congress’s schedule.

Here are some general rules about when most Congresspeople are home and thus available for company visits.

·       January is a month when the Congress often meets very little.

·       February, the week of the President’s Day Holiday.

·         The week around Easter, which can range from late March to late April.

·         The week before and/or after Memorial Day.

·         The week around July 4th.

·         Nearly all of August, as Congress is usually in recess most of August until after Labor Day in September.

·         Mid-November and all of December, keeping in mind that in election years, October is usually open for district visits by members of Congress.

Special Events: Many companies have employee owner events that are not EOM related. For example, many companies have an all employee meeting when the new valuation is available, when statements are passed out, or an anniversary of the founding of the company, and similar events.

·        Be flexible in suggesting a day and time for the visit. For example, “We would be able to welcome [Member of Congress] on either [day] at [time] or [time and date – mention two options]; or we can host [Congress {man} {woman} on [give some other dates.]

·        Be prepared for changes. Schedules of elected officials can be notoriously unpredictable due to changes in the congressional schedule.

Thursday, March 04, 2010

Employee Ownership and Job Growth

There are numerous proposals, ideas, and commentary floating around about how we can improve the jobs outlook in this country. Let’s face, it’s not good right now. With unemployment around 10% (9.7% to be exact), and companies not hiring, where does that leave the discussion of job growth in this country?

Since we can, let’s talk about employee ownership in the context of job growth. Does being employee owned make a difference? Research has shown that companies that are employee owned do outperform their non-ESOP counterparts. There are several studies out there touting the benefits. If you want to read more, click here.

Having The ESOP Association and Employee Ownership Foundation say that being employee owned makes a difference may not mean much, especially to the people that need to hear about employee ownership through an ESOP. So, you may want to read this article that was written by an ESOP Association member and appeared on American Solutions, an organization founded by Former Speaker of the U.S. House of Representatives and rumored presidential candidate in 2012, Newt Gingrich, to address what he believes are America’s most pressing problems. The article — Why Employee Ownership is Necessary for Economic Growth by Andrew J. Kulesza. Go ahead and read it now, we’ll wait.

Andrew Kulesza is the Treasurer of R.E. Kramig & Co., Inc. in Cincinnati, Ohio and a member of The ESOP Association’s Board of Governors. He is currently working with his member of Congress to have her co-sponsor pro-ESOP legislation. He’s vocal in his support of employee ownership through an ESOP and is doing his best to let the public and his members of Congress know what makes his company work. We wanted to take a minute here to highlight his work and encourage other ESOP Association members to talk about employee ownership too. In this discussion, persistence is important and we want to give credit where credit is due.

So, now it’s your turn. Are you out there talking to your members of Congress? Yes, we know we ask a lot, but it’s important. We can’t change the discussion if we aren’t involved in it which means speaking up.

Tuesday, March 09, 2010

The Congressional-Company Visit Kit: Practical Steps For Unparalleled Results

What you need to know

Part 4

 

The ESOP Association will be running every Tuesday for the next seven weeks, tips for putting together a Congressional Company Visit. All of the information that will be featured in these excerpts is available on the Association’s website – http://www.esopassociation.org. The full Kit is available on the homepage under News.

The Member of Congress Is Here—Now What?

The member of Congress more often than not arrives late, in a car driven by one of his or her district office aides. Please remember to take note of the aide and have some one in the company engage that person in conversation during the member of Congress’s visit.   District staff often feel like the odd person out, but in many ways a District staff person is more influential with a member of Congress than anyone on the member of Congress’s Washington staff.

Make sure that people in your reception area know the member of Congress is coming. Have the welcoming delegation ready to come out quickly once notified by front desk personnel.

It is always positive to have on the bulletin board, or stand, a message of welcome for the member of Congress.

Now we come to the meat of the visit.

On the one hand it is dumb to just let the member wander around, or to sit in the conference room and have a disjointed conversation. On the other hand, it is dumb to act like you are afraid of the member of Congress engaging in conversations with employees. And it is a waste of time to permit the member Congress to give a speech, as that speech is more than likely going to take up the entire visit time. (Politicians like to give speeches, as one, they are usually good at it, and two, they do not have to make commitments if there is not time for the constituent to ask a question, or to make a request.)

A good way to think about your time with the member of Congress is that you have a plan of “organized spontaneity,” or “spontaneous organization.”

There is no question that each company should tailor the visit that best suits its culture and style.

Following is a typical approach:

·         A delegation of four or five persons greet the member of Congress in the reception area. The group might include the employee owner chair of the ESOP/employee communications group—goes by various names in different companies as well as the CEO and two or three other senior executives.

·         After the greeting, the delegation might escort the member into a conference room for a brief power point, or video about the company, and perhaps some information on its ESOP. The conference room group should include more than the three or four greeters, perhaps 10 or more persons, including, if there is one, the entire ESOP/employee committee group.

·         After that presentation of the company and ESOP history, a walk around to see the company, stopping by different stations on the floor, or in the offices if not a manufacturing business, for an exchange of greetings is positive. Having one to three employee owners primed to comment on the ESOP at the company is powerful.

·         After the walk around, the core delegation, the first four or five for example, or the CEO, and/or chair of the ESOP/employee committee, should take time, perhaps back in the conference room to make the “sale,” or in other words, to ask for the member of Congress to do “something” for ESOPs.

Now, this outline of a visit is an example, and again each company needs to implement the visit in accord with its own style and culture.

For example, many ESOP companies over the years have had positive results with all the corporate headquarters employees in a room and having just a power point, or video presentation about the company. Others just turn the member of the Congress loose on the company floor, and have him or her meet up with executives later. Others have the member join the early morning “team” session, where the day’s work load and assignments are discussed and divvied out. Others have the member join the annual meeting where the financials are discussed and statements of ESOP accounts handed out. Others have the member join the annual picnic, and its games. Other have the member come to the special event, such as an anniversary celebration and so on.

So flexibility is possible depending on the company, but again, do not leave the encounter to chance.

Thursday, March 11, 2010

Journal of Accountancy Features Article on ESOPs

Scott D. Miller, CPA/ABV, president of Enterprise Services, Inc. in Delafield, WI recently published an article titled, “The ESOP Exit Strategy” in the March 2010 issue of the Journal of Accountancy. Mr. Miller is a professional member of The ESOP Association.

The article explores the advantages of using an ESOP as a succession plan as well as tax incentives and issues that need to be considered when utilizing an ESOP. You can read the full article here.

J. Michael Keeling, president of The ESOP Association, commented: “Although not as prevalent as it was 15 – 20 years ago, I still hear ESOP advocates lament that so many CPAs, lawyers, and other professional advisors steer their clients away from establishing an ESOP. Why? Because these advisors know next to nothing about ESOPs. Peer to peer education is so much more effective than an association trying to educate the uninformed, the cynics, and the naysayers. Thanks Scott for your time and energy in developing the article in the Journal of Accountancy.”

Tuesday, March 16, 2010

The Congressional-Company Visit Kit: Practical Steps For Unparalleled Results

What you need to know

Part 5

 

The ESOP Association will be running every Tuesday for the next seven weeks, tips for putting together a Congressional Company Visit. All of the information that will be featured in these excerpts is available on the Association’s website – http://www.esopassociation.org. The full Kit is available on the homepage under News.

Helpful Tips for a Company Visit

·         The visit is about the people and culture of your company. What makes your company unique? What does your company do/make?

o        Prepare a one page handout on company and ESOP for Member of Congress and staff.

·         Get employee owners involved and most importantly, make sure they know when and why the member of Congress is visiting.

o        Provide some background on the member of Congress to the employee owners. You can find this information on his/her website.

o        Announce the visit by email, information in community rooms and on bulletin boards.

·         Have a few employee owners ready to share their story about why the ESOP is important. Have a few employee owners ready to ask questions as well.

o        Prepare questions in advance to keep conversation flowing, such as:

[If Congressperson is a member of the House Committee on Ways and Means or             Senate Committee on Finance:

·         Do you think that your committee will take up a big tax bill this year?

·         Do you think your committee will make any changes in ESOP tax law this year?

·         Or, a question about a “hot” topic local issue that has relevance to Congress such as: Do you think that there will be money soon to widen interstate X?]

[If Congressperson is NOT a member of either Congressional tax committee:

·         Will Congress take up a big tax bill this year?

·         Do you ever hear any talk about employee stock ownership?

·         The local “hot” issue.]

·         Take pictures!

·         Send out a press release announcing the visit.

·         Most important – Remember to close the sale!

Thursday, March 18, 2010

Indiana State Treasurer Richard Mourdock Honored by The ESOP Association

On January 29, 2010, the Indiana Chapter of The ESOP Association awarded State Treasurer Richard Mourdock with the ESOP Advocacy Award for his work to promote ESOPs in his state. J. Michael Keeling, president of The ESOP Association, Indiana Chapter President, Tracy Woolsey, and Indiana Chapter Immediate Past President, Andy Manchir, presented the award at the Indiana Chapter event.

You can read Treasurer Mourdock’s press release about the award here.

“It’s a real honor to join our Indiana Chapter leaders to present this award to Treasurer Mourdock,” said J. Michael Keeling, president of The ESOP Association. “He continues his efforts to increase the number of ESOPs in Indiana and we are thrilled with his work to promote employee ownership.”

Treasurer Mourdock will be featured in the March 2010 issue of the ESOP Report, the newsletter of the Association.

Wednesday, March 24, 2010

The Congressional-Company Visit Kit: Practical Steps For Unparalleled Results

What you need to know

Part 6

 

The ESOP Association will be running every Tuesday for the next seven weeks, tips for putting together a Congressional Company Visit. All of the information that will be featured in these excerpts is available on the Association’s website – http://www.esopassociation.org. The full Kit is available on the homepage under News.

What Are You Selling, and How Do You Make the Sell?

It does not serve the ESOP cause well if the goal is to convert a member of Congress to the ESOP champion status to let him or her come to your company, and do no more than pat employee owners on their backs.

It is true that it is sometimes unrealistic to expect a member of Congress to “buy” into the ESOP agenda based on his or her first experience. (If your member of Congress is already on the list of ESOP champions, meaning he or she have publicly done something that is evidence of a pro-ESOP position that is part of the public record, then having the visit is super important to reinforce that member’s view that being for ESOPs is a good political posture to have.)

Everyone knows that on January 20, 2009, a new Administration took over the Executive Branch of the U.S. government. Led by President Barack Obama, this Democratic Party group of officials faced a severe, almost depression-like economy, had a commitment to reform the U.S. health care system, and committed to expanding government efforts to fund alternative energy industries.

No matter whether one supports the Obama Administration’s actions in these areas, all agree that those actions have resulted in trillions of dollars of new, or proposed spending, which President Obama says will balloon the Federal deficit, which he promises to address as soon as the economic crisis is over, health care reform is in place, and the nation has begun to develop a large and sustainable non-oil and gas energy supply network.

In the 1980s, Congress faced a similar deficit problem. The response was to enact new taxes nearly every year, under the rhetoric of closing tax loopholes for corporations and individuals.

The same approach will be expected in the years 2010 through 2012, at least.

Unfortunately some in the Administration and some tax experts advising Congress consider ESOP tax law benefits to be corporate and/or individual tax loopholes, to be closed—in other words, repealed.

But in place, as laid out in this Advocacy Kit, is the plan, with the tools, to build support for current, and even better ESOP laws, among the elected members of Congress, in both the House and the Senate.

So, when the member of Congress visits your company between today and when specific ESOP proposals surface, good or bad, what do you want her or him to do?

Ask for support of S. 1612.

[If U.S. Senator]

“Senator _____________, Senator Blanche Lincoln has introduced pro-ESOP legislation S. 1612. We ask that you consider joining Senator Lincoln to show support for broad-based employee ownership.

Here is a summary of S. 1612.

If you and your staff wan more details, don’t hesitate to ask for a briefing from our legal counsel in Washington, DC at The ESOP Association.

[If a member of the U.S. House of Representatives, ask for support of S. 1612 when introduced in House, or to co-sponsor, H.R. 3586, H.R. 692, or H. Con. Res. 204]

“Representative ___________________, we know Congress will not consider legislation of interest to us in the ESOP community in the next moth or so.

For example, we are concerned about proposals that have surfaced in the Ways and Means Committee do restrict ESOP companies, and thus making ownership through ESOPs less likely. Congressman Rangel’s tax reform proposal of 2007 had a provision making it unlikely that an S corporation ESOP could compete for qualified executives. And of course, new proposals affecting ESOPs may surface during the give and take over revenue raisers to lower the deficit, or to lower corporate tax rates.

We also understand that in the Senate Senator Blanche Lincoln has introduced positive ESOP legislation, S. 1612. We believe this legislation and other pro-employee ownership initiatives already introduced in the House such as H.R. 3586, H.R. 692, and H. Con. Res. 204 will help to expand and improve ESOP companies in the U.S.

We would therefore ask that you and your staff be open to our discussing these legislative matters as they unfold. In doing so, we hope you can be supportive of the pro-ESOP position, such as S. 1612, H.R. 3586, H.R. 692 and H. Con. Res. 204.

Thursday, March 25, 2010

Money Magazine Names an ESOP Company as One of Best Companies for Job Growth

Money Magazine has named the Scooter Store one of the Best Companies for Job Growth. The Scooter Store, ranked number one by the magazine, is an ESOP company and a member of The ESOP Association. The company specializes in medical power chairs for seniors.

If you would like to read the full list of Best Companies for Job Growth, please click here.

Earlier in the 2010, the Scooter Store was named among the Top 100 Best Companies to work for by Fortune Magazine. You can read our blog post about it here.

Once again, accolades pile up for ESOP companies.

Congratulations to the Scooter Store.

Tuesday, March 30, 2010

The Congressional-Company Visit Kit: Practical Steps For Unparalleled Results

What you need to know

Part 7 – The Final Installment – The Follow-Up

 

The ESOP Association has been running every Tuesday for the last seven weeks, tips for putting together a Congressional Company Visit. All of the information featured in these excerpts is available on the Association’s website – http://www.esopassociation.org. The full Kit is available on the homepage under News.

The Follow-Up

As powerful as a Congressional visit is to an ESOP company in winning support for ESOPs in Congress, it is not the end all of the be all. To really nail down the case for ESOPs, follow-up is crucial. Since follow-up is so crucial, this fact makes it even more important that the ESOP advocates that hosted the Congressional visit have a reason to follow-up, such as asking politely if the member has declared for ESOPs.

Number one, it goes without saying that a nice letter of appreciation from the company, and as many of its employees as it desires, to the member of Congress for his or her visit, that mentions by name the staff person[s] who facilitated the trip must be written.

In the letter, make a brief reference to the point made during the visit that you anticipate that in 2010 the tax committees of Congress will review various proposals impacting current ESOP law, and you will welcome the opportunity to review the proposals with [her][him] at the appropriate time.

Other Follow-Up Steps: Under the theory that one does not grow Congressional support overnight, but cultivates it month after month, and year after year, the host of a Congressional visit should take every opportunity to renew, or exchange greetings with the member and/or her or his staff.

For example, let’s assume you are attending the Annual Conference in DC. Try to drop by the office of the member of Congress that visited your company before the Congressional reception, or at some other time during the Conference, or the day after if you are staying over. If the member of Congress has not signed on to the pro-ESOP legislation, it is a perfect time to make inquiry about the review process again.

For example, let’s assume your company is having a grand celebration, or opening a new building, or marking a milestone—invite the member of Congress to the event, thinking ahead of time of those periods of the year that the member of Congress might be in her or his state or Congressional district.

For example, let’s assume you read in the newspaper, or received a notice that the member of Congress was going to have a town hall meeting in your community, or near your community, or conduct the new, popular telephone town hall meeting, when thousands can call-in and ask, and listen, to their member of Congress answer. Make a point to attend, or call, and before the formal Q&A period, or after the close, make a point to go up to the member of Congress and shake hands, reminding her or him of his visit. Don’t forget, if the member of Congress local staff person is with him, the same person who came to your company, shake that person’s hand as well, and exchange pleasantries, expressing appreciation once again for the visit. (Avoid town hall meetings until the health care debate ends.)

(Nothing is more powerful than that staff person to say in the car as they drive away, “You know, those ESOP people sure are nice.)

Fall Back

If after several tries, it is not possible to schedule a visit for your member of Congress to visit your company, why not visit the member at his/her District office? While this meeting is not as effective as a company visit in terms of introducing a member of Congress to your company and its culture, it is another way to reach out to your member of Congress.

This meeting is a great opportunity to bring employee owners to the meeting to tell your company’s story and ask for his/her support of ESOPs and employee ownership in America.

Super Duper Fall Back

It is not easy to fit into the schedule of a member of Congress, particularly a Senator who might be in your part of the state only occasionally. No matter what you or your colleagues might think of a member of Congress, they have tremendous demands on their time. There is fortunately a very good fall back position that pays dividends for a future visit by the member of Congress.

If a member of Congress cannot schedule a visit to your company in the near term, ask the top staff person in the district or state office to make a visit. Treat the visit similar to one by a member of Congress, ending the visit with the presentation of the “sales” pitch.

Worthless waste of your time to have a young whipper snapper, hot-shot Congressional aide visit your company? Not at all, as that young person will be riding around the Congressional district or state with the member of Congress many, many hours, with not a great deal to talk about. (Unfortunately, cell phones, and black berries have cut down car talk time between the member of Congress and his or her staff car driver.)

For example, once a company tried and tried and tried to get a Senator to visit their company. Finally they settled on having the state director come to the company. Then in a few weeks that person was riding down the turnpike with the Senator and mentioned that he had visited with a company just off the exit they were passing, and it was a really special company—an ESOP company. The staff man said that the company leaders had invited the Senator to visit, and that he thought that the Senator should do that. The Senator came. The Senator chaired an important committee of Congress, and upon returning to DC told his committee staff that he wanted an employee owner to testify at the next appropriate committee hearing. The employee owner came. Also testifying that day was the Secretary of Labor. He was impressed. He was tasked by the President to have a “seminar/symposium” in Chicago on the work place of tomorrow. He remembered the employee owner. He invited him to testify before the President of the United States. The President of the United States was impressed. It is all on tape.

Never feel you failed if you have the staff person visit your company first.

Conclusion

HAVING A MEMBER OF CONGRESS BECOME AN ESOP CHAMPION IS NOT A ONE TIME EFFORT. ON THE OTHER HAND, THE FIRST ONE TIME EFFORT SHOULD BE A VISIT TO THE ESOP COMPANY, AS IT IS THE MOST EFFECTIVE LOBBYING TOOL IN THE ESOP ADVOCATES KIT. THE DATA FROM THE PAST 30 YEARS PROVES THIS STATEMENT AS A FACT.

The full Kit is available on the homepage under News – http://www.esopassociation.org.

Tuesday, March 30, 2010

The ESOP Association Files Amicus Brief in Citigroup ERISA Litigation

The ESOP Association sent out the following press release today. We wanted to share the information here on the blog as well.

A copy of the Association’s brief is available on The ESOP Association website here. The Association’s brief was prepared by Charles C. Jackson of Morgan, Lewis & Bockius, LLP.

Additionally, the ERISA Industry Committee and the American Benefits Council also filed a brief in the case which can be found here. The ERISA Industry Committee and American Benefits Council’s brief was written by ERIC counsel John Vine and T. L. Cubbage, Covington & Burling.

 

For Immediate Release: March 30, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

 

The ESOP Association Files Amicus Brief in Citigroup ERISA Litigation

March 30, 2010 (Washington, DC) – On March 25, 2010, The ESOP Association filed an Amicus Brief in the Citigroup ERISA litigation. The case is currently on appeal from the U.S. District Court for the Southern District of New York. The Association is asking the court to affirm the district court ruling that the defendants are not liable for breach of fiduciary duty.

At issue in this case is the important role that ESOPs (employee stock ownership plans) play both as retirement and employee ownership vehicles. The Association believes that courts examining ESOPs need to be mindful that ESOP investments are intended to have long-term goals and are often offered as part of a diversified portfolio.

“This case has the potential for far-reaching effects on ESOP plan creation, design, and administration,” said J. Michael Keeling, president of The ESOP Association. “The court cannot ignore the wishes of Congress to encourage the formation of ESOPs as long-term ownership plans, as well as, long term retirement vehicles.”

“Particularly disturbing is that on behalf of the Administration, the Department of Labor (DOL) has filed an amicus in this case that supports a position that undermines Congressional wishes since 1974 to encourage employee ownership through ESOPs,” said Keeling. “The DOL says, in essence, drop the ESOP stock should there be a temporary drop in share value or face the wrath of DOL for a supposed violation of ERISA.”

Keeling went on to say, “Frankly, if the DOL wants to curtail employee stock ownership, let’s take the debate to the halls of Congress not the Federal court system. Even though Federal courts have consistently recognized Congressional support of ESOPs, the ESOP community stands ready to have a debate with ESOP cynics. Over 30 years of solid research shows that employee stock ownership preserves good paying jobs, creates higher performing companies, and provides substantial wealth for average pay employees.”

The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy.

###

April 2010

The following articles appeared in April 2010.

Thursday, April 01, 2010

Employee Owners of Van Meter Industrial Meet with Senator Charles Grassley

The employee owners of Van Meter Industrial (VMI) had the privilege to meet with Senator Charles Grassley during a visit and tour of VMI’s corporate office and Central Distribution Center in Cedar Rapids, IA on February 26, 2010. VMI also hosted a lunch meeting that day with over one 100 area business leaders from the Iowa City and Cedar Rapids area called “Friends of The Corridor” in which the Senator was able to attend and speak briefly at as well. The Senator did his weekly press conference from VMI’s facility and many of the employee owners were able to sit in. In total, the Senator spent about 2-1/2 hours at VMI. They were able to speak about how important ESOPs are to not only their company but companies across the nation. They thanked the Senator for his support for ESOPs over the years and he shared stories with VMI employee owners back to the beginning of ESOPs and when he worked with Senator Russell Long to establish ESOP law. As the Senator toured the company, he was able to speak with many employee owners and see the passion for ESOPs and the ownership culture of VMI. Senator Grassley is a ranking member of the Senate committee that has jurisdiction over ESOP law.

Tuesday, April 06, 2010

2010 33rd Annual Conference Topics Announced

Session topics for the 33rd Annual Conference in Washington, DC, May 12 & 13, 2010 have been announced. A copy of the Preliminary Agenda is available on the Association’s website.

The 2010 Conference will follow the same format as previous years with two tracks for attendees to participate in – Human Side of ESOPs and Technical & Operational Sessions.

The Human Side will feature sessions on: ESOP Committee Workshop; Should an ESOP Company Board of Directors be Different?; Succession Planning & Leaders Development; ESOP Mission and Value Statements; AACE – Measuring the Strength of Your ESOP Communications Programs; Open Book Management; How You Can Use Social Networking to Enhance Your ESOP Culture.

The Technical Side will feature: Basic and Advanced Administration; Recent Trends for ESOP Fiduciaries; Legislative, Regulatory and Judicial Update; Basic and Advanced Valuation; Basic and Advanced Repurchase; Best Practices in Governance by ESOP Companies; Diversification; and Trustees’ Duties.

Registration forms for the 33rd Annual Conference are online. We hope you can join us this year.

Also, don’t forget about the 19th Annual Awards Dinner on the evening of May 11th. Tickets for the event are still available. Join us for a celebration of employee ownership!

Wednesday, April 07, 2010

State Treasurer Mourdock Working to Make ESOPs a Priority in Indiana

The following article originally ran in the March 2010 issue of the ESOP Report, the newsletter of The ESOP Association.  Archived issues of the ESOP Report can be found in the members only section of the Association’s website.

What do Indiana and ESOPs have in common? More than you think.

In May 2008, Indiana State Treasurer Richard Mourdock began an innovative program called Indiana’s ESOP Initiative (IEI). The program was created to promote and encourage the formation of new ESOPs in Indiana. One of Treasurer Mourdock’s goals after being sworn into office as the 53rd State Treasurer in November 2006 was to make Indiana the leading state with the number of ESOP companies within its borders. He saw it as an opportunity to keep more companies, future ESOP companies, and Hoosier jobs within the State of Indiana. His favorite line goes, “An employee-owned company has never, never, never, never, never, ever packed-up and moved to Mexico or China!”

The program is important to Indiana for one very basic reason — jobs. Expanding job opportunities and keeping businesses in the state are main concerns. The IEI program encourages Indiana businesses to becomes ESOP companies and remain in the state, saving jobs and hopefully creating new ones in the process. “The goal is to make Indiana the leading state in the country for employee ownership. Right now there are not nearly enough ESOP companies in Indiana. There are more ESOPs in Illinois, Ohio, and Minnesota and we need more in Indiana,” stated Treasurer Mourdock.

The ESOP Association has been watching the program closely. “No other state has taken this bold step to help create ESOPs,” said J. Michael Keeling, president of The ESOP Association. “Several of our professional members have and are working with the Treasurer’s office on this innovative program, and we hope that other states will pick up Treasurer Mourdock’s lead and begin programs such as his IEI program to help create ESOPs.”

Treasurer Mourdock has given presentations about the IEI program at the national Association of State Treasures meetings and has noted interest in the program but so far no similar programs have been created. However, he said he would like to see programs in others states created.

How did a State Treasurer become involved with ESOPs? In 1988, Treasurer Mourdock’s employer began the process of becoming 100% employee-owned. It was not a journey without challenges as the company experienced changes in the economy and changes in its market. The ESOP, however, allowed for the expansion of the company, helped develop a sense of employee ownership throughout its workforce, and increased the stock value of the company. At the age of fifty, Treasurer Mourdock left the company confident that his retirement savings were sufficient for him to begin his own business and to pursue his goal of public service. An ESOP allowed Treasurer Mourdock to enjoy that kind of freedom, and it is an experience he wants thousands of Hoosiers to share in as well. As Treasurer Mourdock has stated, “I would not have the opportunity to serve as Indiana’s State Treasurer if I had not been involved with an ESOP early in my career.”

The IEI Linked-Deposit program works like this: As with all ESOP companies, a company borrows money for the ESOP trust to purchase stock from the original shareholder(s). The Linked-Deposit program will allow the Treasurer’s office to link its routine purchase of CDs from Indiana’s financial institutions to the Indiana company needing capital for the ESOP transaction. A $50 million investment has been designated for the Linked-Deposit program. Companies considering an ESOP that would like to participate in the IEI Linked-Deposit program must adhere to program guidelines and meet specific requirements. More information about the IEI program as well as guidelines and requirements are available on the State Treasurer’s website at http://www.in.gov/tos/2343.htm.

Since the IEI program began, several Indiana companies have taken advantage of the program including: Radian Research, Lafayette, IN; McFarling Foods, Indianapolis, IN; AIT Laboratories, Indianapolis, IN; HIS Constructors, Inc., Indianapolis, IN; and Kocolene Development Corp., Seymour, IN. According to the Treasurer’s office, two more ESOP conversions are in the works and will hopefully close by the end of the 1st quarter.

Andy Manchir, Business Valuation and ESOP Services, Katz, Sapper & Miller LLP in Indianapolis, IN and Immediate Past President of the Indiana Chapter of The ESOP Association, has had direct experience with the program and had this to say: “I have had more than one client work with the Treasurer’s office as part of the IEI program. The most refreshing part of working with the Treasurer’s office is the straightforward nature of the program. The IEI has requirement of each company that participates, but Treasurer Mourdock’s office is accommodative with its process, and the program is not burdensome or bureaucratic in its nature. What makes that work is the direct involvement of Treasurer Mourdock. His passion for ESOP employee ownership has allowed for even more business owners in Indiana to complete their transactions, in a banking environment that has been difficult to say the least.”

Mr. Manchir went on to say, “The IEI Linked-Deposit has been more important than ever since the credit crunch. Bankers not only care about the quality of the loan, but they care about increasing deposits on the other side of their balance sheet. When an IEI program company can create both a loan and a deposit, it makes the ESOP transaction more appealing to a bank.”

When asked if state officials were supportive of the program Treasurer Mourdock said the response to the program has been fully positive. “There were some questions initially about why the state would want to support one type of business plan but the idea of keeping businesses in the state, creating long-term businesses, and creating wealth for employee won people over,” said Treasurer Mourdock. “Working with the program on the state level brings a lot of satisfaction. You can really affect the businesses and do a lot of good. It’s a good feeling to be able to go out and do that for the companies and the state of Indiana.”

Thursday, April 08, 2010

Center for American Progress Against ESOPs?!

Yes, it appears to be the case.

While sorting news clips, we came across an article on the Center for American Progress’s website by Sima J. Gandhi titled “Cracking the Code: A Closer Look at Tax Expenditures Reveals Wasteful Subsidies.” You can read the full article on the Center for American Progress’s website here. The Center for American Progress is a think tank oriented to developing policy for leaders of the Democratic Party.

What’s so interesting about this particular article? Well, ESOPs are number 10 on the list under the heading – Murky stock option incentives. The author states that employee ownership can have positive effects, but goes on to say that it’s up for debate as to whether or not ESOPs do more good than harm and of course brings up Enron. We’ll quote the second to last sentence directly — “Policies that support small businesses and encourage people to save for retirement are sound government policies, but whether these policies should be enacted through ESOPs is not clear.”

J. Michael Keeling, president of The ESOP Association decided to write a letter to the author. We are re-printing the letter below which was sent earlier this week.

April 6, 2010

Dear Ms. Gandhi,

            Needless to say, I was dismayed by your Wall Street centric blast against national policy to encourage employee ownership through the ESOP model.

            Over 99% of the ESOP companies in the U.S. are not publicly-traded on stock exchanges, around 90% employee fewer than 500 persons, and data indicates 85% were created by an exiting shareholder, often the owner-founder of the corporation.

            When an exiting owner exits a small to mid-size business s/he faces limited options. One, go public; two, sell to her/his second tier executives in a management buyout; three, sell to a competitor; four, sell to a private equity firm; five, liquidate the business’s assets; and six, sell to an ESOP to benefit his/her employees.

            Option one is unrealistic; two is often not possible, because second tier management in small businesses do not have fat cat income to justify lenders underwriting their purchase of the company where they work; three and four usually, and notoriously, result in lay-offs of the employees who created the successful business; and five is not good for anyone – the community, the employees, the U.S. economy, or the exiting shareholder.

            Congress passed laws in the mid-1970s, and mid-1980s, to encourage the exiting shareholder to sell to an ESOP, the sixth option mentioned.

            Has Congressional intent been met? Yes, it has. Over 30 years of data from the typical ESOP universe – not Lehman, not Enron, not Bear Stearns, your cites used to condemn ESOP law – they were not ESOP companies by the way – has shown ESOP companies overwhelmingly are high performing companies: more sales, more productivity, better benefits, including more often than not retirement savings plans in addition to the ESOP, better pay, and higher retirement income security, among other things.

            We enclose summaries of only a handful of the studies.

            Certainly, ESOP companies are not 100% home run stories. But we live in a free enterprise system, where risk goes along with reward.

            If the Center for American Progress view of economic justice is to shield middle class employees from risk, or as some on Wall Street would say, the “little” people, then it has to reject not just ESOP policies, but a whole slew of our American economic policies.

            I would welcome your taking the time to come to The ESOP Association’s 33rd Annual Conference, May 12-13, at the Renaissance Washington Hotel, 999 9th St., Washington, DC, to review a display of work by ESOP companies to empower employees, and to build high performing companies. You might want to hear remarks at the opening lunch on May 12th, by Dr. Richard Freeman, head of the Economics Department, Harvard University, as he gives a preview of his, and Dr. Joseph Blasi’s and Dr. Douglas Kruse’s, Rutgers University, research on “shared capitalism”, which includes ESOPs, in their soon to be published book, Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing and Broad-Based Stock Options, (National Bureau of Economic Research Conference Report.) Or come to the Association’s 18th Annual Awards Banquet, May 11th, Renaissance Washington Hotel, 7:00 PM, to see the men and women who make ESOPs special.

            In sum, I feel your attack on ESOP law on behalf of the Center for American Progress was just wrong.

Sincerely yours,

J. Michael Keeling, CAE

President

We’re not sure if you’re familiar with the Center for American Progress but you can read more about the organization here. We, however, did want to point out a few things that we thought odd. The group is dedicating to improving the lives of Americans through progressive ideas as well as building on the achievements of progressive thinkers to address economic growth and opportunities. Yet, they are against an idea like the ESOP that has been proven, as 30 plus years of research has shown, to improve the lives of Americans by offering more opportunity at their jobs to grow, participate, and build a nest egg for retirement. They want to shape the national debate but how far will one really get by ignoring the people who make a company what it is and help drive the American economy through the small businesses that they work for.

Just as a side note, the group is headed by John D. Podesta, the former White House Chief of Staff under President Bill Clinton. He has had a long and storied career in Washington, DC. He’s an influential person in this town and one with wide reaching opinions. That’s the reason we’re bringing this up here. While we are always working to increase knowledge of ESOPs and, especially within the Congress and Administration, it is broad statements like this one that we are working to change.

Tuesday, April 13, 2010

2010 Silver ESOP Award Winners

The ESOP Association sent out the following release yesterday congratulating the 2010 Silver ESOP Award winners. We wanted to share the information with our readers here.

Congratulations to this year’s Silver ESOP Award winners.

For Immediate Release: April 12, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

The ESOP Association Announces 2010 Silver ESOP Award Winners

April 12, 2010 (Washington, DC) – The ESOP Association has presented 22 corporate members of the Association with a Silver ESOP Award to recognize their work in sustaining their ESOP (employee stock ownership plan) for 25 years or more. This year, the Silver ESOP Awards are being presented to companies that will be celebrating 25 years or more as an ESOP company in 2010.

This is the third year the Silver ESOP Awards have been presented by the Association.

In 2008, 130 corporate members were presented with the first annual Silver ESOP Awards and in 2009, 12 companies were honored. To be named a Silver ESOP Award winner, a company must be a member of The ESOP Association and have an ESOP in place for 25 years or more.

“It is my pleasure to present these companies with the 2010 Silver ESOP Award for excellence in sustaining their ESOP for 25 years. Congratulations to all,” said J. Michael Keeling, president of The ESOP Association. “As these Silver ESOP Award winners have clearly shown, sharing wealth with employee owners creates greater economic prosperity and strengthens our free enterprise system. This is the direction we need to move to turn our economy around.”

The list of 2010 Silver ESOP Award Winners:

Alterman, Inc., San Antonio, TX

Border States Electric Supply, Fargo, ND

Central Pennsylvania College,

Summerdale, PA

Cummins-Wagner Company, Inc., Annapolis Junction, MD

Ecker Enterprises, Inc., Rosemont, IL

Employee Benefit Management Corp., Dublin, OH

Evapco, Inc., Westminster, MD

GBS Lumber, Inc., Mauldin, SC

Great Lakes Financial Resources, Inc., Matteson, IL

John Henry Foster Company,

Saint Louis, MO

Kinney Drugs, Inc., Gouverneur, NY

Lanford Brothers Company, Inc.,

Roanoke, VA

LSA Associates, Inc., Irvine, CA

McKay Nursery Company, Waterloo, WI

Modern Group Ltd., Bristol, PA

Nasco Industries, Inc., Washington, IN

New River Electrical Corporation, Cloverdale, VA

Robert W. Chapman & Co., Charlotte, NC

Shorr Packaging Corp., Aurora, IL

The Chilcote Company, Cleveland, OH

Thomson-Shore, Inc., Dexter, MI

Trinidad Benham Corp., Denver, CO

All 2010 Silver ESOP Award winners will be honored at The ESOP Association’s Annual Conference in May and highlighted at the 19th Annual Awards Banquet held on the evening of May 11th.

The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. For more information please visit, www.esopassociation.org.

Thursday, April 15, 2010

Going into the arcane…when is employee ownership called employee ownership

On this blog we try to bring to light all thoughts on employee ownership even some that are not directly related to the uniquely American version of the ESOP. Today we’re talking about employee ownership in the European sense.

As we know you know, the concept of employee ownership is very different in Europe than in the U.S. We tend to focus more on the ownership concept while in Europe, there is more of a participation idea.

The Employee Ownership Foundation is a member of the European Federation of Employee Share Ownership (EFES), which promotes the development of employee ownership across Europe. The organization’s members are employee owners, companies, experts, researchers, and members of trade unions. You can learn more about the EFES here.

In the discussion forum on their website, there’s an interesting debate going on that we wanted to share with our readers. The title of the debate — The concept of employee financial participation is obsolete and confusing – employee ownership is now the right one.   Take a moment to read it.

Why did we want to bring this up? Well, it seems the idea of employee ownership is transforming, at least in terms of the terminology, in Europe. While the concept of employee financial participation was a good starting point, it now seems confusing. No one is using the term any longer, and the EFES is wondering if it’s time to leave the concept and move on to new terms that have been in use for years and portray a greater understanding of how the concept is actually working in Europe.

So, when do you call employee ownership, well, employee ownership? Thoughts?

Friday, April 16, 2010

AACE Awards 2010 – And the Winner is…

Below are the winners of the 2010 AACE Awards. Congratulations to all of this year’s winners. Don’t forget to purchase your ticket to the 19th Annual Awards Dinner on May 11th. Tickets for the event, which opens the 33rd Annual Conference in Washington, DC, are still available. Contact meetings@esopassociation.org to reserve your tickets.

 

Note: A company may not be a Top Winner more than once each year. They can be a Runner Up Winner & Top Winner or Runner Up Winner in several categories. They cannot win the same top award two years in a row. No such restrictions apply to Runner Up Winners. When a judge’s company is in a category being judged, the judge is recused.

Category 1-A, Total Communications Program, 100 or fewer employees

Winner: The Onyx Group (Onyx of Alexandria, Inc.)

Runner Up: McGuire and Hester

Category 1-B, Total Communications Program, 101 – 500 employees

Winner: MidSouth Building Supply, Inc.

Runner Up: Worm’s Way, Inc.

Category 1-C, Total Communications Program, 501 – 1,000 employees

Winner: Entertainment Partners

Runner Up: Hot Dog on a Stick

Category 1-D, Total Communications Program, 1,001 – 5,000 employees

Winner: Burns & McDonnell Engineers-Architects

Runner Up: Acadian Ambulance Service, Inc.

Category 2, Audio Visual

Winner: Janotta & Herner, Inc.

Runner Up: Austin Industries, Inc.

Category 3-A, Printed Materials, 250 or fewer employees

Winner: Carl Warren & Company

Runner Up: Cisco-Eagle, Inc.

Category 3-B, Printed Materials, over 250 employees

Winner: Hot Dog on a Stick

Runner Up: Holden Industries, Inc.

Category 4-A, Educational Materials, Print

Winner: The SCOOTER Store

Runner Up: Holden Industries, Inc.

Category 4-B, Education Materials, ESOP Intranet

Winner: Carris Reels, Inc.

Runner Up: Caltrol, Inc.

Category 5-A, External ESOP Advertising, Print

Winner: Douglas Machine, Inc.

Runner Up: Woodward Communications, Inc.

Category 5-B, External ESOP Advertising – Website

Winner: Cisco-Eagle, Inc.

Runner Up: Carris Reels, Inc.

Category 6-A, Special Events, Promotions, 1 Outstanding Event,

250 or fewer employees

Winner: LeFiell Manufacturing Company

Runner Up: Owner Revolution Inc.

Category 6-B, Special Events, Promotions, 1 Outstanding Event,

over 250 employees

Winner: Acadian Ambulance Service, Inc.

Runner Up: CarePro Health Services

Category 7-A, Special Events, Promotions, Series, 250 or fewer employees

Winner: BL Companies, Inc.

Runner Up: Sentry Equipment Corp.

Category 7-B, Special Events, Promotions, Series, over 250 employees

Winner: Glatfelter Insurance Group

Runner Up: Woodward Communications, Inc.

Tuesday, April 20, 2010

Best Practices in Advocacy

The following post ran in the March 2010 issue of the ESOP Report as the Washington Report. With the approach of The ESOP Association’s Annual Conference in Washington, DC, we know many attendees will be visiting members of Congress and thought it would be a good reminder and refresher.

Often people assume that advocacy for a cause, or an issue, such as ESOP law and employee ownership, with elected officials has some mysterious, or even nefarious, secrets. There is no question that the media likes to portray such a picture, and even hired lobbyists in D.C. add to the aura, that “common” folks can’t influence members of Congress.

Once this myth is discarded, then one can focus on the “best” practices in getting the ESOP message to decision makers in D.C. that leads to the decision makers voting for, and promoting, positive ESOP laws.

Before laying out the “best” practices two points need to be made. A tactic being a “best” practice does not mean “good” tactics are to be discarded — only “bad” tactics are to be avoided, not “good” tactics. There is a popular saying these days that the “perfect” should not be an enemy of the “good.” This is a meaningful statement.

The second point is that “persuading” anyone, be it your next door neighbor, a business owner thinking of exiting her/his business, or a member of Congress, is a “marketing” task that adheres to the best practices of selling, or marketing any product. The best preparation for marketing ESOP laws and policies is to be as faithful as possible to the teachings laid out in the famous book How to Win Friends & Influence People, by Dale Carnegie. People forget that Mr. Carnegie was not writing a book primarily for CEOs, or leaders of government, the military, or non-profits; he was writing to help salespeople, during the depression years of the 1930s, market their product. For example, one key point: if a person is going to be a successful salesperson, s/he has to believe sincerely in the product to be sold. To successfully persuade a decision maker to be pro-ESOP, the persuader has to believe sincerely in the value of employee ownership for America — locally and nationally.

Once the ESOP advocate understands that marketing the ESOP message is similar to selling, the question becomes what is the “best” practice for picking a location to present the message.

It is generally accepted that “demonstrating” the product is the best method to sell a product.

So what better way to sell the ESOP message than demonstrating the power of employee ownership, which means exposing the ESOP company and its employees to a decision maker by having the decision maker see, feel, and dialogue with people in the ESOP company at the location of the company? There is no better way.

But this “how to” column promised not to ignore good practices for selling the ESOP message if the best practice is not doable.

The first good practice on the list would be a delegation of ESOP proponents meeting with the decision maker in her or his local office — a member of the U.S. House of Representative calls such an office the district office, and a member of the U.S. Senate calls such an office the state office.

The next in line would be to have a decision maker’s staff person based in the Congressional district or state see the ESOP company first hand, with an invitation that the member of Congress stop by when possible.

Next in line would be the ESOP advocate from the House of Representative’s district, of the state of a U.S. Senator, stopping by that person’s Washington D.C. office. While many people believe that “seeing” a member of Congress where she or he makes voting decisions, i.e. Washington D.C., is the best practice in lobbying, it is not, as back home what a member of Congress values most is on display — voters — and back home the member of Congress is not surrounded by numerous aides, and a whole slew of other people “selling” their product in the office, waiting in line as it were, to see their Congressperson.

But perhaps most important for the ESOP salesperson is to remember — few products are sold on the first sales call, and to have a customer for more than one purchase, the customer has to be “cultivated” with more than one visit, one letter, one phone call, and so on. The D.C. visit can lead to a company visit; a company visit should be supplemented with future contacts — thank you letter, drop bys when in D.C., telephone call, learning names of key staff persons, showing up at a town hall meeting, but not to yell and scream for goodness sake. [How many salespeople make sales yelling at the person they wish to persuade to buy their product.]

Also, remember, the Association’s web site has all the tools you need to make the case for ESOPs — company visit materials, advocacy kit, and the latest on the pro-ESOP agenda.

Next to final word — persuading someone to be for ESOPs cannot be successful if the seller has no respect for the buyer. So, if the ESOP company leaders dislike their member of Congress, or think members of Congress are no good, do your fellow ESOP colleagues a favor — don’t lobby, as believe it or not, members of Congress, as a rule, can read people very well. Like anyone, if they sense hostility, they will not listen to the argument, unless they perceive the vast majority of voters think the same way. Unfortunately, the vast majority of voters, or really, all voters, do not vote based on ESOP issues.

The final word is an ESOP advocate has to have something specific to request from the decision maker. A salesperson would not seek to sell just a brand, but would use the brand to sell a specific product. It is easy for a decision maker to say “I like ESOPs;” it is closing the sale for the decision maker to do something specific to advance the ESOP cause.

Thursday, April 22, 2010

Do you know the ESOP Advocates?

Do you know if your member of Congress supports ESOPs and employee ownership? Take a look at the list below. These members of Congress were ESOP champions in recent Congresses as sponsors and co-sponsors of pro-employee ownership legislation, and who will serve in the 111th Congress.   We know that many ESOP Association members who will be attending the 33rd Annual Conference in Washington, DC on May 12 & 13, 2010, will be scheduling visits with their members of Congress.  Now is the time to see if your member is a supporter. If not, a visit is in order.

If you would like additional information about a particular member of Congress, visit the US. House of Representatives, http://www.house.gov/, and the US Senate, http://www.senate.gov/. You can find your Representative by entering your zip code on the House site in the upper left corner and you can find your Senators by clicking on your state name in the upper left corner of the page.

House of Representatives

Congressman Rodney Alexander (R-LA)
Congressman Robert E. Andrews (D-NJ)
Congresswoman Tammy Baldwin (D-WI)

Congressman Earl Blumenauer (D-OR)
Congressman Roy Blunt (D-MO)
Congresswoman Madeleine Z. Bordallo (D-GU)
Congressman Rick Boucher (R-VA)
Congressman Henry Brown (R-SC)
Congressman Ken Calvert (R-CA)

Congressman Dave Camp (R-MI)
Congressman Eric I. Cantor (R-VA)
Congresswoman Donna M. Christensen (D-VI)
Congressman Howard Coble (R-NC)
Congressman David Dreier (R-CA)

Congressman Steve Driehaus (D-OH)
Congressman John Duncan, Jr. (R-TN)
Congressman Vernon Ehlers (R-MI)
Congresswoman Jo Ann Emerson (R-MO)

Congressman Barney Frank (D-MA)
Congressman Elton Gallegly (R-CA)

Congressman Jim Gerlach (R-PA)
Congressman Bob Goodlatte (R-VA)
Congressman Raul Grijalva (D-AZ)

Congressman Brett Guthrie (R-KY)
Congressman Wally Herger (R-CA)
Congressman Maurice D. Hinchey (D -NY)
Congressman Peter Hoekstra (R-MI)

Congressman Sam Johnson (R-TX)
Congressman Walter Jones, Jr. (R-NC)
Congresswoman Marcy Kaptur (D-OH)
Congresswoman Carolyn C. Kilpatrick (D-MI)
Congressman Dennis Kucinich (D-OH)
Congresswoman Barbara Lee (D-CA)

Congressman Sander Levin (D-MI)

Congressman Frank D. Lucas (R-OK)
Congresswoman Carolyn Maloney (D-NY)
Congressman Donald A. Manzullo (R-IL)
Congressman Charlie Melancon (D-LA)
Congressman Michael H. Michaud (D-ME)
Congressman Tim Murphy (R-PA)
Congressman Richard Neal (D-MA)

Congressman James Oberstar (D-MN)

Congressman Bill Pascrell, Jr. (D-NJ)
Congressman Ed Pastor (D-AZ)
Congressman Ron Paul (R-TX)

Congressman Erik Paulsen (R-MN)

Congressman Gary C. Peters (D-MI)
Congressman Collin Peterson (D-MN)

Congressman Thomas Petri (R-WI)

Congressman Jared Polis (D-CO)
Congressman Todd R. Platts (R-PA)

Congressman Earl Pomeroy (D-ND)

Congressman Bill Posey (R-FL)

Congressman Charles Rangel (D-NY)
Congresswoman Dana Rohrabacher (R-CA)
Congressman Peter J. Roskam ( R-IL)
Congressman Edward Royce (R-CA)
Congressman Paul Ryan (R-WI)

Congresswoman Jean Schmidt (R-OH)
Congressman Jose E. Serrano (D-NY)
Congressman John Shadegg (R-AZ)
Congressman Ike Skelton (D-MO)
Congressman Bart Stupak (D-MI)

Congressman Mark Souder (R-IN)
Congressman John Tanner (D-TN)

Congressman Lee Terry (R-NE)
Congressman Mike Thompson (D-CA)

Congressman Patrick J. Tiberi (R-OH)

Congressman Timothy J. Walz (D -MN)

Senate

Senator Max Baucus (D-MT)

Senator Sherrod Brown (D-OH)

Senator Maria Cantwell (D-WA)
Senator Ben Cardin (D-MD)

Senator Saxby Chambliss (R-GA)
Senator Michael Crapo (R-ID)
Senator Charles Grassley (R-IA)
Senator Orrin Hatch (R-UT)

Senator Johnny Isakson (R-GA)
Senator Mary Landrieu (D-LA)

Senator Patrick Leahy (D-VT)

Senator Blanche L. Lincoln (D-AR)

Senator John McCain (R-AZ)

Senator Robert Menendez (D-NJ)
Senator John D. Rockefeller (D-WV)
Senator Bernard Sanders (I-VT)
Senator Sheldon Whitehouse (D-RI)
Senator Ron Wyden (D-OR)

Monday, April 26, 2010

Get Your Legislative Fix Here

With the 33rd Annual Conference approaching (May 12 & 13, 2010 – you can find more info here), we thought it would be a good time for a legislative re-cap/refresher, whatever you want to call.

Over the next two weeks, we’ll be highlighting pro-ESOP legislation in the House and Senate along with some other tidbits that we think you might find helpful if you’re planning to visit your member of Congress while in Washington, DC for the Association’s Annual Conference.

We’re in the process of updating the Advocacy Kit and Congressional Company Visit Kit and will have that information up on The ESOP Association’s website soon. Copies will also be available at the Conference. Visit the Membership Services Booth to pick up a Kit.

Tuesday, April 27, 2010

Legislative Highlight — S. 1612

S. 1612, the Employee Stock Ownership Plan Promotion and Improvement Act of 2009, was introduced in the Senate on August 6, 2009 by Senator Blanche Lincoln [D-AR].

S. 1612 is co-sponsored by the following Senators:

Senator Maria Cantwell (D-WA)

Senator Saxby Chambliss (R-GA)

Senator Mike Crapo (R-ID)

Senator Johnny Isakson (R-GA)

Senator Mary L. Landrieu (D-LA)

Senator Patrick J. Leahy (D-VT)

Senator Bernard Sanders (I-VT)

Senator Sheldon Whitehouse (D-RI)

S. 1612 Summary:

One, S. 1612 would repeal the punitive 10% penalty tax on S corporations distributions from current earnings, also referred to as dividends, placed on the distributions from current earnings that are passed through to ESOP participants in cash.

Two, S.1612 would clarify that dividends paid by C corporations on ESOP stock are not a preference item in calculating the corporate alternative minimum tax.

Three, S. 1612 improves the 1042 ESOP tax deferred rollover provisions by (a.) permitting sellers to the ESOP of an S corporation to utilize the ESOP tax benefit referred to as the tax deferred rollover, or the so-called 1042 treatment; (b.) permitting proceeds received from a 1042 transaction to be reinvested in mutual funds consisting of operating U.S. corporation securities; and (c.) redefining what is a 25% owner, for purposes of IRC 1042, as a 25% owner or more of voting stock, or 25% owner or more of all stock of the corporation, instead of current law definition that owning of 25% of any class of stock is a 25% owner for purposes of IRC 1042.

And, four, S. 1612 would eliminate a bias against majority owned ESOP companies by making clear that a non-ESOP small businesses currently eligible for any Small Business Administration program is still eligible for the SBA program if becoming a majority owned ESOP company with the same characteristics it had before if it becomes a majority owned ESOP company. (A majority owned ESOP company is 50% plus owned by the ESOP on behalf of the employees.)

S. 1612 Status:

The bill was read twice and referred to the Senate Committee on Finance.

Importance of S. 1612 to ESOP Community: Like all pro-ESOP bills, a primary strategic reason S. 1612 is important to the ESOP community is that it is a tool that identifies who in Congress will be for ESOPs, by opposing negative ESOP proposals, as well as, supporting new, good ESOP laws.

Specifically the 10% early withdrawal tax in passing through S dividends to ESOP participants results in an S ESOP having little cash flow enhancements for less than 100% ESOPs. In addition, where the ESOP is just one of multiple shareholders, distributions to pay tax to the non-ESOP shareholders that remain in the ESOP, literally transfers the ESOP status, as cash becomes more than the value of the ESOP stock.

It is important to permit sellers of S stock to take advantage of code section 1042, as there continues to be a waste of resources in conversion of a C to S to enable 1042 treatment.

And it is very wrong to deny a small business owned by an ESOP to be denied SBA status and preferences. This unjustified SBA position often results in a small business with SBA preference losing that preference if ownership is transferred to the ESOP.

Wednesday, April 28, 2010

Legislative Highlight — S. 2914

S. 2914, the United States Employee Ownership Bank Act, was introduced in the Senate on December 18, 2009 by Senator Bernard Sanders [I-VT].

S. 2914 is co-sponsored by the following Senators:

Senator Sherrod Brown (D-OH)

Senator Patrick J. Leahy (D-VT)

Senator Robert Menendez (D-NJ)

S. 2914 Summary:

S. 2914 would establish the United States Employee Ownership Bank, to foster increased employee ownership of United States companies and greater employee participation in company decision making throughout the United States.

The Bank would be authorized to provide loans, on a direct or guaranteed basis, which may be subordinated to the interests of all other creditors — (1.) to purchase a company through an employee stock ownership plan or an eligible worker-owned cooperative, which shall be at least 51 percent employee owned, or will become at least 51 percent employee owned as a result of financial assistance from the Bank; (2.) to allow a company that is less than 51 percent employee owned to become at least 51 percent employee owned; (3.) to allow a company that is already at least 51 percent employee owned to increase the level of employee ownership at the company; and (4.) to allow a company that is already at least 51 percent employee owned to expand operations and increase or preserve employment.

 

S. 2914 Status:

The bill was read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Importance of S. 2914 to ESOP Community: Again, the legislation enables the ESOP community to identify friends of ESOPs.

Specifically, state progress, such as Ohio and Vermont Ownership Centers, are helping new ESOPs get financed and helping existing ESOPs to perform better. And, too often, jobs are lost because a business is being shut down, and traditional financing for an employee buy-out is not available. A federal lending program would close the gap.

Thursday, April 29, 2010

Legislative Highlight — S. 2909

S. 2909, the WORK Act, was introduced in the Senate on December 18, 2009 by Senator Bernard Sanders [I-VT].

S. 2909 is co-sponsored by the following Senators:

Senator Sherrod Brown (D-OH)

Senator Patrick J. Leahy (D-VT)

Senator Blanche L. Lincoln (D-AR)

Senator Robert Menendez (D-NJ)

S. 2909 Summary:

S. 2909 would provide State programs to encourage employee ownership and participation in business decisionmaking throughout the United States.

The program would encourage new and existing programs within the States that focus on — (1.) providing education and outreach to inform employees and employers about the possibilities and benefits of employee ownership, business ownership succession planning, and employee participation in business decisionmaking, including providing information about financial education, employee teams, open-book management, and other tools that enable employees to share ideas and information about how their businesses can succeed; (2.) providing technical assistance to assist employee efforts to become business owners, to enable employers and employees to explore and assess the feasibility of transferring full or partial ownership to employees, and to encourage employees and employers to start new employee-owned businesses; (3.) training employees and employers with respect to methods of employee participation in open-book management, work teams, committees, and other approaches for seeking greater employee input; and (4.) training other entities to apply for funding under this section, to establish new programs, and to carry out program activities.

Grants will also be part of the program which may include (1.) Education and outreach; (2.) Technical assistance; (3.) Training activities for employees and employers; (4.) Activities facilitating cooperation among employee-owned firms.

S. 2909 Status:

The bill was read twice and referred to the Committee on Health, Education, Labor, and Pensions.

Importance of S. 2909 to the ESOP Community:

There is evidence that a focus on employee ownership by non-profits leads to more and more successful ESOPs. There are several reasons for this fact, such as more networking among ESOP company leaders, more communications between employee owners of the state’s ESOP companies, and easily obtained financial assistance necessary to establish an ESOP.

Thursday, April 29, 2010

Rutgers School of Management and Labor Relations Announces the Smiley Fellowships

On April 28, 2010, Rutgers University’s School of Management and Labor Relations announced the establishment of the Smiley Fellowships in economic history to encourage the study of significant issues related to broad-based employee ownership in American history.

The fellowships were established by Robert W. Smiley Jr. through the auspices of the Employee Ownership Foundation. Mr. Smiley is the founder, chair and managing director of The Benefit Capital Companies Inc., a national group of merchant banking firms with offices in California, Hawaii, Nevada, New York and Texas. Mr. Smiley is a member of The ESOP Association.

You can read the full release on the Rutgers University website.

Friday, April 30, 2010

Prominent Harvard Scholar to Speak at Employee Ownership Foundation Lunch at The ESOP Association’s 33rd Annual Conference

Dr. Richard B. Freeman, the Herbert Ascherman Chair in Economics at Harvard University and Director of the National Bureau of Economic Research/Sloan Science Engineering Workforce Projects, will be the key note speaker at the Annual Employee Ownership Foundation Luncheon during The ESOP Association’s 33rd Annual Conference in Washington, DC, May 12 & 13, 2010.

His new book, Shared Capitalism at Work: Employee Ownership Profit and Gain Sharing, and Broad-Based Stock Options from the University of Chicago Press will be available in the coming weeks. This book will attract more attention to ESOP firms and their performance. His co-authors are Dr. Joseph Blasi and Dr. Douglas Kruse of Rutgers University, whose previous work on employee ownership has made both well-respected in the employee ownership community.

If you are joining us at this year’s Annual Conference, stop by the Foundation Lunch to hear what he has to say about his research on ESOPs.

May 2010

The following articles appeared in May 2010.

Monday, May 03, 2010

Congressional Listing Available for Members of The ESOP Association

Did you know that you can get a Congressional contact list from The ESOP Association? By request, the Association will send by email a PDF listing of all members of the 111th Congress.  If you are an Association member and would like to request a copy, please send an email to media@esopassociation.org.

If you are going to visit your member of Congress during this year’s Annual Conference in Washington, DC, May 12 & 13, 2010, be sure to ask for a copy. Copies will also be available at the Membership Services Booth at the Conference.

Tuesday, May 04, 2010

Legislative Highlight — House Concurrent Resolution 204

H. Con. Res. 204, which expresses continued support for employee stock ownership plans, was introduced in the House of Representatives on October 22, 2009, by Representative Maurice Hinchey [D-NY].

H. Con. Res 204 is co-sponsored by the following Representatives:

Representative Eric Cantor [R-VA-7]

Representative Howard Coble [R-NC-6]

Representative Joe Courtney [D-CT-2]

Representative Walter B. Jones, Jr. [R-NC-3]

Representative Earl Pomeroy [D-ND-at large]

Representative Bill Posey [R-FL-15]

Representative Dana Rohrabacher [R-CA-46]

Representative Peter J. Roskam [R-IL-6]

Representative Edward R. Royce [R-CA-40]

Representative Mark E. Souder [R-IN-3]

H. Con. Res 204 Summary:

Expresses continued support for employee stock ownership plans.

 

Whereas in the Employee Retirement Income Security Act of 1974, Congress codified a technique of corporate finance which utilizes employee stock ownership, officially named an employee stock ownership plan (ESOP);

Whereas in the 35 years since the statutory recognition of ESOPs, there have been ample data collected by objective research indicating that the vast majority of corporations sponsoring employee stock ownership through ESOPs are high performing companies that, among other indicia of high performing companies, have better sales, are more sustainable, pay better, and provide more retirement savings compared to similar companies that are not employee-owned; and

Whereas Congress, in more than 15 laws since 1974, has made it explicit that ESOPs are to serve the dual purpose of providing retirement savings and stock ownership for employees, as well as being a financing technique for corporations: Now, therefore, be it resolved by the House of Representatives (the Senate concurring), that Congress expresses its continued support for employee stock ownership plans.

 

H. Con. Res 204 Status:

The bill was read twice and referred to the House Committee on Education and Labor.

Importance of H. Con. Res. 204 to ESOP Community: If more House members would co-sponsor this resolution, it would be a strong message to the Administration and the House leadership not to dismantle ESOP tax incentives in order to raise revenue.

Wednesday, May 05, 2010

Legislative Highlight — H.R. 3586

H.R. 3586, the S Corporation ESOP Promotion and Expansion Act of 2009, was introduced in the House of Representatives on September 16, 2009 by Representative Ron Kind [D-WI-3].

H.R. 3586 is co-sponsored by the following Representatives:

Representative Earl Blumenauer [D-OR-3]

Representative Steve Driehaus [D-OH-1]

Representative Barney Frank [D-MA-4]

Representative Bob Goodlatte [R-VA-6]

Representative James L. Oberstar [D-MN-8]

Representative Bill Pascrell, Jr. [D-NJ-8]

Representative Erik Paulsen [R-MN-3]

Representative Gary C. Peters [D-MI-9]

Representative Collins C. Peterson [D-MN-7]

Representative Jared Polis [D-CO-2]

Representative Jean Schmidt [R-OH-2]

Representative Lee Terry [R-NE-2]

Representative Patrick J. Tiberi [R-OH-12]

Representative Timothy J. Walz [D-MN-1]

H.R. 3586 Summary:

In general, the bill would: permit owners of S stock to sell their stock to an ESOP under the same treatment C stock of a private company receives under Internal Revenue Code (IRC) Section 1042, also known as the ESOP cap gains deferred rollover provision; permit a lender to S corporations to exclude 50% of its interest income if the loan is used for a qualified employer securities loan, modeled after former IRC Section 133; permit an S ESOP to assume the estate tax liability of an estate if S stock of equal value is transferred to the S corporation ESOP; and establish a Federal program in the Department of Labor to encourage S ESOP creation.

 

H.R. 3586 Status:

The bill was read twice and referred to the Subcommittee on Health, Employment, Labor, and Pensions.

Importance of H.R. 3586 to ESOP Community: In particular, as S. 1612 permits sellers of S stock to an ESOP to utilize the IRC 1042 deferral of gains scheme, this bill would lead to the creation of more S ESOPs, particularly minority S ESOPs.

Thursday, May 06, 2010

Legislative Highlight — H.R. 692

H.R. 692, which will amend the Internal Revenue Code of 1986 to exclude from gross income compensation received by employees consisting of qualified distributions of employer stock, was introduced in the House of Representatives on January 26, 2009 by Representative Dana Rohrabacher [R-CA-46]

H.R. 692 is co-sponsored by the following Representatives:

Representative Walter B. Jones, Jr. [R-NC-3]

Representative Ron Paul [R-TX-14]

H.R. 692 Summary:

H.R. 692 would exempt from tax the value of company stock paid directly to an employee if the employee holds the stock for at least 10 years. This proposal would be most suitable for a publicly traded company. As such, H.R. 692 is the first to encourage employee ownership in a publicly traded company over the 2001 law. The 2001 law expanded the federal tax deduction for dividends paid on ESOP stock to permit a deduction for dividends reinvested by the employee back to the plan to acquire more company stock.

 

H.R. 692 Status:

The bill was read twice and referred to the House Committee on Ways and Means.

Importance of H.R. 692 to ESOP Community: H.R. 692, which is not an ESOP bill, would be a major step for large employers to make employees owners.

Friday, May 07, 2010

5 Myths About ESOPs

Even in Europe, people seem to recognize that the American media coverage of ESOPs is mostly about failures and not successes. Enron and United are always popular but we don’t hear much about the ESOPs that are thriving. Yes, there are some stories out there that are positive (We try to highlight them here when we can.) but the negative stories tend to out number the positive.

We thought we’d put together a list of 5 myths about ESOPs. This is just a start. If you have something to add to the list, leave us a comment and we’ll add it to the list.

5 Myths About ESOPs

1 – ESOPs are only for sick companies.

2 – ESOPs fail in large companies.

3 – ESOPs are not utilized by large companies or publicly traded companies.

4 – ESOPs last only 5 or 6 years.

5 – There is no research to validate that ESOPs work or can be successful.

Friday, May 07, 2010

Rutgers’ School of Management and Labor Relations Announces Louis O. Kelso Fellowships to Study Broadened Capital Ownership

On May 6, 2010, Rutgers University’s School of Management and Labor Relations announced the establishment of the Louis O. Kelso Fellowships for the study of broadened ownership of capital in a democratic society.

The fellowships honor Kelso, a San Francisco merchant banker, lawyer and political economist. Kelso created the ESOP and worked on other approaches to expand the ability of workers and citizens to acquire capital. He died in 1991. The fellowships are supported by the Employee Ownership Foundation, Washington, D.C.

You can read the full release on the Rutgers University website.

Wednesday, May 12, 2010

The ESOP Association Honors Members at Annual Awards Program

The following award winners were announced at The ESOP Association’s 19th Annual Awards Banquet held in Washington, DC on the evening of May 11th.

 

 Congratulations to all of this year’s winners.

 

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

The ESOP Association Honors Members for Excellence in

Employee Ownership Communications

May 12, 2010 (Washington, DC) –The ESOP Association is pleased to announce the 2010 winners of the Annual Awards for Communications Excellence (AACE). The AACE Awards are sponsored each year by the Association to recognize the outstanding communications and educational programs of its members. The awards were presented at the Association’s 33rd Annual Conference in Washington, DC to companies who have excelled in communicating the ESOP (employee stock ownership plan) and its meaning to employee owners.

AACE Award winners are chosen by a panel of five judges made up of both management and non-management employee owners, each of whom has demonstrated active experience and interest in the field of ESOPs and employee ownership communications. Awards are based on: overall quality and quantity of employee owner education, contributions of employee owners, integration of the ESOP into company culture, frequency of ownership communications, involvement and/or response of employee owners, encouragement of ownership attitudes, clear explanations, creative ideas, graphic design, and technical quality.

The 2010 AACE Award winners are:

Category 1-A, Total Communications Program, 100 or fewer employees

Winner: The Onyx Group (Onyx of Alexandria, Inc.), Alexandria, VA

Runner Up: McGuire and Hester, Oakland, CA

Category 1-B, Total Communications Program, 101 – 500 employees

Winner: MidSouth Building Supply, Inc., Springfield, VA

Runner Up: Worm’s Way, Inc., Bloomington, IN

Category 1-C, Total Communications Program, 501 – 1,000 employees

Winner: Entertainment Partners, Burbank, CA

Runner Up: Hot Dog on a Stick, Carlsbad, CA

Category 1-D, Total Communications Program, 1,001 – 5,000 employees

Winner: Burns & McDonnell Engineers-Architects, Kansas City, MO

Runner Up: Acadian Ambulance Service, Inc., Lafayette, LA

Category 2, Audio Visual

Winner: Janotta & Herner, Inc., Monroeville, OH

Runner Up: Austin Industries, Inc., Dallas, TX

Category 3-A, Printed Materials, 250 or fewer employees

Winner: Carl Warren & Company, Placentia, CA

Runner Up: Cisco-Eagle, Inc., Dallas, TX

Category 3-B, Printed Materials, over 250 employees

Winner: Hot Dog on a Stick, Carlsbad, CA

Runner Up: Holden Industries, Inc., Deerfield, IL

Category 4-A, Educational Materials, Print

Winner: The SCOOTER Store, New Braunfels, TX

Runner Up: Holden Industries, Inc., Deerfield, IL

Category 4-B, Education Materials, ESOP Intranet

Winner: Carris Reels, Inc., Proctor, VT

Runner Up: Caltrol, Inc., Las Vegas, NV

Category 5-A, External ESOP Advertising, Print

Winner: Douglas Machine, Inc., Alexandria, MN

Runner Up: Woodward Communications, Inc., Dubuque, IA

Category 5-B, External ESOP Advertising – Website

Winner: Cisco-Eagle, Inc., Dallas, TX

Runner Up: Carris Reels, Inc., Proctor, VT

Category 6-A, Special Events, Promotions, 1 Outstanding Event,

250 or fewer employees

Winner: LeFiell Manufacturing Company, Santa Fe Springs, CA

Runner Up: Owner Revolution Inc., Adair, IA

Category 6-B, Special Events, Promotions, 1 Outstanding Event,

over 250 employees

Winner: Acadian Ambulance Service, Inc., Lafayette, LA

Runner Up: CarePro Health Services, Cedar Rapids, IA

Category 7-A, Special Events, Promotions, Series, 250 or fewer employees

Winner: BL Companies, Inc., Meriden, CT

Runner Up: Sentry Equipment Corp., Oconomowoc, WI

Category 7-B, Special Events, Promotions, Series, over 250 employees

Winner: Glatfelter Insurance Group, York, PA

Runner Up: Woodward Communications, Inc., Dubuque, IA

###

Butch Munson of LeFiell Manufacturing Company Named

2010 Employee Owner of the Year by The ESOP Association

May 12, 2010 (Washington, DC) – Butch Munson of LeFiell Manufacturing Company located in Santa Fe Springs, California, has been named the 2010 Employee Owner of the Year by The ESOP Association. The award was presented at the Association’s 33rd Annual Conference in Washington, DC.

Mr. Munson is known at LeFiell for his ability to think outside the box. He develops and trains new employees into motivated and productive employee owners, encouraging each and every person to think radically. Following his own rules, he has saved the company thousands of dollars by streamlining several manufacturing processes. For 34 years, Mr. Munson has been known as the LeFiell ESOP Champion because of his enthusiasm and knowledge of the ESOP. He proudly displays his participant statement at the company’s annual ESOP meeting, explains how he obtained his shares, the value, and how the shares are a direct reflection of the day-to-day contributions everyone at the company makes. He is a key member of the ESOP committee and is actively involved in ESOP events during the year and throughout Employee Ownership Month in October. He actively shares his knowledge and has been known to say, “You have to think like an owner and be an owner. The more money you make for the company the more money you get in your ESOP.”

“Butch is an outstanding ESOP advocate not only for his own company but for all ESOP companies. I am honored to present him with this award,” said J. Michael Keeling, president of The ESOP Association. “He is a true leader, a supporter, and a dedicated employee owner of the company. He has helped significantly in creating the culture at LeFiell that recognizes the employees and each individual’s potential.”

###

ComSonics, Inc. Named 2010 ESOP Company of the Year by The ESOP Association

May 12, 2010 (Washington, DC) – ComSonics, Inc., an employee-owned company headquartered in Harrisonburg, Virginia, has been selected by The ESOP Association as the 2010 ESOP Company of the Year. The award was presented at the Association’s 33rd Annual Conference in Washington, DC.

ComSonics, Inc. has been building solutions for the cable television industry for over 40 years. The company and employee owners like to say that — Making you successful is ComSonics’s goal and Mission. ComSonics became a 100% employee-owned company in 1975.

In 2010, ComSonics will celebrate its 35th year as an ESOP company. The company is a strong supporter of employee ownership and its employee owners are very much involved with the Association and the Mid-Atlantic Chapter, regularly attending and presenting at national and Chapter conferences. They are active in government relations activities and have built strong relationships with their members of Congress through visits and company focused events. The company’s Employee Advisory Committee reaches out to new employees and matches each with a mentor and also provides materials on the ESOP, as well as, holding educational sessions for new participants. ComSonics likes to say that their employee owners ‘walk the walk’ of employee ownership. They give back to the community and continue to promote the message of employee ownership.

“ComSonics is an example of the value and potential that employee ownership can bring to a company,” said J. Michael Keeling, president of The ESOP Association. “The employee owners strive to make their company stronger each day. They work to communicate the ESOP concept to the employee owners and also the ESOP community at large. I am proud to present the employee owners of ComSonics with this award.”

###

Iowa/Nebraska Chapter Named 2010

Chapter of the Year by The ESOP Association

 

May 12, 2010 (Washington, DC) – The Iowa/Nebraska Chapter of The ESOP Association has been named the 2010 ESOP Chapter of the Year by the Association. The award was presented at the Association’s 33rd Annual Conference in Washington, DC.

In 2009, the Iowa/Nebraska Chapter hosted eight events with a total of 403 attendees. For a Chapter that ranks 13th in size among the Association’s 18 Chapters, it held more meetings with a higher attendance rate than any other Chapter last year. The Iowa/Nebraska Chapter was selected from 18 Association Chapters across the United States for this honor. The Chapter includes Association members in Iowa and Nebraska.

“The Iowa/Nebraska Chapter engaged members and has set performance standards with a variety of high quality meetings in both states,” said J. Michael Keeling, president of The ESOP Association. “The Chapter and its leadership are working to provide exceptional value to Association members in those states. We are proud to honor the Iowa/Nebraska Chapter with this award.”

###

Andrew J. Manchir of Katz, Sapper & Miller LLP Named

2010 Chapter Officer of the Year by The ESOP Association

 

May 12, 2010 (Washington, DC) – Andrew J. Manchir of Katz, Sapper & Miller LLP located in Indianapolis, Indiana, has been named the 2010 Chapter Officer of the Year by The ESOP Association. Mr. Manchir is the Immediate Past President of the Indiana Chapter of the Association. The award was presented at the Association’s 33rd Annual Conference in Washington, DC.

During his term as Chapter President, Mr. Manchir brought enthusiasm to the Chapter and worked to make the Indiana Chapter strong in its educational programming and membership.

“Under Andy’s leadership and guidance, the Chapter brought numerous educational opportunities to our members in Indiana,” said J. Michael Keeling, president of The ESOP Association. “I am pleased to present him with this award for all the work he has done to encourage ESOP members in his home state.”

###

Entertainment Partners Named 2010

Employee Ownership Month Poster Contest Winner

May 12, 2010 (Washington, DC) – Entertainment Partners, an employee-owned company located in Burbank, California, has been selected by The ESOP Association as its 2010 Employee Ownership Month Poster Contest Winner. The winning poster design was unveiled at the Association’s 33rd Annual Conference in Washington, DC in front of 250 guests.

Entertainment Partners’s mission is to help people do their jobs by delivering personalized client services and innovative, reliable solutions. The company is the leading provider of payroll and production management solutions for the entertainment industry. On Valentine’s Day in 2004, the employees of Entertainment Partners purchased 100 percent of the company through the ESOP.

Entertainment Partners’s poster was selected because of the idea it expressed: “My Company Your Company Our Company.” The poster will be used by the Association to promote employee ownership month, which takes place every October and is a celebration of the incredible spirit of employee ownership.

###

Colin M. Henderson of the Strategic Investment Counsel Corp. Receives Membership Recruitment Award from The ESOP Association

 

May 12, 2010 (Washington, DC) – Colin M. Henderson of the Strategic Investment Counsel Corp. located in Dallas, Texas, has been presented with the 2010 Membership Recruitment Award for a Professional Member by The ESOP Association. The award was presented at the Association’s 33rd Annual Conference in Washington, DC.

Mr. Henderson is an officer of the Southwest Chapter and has been involved with the ESOP community for many years. His commitment to employee ownership is evident in the work he does not only for The ESOP Association but also the Southwest Chapter.

“Colin has done a tremendous job encouraging ESOP companies to join the Association and promoting our cause,” said J. Michael Keeling, president of The ESOP Association. “It is my pleasure to present him with this award for all the work he has done to further the cause of employee ownership.”

###

Spencer A. Coates of Houchens Industries, Inc. Named 2010 Outstanding Board of Governors Member by The ESOP Association

 

May 12, 2010 (Washington, DC) – Spencer A. Coates, President of Houchens Industries, Inc., located in Bowling Green, Kentucky, has been named the 2010 Outstanding Board of Governors Member by The ESOP Association. The award was presented at the Association’s 33rd Annual Conference in Washington, DC.

Mr. Coates has been an active member of The ESOP Association for many years serving in numerous volunteer positions over the years. He is a strong supporter of the Employee Ownership Foundation, the affiliated foundation of The ESOP Association, and active in government relations activities of the Association.

“Spencer is an enthusiastic supporter of The ESOP Association and the Employee Ownership Foundation. He has gone above and beyond in his duties as a member of the Association’s Board of Governors,” said J. Michael Keeling, president of The ESOP Association. “I am pleased to present him with this award for his dedication to the employee ownership cause.”

###

Southwest Chapter Recognized for Outstanding Membership Development by

The ESOP Association

 

May 12, 2010 (Washington, DC) – The Southwest Chapter of The ESOP Association has been recognized for its commitment to membership development at the Association’s 33rd Annual Conference in Washington, DC.

The Southwest Chapter demonstrated a focused commitment to membership in the last year. As a result of their efforts, the Chapter has retained its full membership and has, in fact, gained several new members in a bad economic year. The Southwest Chapter includes Association members in Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.

“The Southwest Chapter made it a priority to not only recruit new members but to also retain all their members and their efforts have paid off,” said J. Michael Keeling, president of The ESOP Association. “I am pleased to present the Southwest Chapter with this award for all the work they have done to promote employee ownership in America.”

###

Illinois Chapter of The ESOP Association Recognized for

Outstanding Membership Recruitment

 

May 12, 2010 (Washington, DC) – The Illinois Chapter of The ESOP Association has been recognized for its commitment to membership recruitment at The ESOP Association’s 33rd Annual Conference in Washington, DC.

The Illinois Chapter was selected from among 18 Association Chapters across the United States for this honor.

“I’m pleased to present this honor to the Illinois Chapter members,” said J. Michael Keeling, president of The ESOP Association. “This year, the Chapter leadership worked hard to meet a target prospect goal and to promote the cause of employee ownership in Illinois.”

###

Wednesday, May 12, 2010

Congressmen Boustany and Pomeroy Introduce H.R. 5207 — The ESOP Promotion and Improvement Act of 2010

The following press release was sent out by The ESOP Association on May 12, 2010.  We wanted to share the information on the blog as well.

For Immediate Release: May 12, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

Congressmen Boustany and Pomeroy Introduce H.R. 5207 —

The ESOP Promotion and Improvement Act of 2010

May 12, 2010 (Washington, DC) – On May 12, 2010, Congressman Charles W. Boustany, Jr. (R-LA-7th) and Congressman Earl Pomeroy (D-ND-ATL) announced the introduction of the ESOP Promotion and Improvement Act of 2010. The bill is an important step to broaden employee ownership in the U.S.

In summary, the proposed Act improves the 1042 ESOP tax deferred rollover provisions by permitting sellers to the ESOP of an S corporation to utilize the ESOP tax benefit referred to as the tax deferred rollover, or the so-called 1042 treatment. The bill also makes needed clarifications and technical amendments to the section 1042 provision related to how proceeds from a sale to an ESOP may be reinvested, and who are not permitted to participate in a 1042 ESOP. H.R. 5207 would clarify that dividends paid by C corporations on ESOP stock are not a preference item in calculating the corporate alternative minimum tax and would repeal the punitive 10% penalty tax on S corporations distributions from current earnings, also referred to as dividends, that are passed through to ESOP participants in cash. H.R. 5207 would eliminate a bias against majority owned ESOP companies by making clear that a non-ESOP small businesses currently eligible for any Small Business Administration program is still eligible for the SBA program if becoming a majority owned ESOP company with the same characteristics it had before becoming a majority owned ESOP company. (A majority owned ESOP company is 50% plus owned by the ESOP on behalf of the employees.)

“Employee stock ownership plans help workers take ownership in their company, which is part of the American dream,” said Congressman Boustany.  “ESOPs continue to be a critical component of improving American competitiveness and helping to create jobs here at home, and this bill improves options for employees to participate in these plans.”

“Businesses that follow the path of employee ownership are often more successful and provide better services, and ownership can make them more exciting places to work. There’s no better example of that than some of the great companies we have in North Dakota like Border States Electric and Dakota Supply Group,” Congressman Pomeroy said. “The federal tax system needs to encourage employee ownership, not stymie it. Our bill will finally set this system on a path of growth.”

“As members of the House Ways and Means Committee, there could be no better proponents in Congress for equitable ownership polices for all working Americans than Congressman Boustany and Congressman Pomeroy,” stated J. Michael Keeling, president of The ESOP Association. “The ESOP community appreciates their recognition of employee stock ownership plans and the need to make them stronger for employee owners across America.”

For additional information about H.R. 5207, please visit The ESOP Association’s website, www.esopassociation.org and the Employee Ownership Blog, http://www.esopassociation.org/blog/default.asp.

The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy.

###

Friday, May 14, 2010

H.R. 5207, the ESOP Promotion and Improvement Act of 2010, Makes News

Last week, we told you about the new pro-ESOP legislation introduced by Congressman Charles W. Boustany, Jr. (R-LA-7) and Congressman Earl Pomeroy (D-ND-ATL). You can read the press release sent out by The ESOP Association here.

This week, we wanted to share a few links to articles that we thought might be of some interest.

The Grand Forks Herald in Grand Forks, ND, ran a good article by Ryan Johnson titled – New bill helps employee-owned businesses, Pomeroy says.

In addition, a local Washington, DC publication called the Daily Tax Report, which is published by the Bureau of National Affairs, ran an article titled, “Reps. Boustany, Pomeroy Introduce Bill to Improve ESOPs as Retirement Vehicles.” The Daily Tax Report is a subscription based service so we cannot share a link to the article but if you have a subscription, you can find the article on their website in the Tax Core section.

Monday, May 17, 2010

H.R. 5207 Finds Co-Sponsors in the House

Within a few days of the May 5, 2010 introduction of H.R. 5207, four more members of the U.S. House of Representatives joined the bi-partisan pro-ESOP proposal introduced by Congressman Earl Pomeroy (D-ND-ATL) and Congressman Charles W. Boustany, Jr. (R-LA-7). They are:

Congressman Jim Gerlach [R-PA-6]

Congressman Brett Guthrie [R-KY-2]

Congressman Wally Herger [R-CA-2]

Congressman Maurice D. Hinchey [D-NY-22]

These Congressmen joined as a direct result of grassroots advocacy by the California/Western States, Pennsylvania/Delaware, and Ohio/Kentucky Chapters of the Association, and the members of these Chapters.

A goal of 100 co-sponsors would be nice, including 30 members of the House Ways and Means Committee.

Do you think that the ESOP community is up to the job?

Wednesday, May 19, 2010

The ESOP Association Welcomes New Board of Directors and New Board of Governors Members

The ESOP Association would like to welcome the following members of the Association’s Board of Directors and Board of Governors. Each member began his or her term on May 1, 2010.

Board of Directors:

Chair – Advisory Committee’s Chairs Council – Voting Ex-Officio Member –

Karen D. Ng, Partner, Sedgwick, Detert, Moran & Arnold LLP, San Francisco, CA

At-Large Board of Directors Member (Representing a Corporate Member) –

Caryn Siebert, President/CEO, Carl Warrren & Company, Placentia, CA

Advisory Committee Chairs:

Chair – Advisory Committee on Administration –

Nancy K. Dittmer, Managing Director, RSM McGladrey Retirement Resources, Des Moines, IA

Chair – Advisory Committee on Interdisciplinary on Fiduciary Issues –

Alexander P. Moss, Praxis Consulting Group, Inc., Philadelphia, PA

Chair – Advisory Committee on Ownership Culture –

Renee M. Rettler, Consultant, Principal Financial Group, Appleton, WI

At Large Board of Governors Members:

Kim S. Abello, Senior Vice President, JPMorgan Chase Bank, N.A., Chicago, IL

David Fitz-Gerald, Vice President & CFO, Carris Reels, Inc., Proctor, VT

Michael E. Silverman, General Counsel, SmithBucklin Corporation, Chicago, IL

Friday, May 21, 2010

Pinehurst Resort Donates Golf Package at First Ever Tri-Chapter Regional ESOP Conference to the Employee Ownership Raffle

On March 18 – 19, 2010, the Mid-Atlantic, New South, and the Carolinas Chapters held the first ever Tri-Chapter Regional ESOP Conference at Pinehurst Resort in Pinehurst, NC. The Chapter meeting featured sessions on culture and communications as well as a few technical sessions. As many Chapters do, a raffle was held at the Conference and in addition to the already good prizes up for grabs, the Pinehurst Resort graciously donated a three day/two night stay golf package. The item was opened for auction, and Peter Prodoehl, Vice President of Consulting for the Principal Financial Group, Fort Myers, FL, won the bidding at an even $1,000, with all proceeds going to the Foundation.

The Conference closed with a round of golf on Pinehurst’s Course #1. Over 50 golfers took to the course and, with several sponsorships, helped raise additional money for the Foundation. The Pinehurst Resort is world-renowned as being the cradle of golf. The historic property has hosted more golf championships than any other site in America including the U.S. Open, the PGA Championship, Ryder Cup, and the PGA Tour. In 2014, it will make history by hosting both the U.S. Open and the U.S. Women’s Open Championships.

The Employee Ownership Foundation, along with the Mid-Atlantic, New South, and Carolinas Chapters, would like to extend its thanks to the Pinehurst Resort for its incredibly generous donation.

Tuesday, May 25, 2010

Sharing ESOP Stories

Representatives from the Amerequip Company in Kiel, WI recently traveled to ESOP Association member, Priority Sign in Sheboygan, WI, to present ideas to Priority Sign’s ESOP committee on how to shape an ESOP culture. According to Betty Bollis, an employee owner of Amerequip, the company’s employee owners are always willing to share their knowledge with other ESOP companies about their culture.

During the presentation, Amerequip employee owners shared their ESOP story, information about the company’s culture, and described the activities of the ESOP committee. Amerequip had also participated in a company to company meeting earlier in the year that was sponsored by the Wisconsin Chapter of the Association where Amerequip employee owners shared similar information, as well as, provided company tours for participants to learn more about the company.

As an ESOP Association and Wisconsin Chapter member, Priority Sign’s employee owners were so impressed with Amerequip’s creative ESOP ideas and teamwork presentation at the company to company meeting that they were inspired to invite Amerequip to their facility for a training session on ESOP culture for a large group of their employees.

Betty Bollis, Wisconsin Chapter President and an Amerequip employee, was happy to lend a hand to help a fellow ESOP company. “It was an excellent opportunity for us to promote a positive ESOP message. We were pleased to be invited!”

Below, Priority Sign employee owners listen to the Amerequip message.

June 2010

The following articles appeared in June 2010.

Tuesday, June 01, 2010

Employee Ownership Takes Its Place Among New Ownership Patterns for the 21st Century

Employee-owned firms are more and more being recognized as exemplifying behavior and ownership designs that can set the tone for the 21st century corporation. One powerful example of this is a recent article from Strategy and Business magazine, “Not Just for Profit” (Spring 2009), in which author Marjorie Kelly of Boston’s Tellus Institute writes about emerging alternatives to the shareholder-centric model that can help companies avoid ethical mishaps and contribute more to the world at large. Employee-owned companies are among the models she points to as “representing an evolutionary step in the development of corporate structure.” She notes these emerging models are as likely to be profitable as more conventional companies, but are more adept at pursuing goals that other companies usually fail to reach, like treating customers fairly, creating a healthy workplace, protecting the environment, and supporting the communities in which they operate.

In this article, Kelly uses a three-part grouping of broad approaches to new kinds of ownership architecture:

1) Stakeholder-Owned Companies (which includes cooperatives and employee-owned firms).

2) Mission-Controlled Companies (which includes the foundation-owned companies that are common in northern Europe and family-controlled firms).

3) Public-Private Hybrids (which includes emerging models like Google.org, being called the model of “for-profit philanthropy”).

“Not Just for Profit” can be downloaded at this link.

Employee ownership is also featured in other recent research from the Ford Foundation, in a November 2009 report entitled “Keeping Wealth Local: Shared Ownership and Wealth Control for Rural Communities,” by Marjorie Kelly and Shanna Ratner. The report is part of a broad initiative, “Wealth Creation in Rural America,” in which Ford aims to help low-wealth rural areas overcome isolation and increase their ownership and influence over various kinds of wealth. This report is a handbook of various “shared ownership” models, featuring employee ownership alongside other models such as community land trusts, municipal ownership, and local ownership in general.

“Keeping Wealth Local” can be downloaded at this link.

The author of both reports, Marjorie Kelly (MKelly@Tellus.org), is co-founder of Corporation 20/20 (www.corporation2020.org), which is a multi-stakeholder initiative that since 2005 has brought together hundreds of leaders from business, finance, law, government, and civil society, to envision and advocate for company models that bring social and environmental concerns into the heart of company design. The initiative is housed at Tellus Institute in Boston, a 30-year-old nonprofit research and consulting organization.

Friday, June 04, 2010

Federalizing K Plans

A recent column in the ESOP Report talked about how ERISA policy germinated in our nation’s capital. (You can read the full President’s Page column in the May 2010 issue of the newsletter, page 2. The newsletter is located in the members only section of the Association’s website.)

One point made by Association President Keeling in the column was that during the first half of 2009, there was rumblings from certain experts in retirement savings policy — both in government, academia, and think tanks — that perhaps 401(k) plans should be “Federalized” in order to protect people’s retirement savings from the volatility of equity investments as the public stock market hit all time lows first quarter of 2009. While this talk eased a bit as the market recovered, recent dips in the market seem to have revived “Federalization” talk in the windowless offices of ERISA experts.

Such discussions triggered a letter from 14 Republican members of Congress, including several strong ESOP champions, to the Secretary of the Treasury Timothy Geithner, and the Secretary of Labor Hilda Solis, putting forth concerns that the implications that the Administration wanted to mandate annuities as the form of distributions from defined contribution plans was perhaps intended to be the move to have 401(k) plans come under Federal agency control.

Secretary Geithner responded on May 14 with a letter which basically said “Not true, not true, not true,” denying vehemently that a desire to collect opinions on distributions from defined contribution plans by the Administration’s agencies responsible for regulating ERISA did not evidence a move to take k plans out of employers’ hands.

If you’re interested in reading the letter, send us an email – media AT esopassociation.org.

In this corner sounding an alarm is not wrong, particularly when there is knowledge of private conversations that do not jive with the “official” explanation. And when the alarm triggers clear cut denials of impending changes, good was done.

Tuesday, June 08, 2010

30/100

The following post ran in the May 2010 issue of the ESOP Report as the Washington Report. 

What does 30/100 mean?

While it is never possible to predict success in the legislative process, primarily because there is no final victory nor defeat, these two numbers represent what it would take to have all, or some of the provisions of pro-ESOP legislation pending in the House of Representatives become law.

Thirty represents the number of men and women who serve on the House Ways and Means Committee that need to be co-sponsors of pro-ESOP legislation for pro-ESOP proposals to be adopted by the Ways and Means Committee, which is the House committee with jurisdiction over tax legislation. [Please keep in mind that historically what the House Ways and Means Committee adopts as tax law changes usually represents anywhere from 70 to 80% of what is in a tax law signed by a President, and that the Ways and Means Committee 90% of the time is the House Committee considering ESOP law, for changes, good or bad.]

One might say, “How come 30, as there are 41 members on the Committee, and isn’t the number 21 the majority?” No, 21 is not the number, as a study of how the Ways and Means Committee adopts tax law provisions that are not on the front page of leading newspapers, or a key topic in a shouting fest on cable news, demonstrates that to have a new, positive tax law adopted that a group is interested in takes a super majority almost bordering on consensus.

As a rule, decisions about what will be considered in any bill by a Congressional Committee is a done deal before the Committee formally sits down in a public session to vote on pending legislation and amendments thereto. The real decisions are made in one-on-one conversations between the Chair and key members, and/or in a “members only” meeting of members who are in the same party.

To be specific, there are 26 Democrats on Ways and Means, and 15 Republicans in this Congress, the 111th Congress of the United States. The Chair of Ways and Means will collect from each of his members, or have his staff tell him what his members have indicated an interest in — and the key element here is what bills have the members sponsored or co-sponsored? The ranking, or number one Republican, member of Ways and Means will be doing the same with his members.

Having four or five members, of either party, or a mixture thereof, will not impress the Chair or ranking Republican. Even 21 is marginal as not every idea to reduce taxes, or each idea to increase taxes, will rise or fall on 21 members expressing a view.

But, ah, 30 is nearly 75% of the members of the Committee. No Committee Chair will defy 75% of his or her members.

There are three pro-ESOP bills pending in the House Ways and Means Committee as of this writing: H.R. 5207, the ESOP Promotion and Improvement Act of 2010; H.R. 3586, the S Corporation ESOP Promotion and Expansion Act of 2009; and H. Con. Res. 204, Expressing the House of Representatives’ Continued Support for Employee Stock Ownership Plans.

Right now, nine members of Ways and Means support one, or two, of the three pieces of legislation mentioned above.

Twenty-one more co-sponsors are needed.

What about the number 100? One hundred represents the total number of members of the House of Representatives who are not members of Ways and Means who should co-sponsor the pro-ESOP bills. Why? One hundred is sort of a threshold number that any chair of a committee would recognize that to defy the interests of approximately 25% of the members of the House who are not members of his Committee would be risky if he expects overall support for bills he brings to the House floor. Plus, the 100 co-sponsor sentiments can overcome the fact that only five to ten members of the Committee support an initiative, as those men and women can say, legitimately, “Look, many members of the House favor our position on ESOPs, and you cannot defy us and them with an anti-ESOP position, or by refusing to promote laws to aid ESOP creation and operation.”

Right now, 34 members of the House co-sponsor one, or two, of the three pieces of legislation mentioned above.

Sixty-six more are needed.

So the 30/100 is right now 21/66. Can the ESOP community reach these goals before Congress quits in the fourth quarter of this year? We have before.

Think about helping out by going to http://www.esopassociation.org and downloading the Advocacy Kit and Congressional Visit Kit and taking action.

Wednesday, June 09, 2010

ESOP Association Member Named a 2010 Top Small Workplace

Congratulations to Van Meter Industrial in Cedar Rapids, IA for being named a Top Small Workplace of 2010.  NewAge Industries in Southampton, PA, another Association member, was named as a finalist. For more information about the Top Small Workplaces project, visit Winning Workplaces or read the press release.

The winners were featured in Inc. Magazine as well. To read the full story, click here.

The winners were chosen based on their success in creating a culture fostering professional growth opportunities, and unique benefits. Research on employee owned companies has found that ESOP companies are high performing, have high employee retention rates, and workers that are more productive and motivated.

Congratulations to this year’s winners.

Tuesday, June 15, 2010

Carey Chen Elected to Employee Ownership Foundation Executive Committee

Carey Chen, Vice President and Chief Financial Officer of Hypertherm, Inc. located in Hanover, NH, has been elected to the Employee Ownership Foundation’s Executive Committee. Mr. Chen has been elected to fill an at-large slot representing a corporate member.

Mr. Chen was formally approved at the Employee Ownership Foundation’s Executive Committee meeting held prior to the 33rd Annual Conference in Washington, DC in May 2010.

“Carey will be a strong addition to the Employee Ownership Foundation’s Trustees,” said J. Michael Keeling, president of the Foundation. “We are lucky to have so many individuals who are committed to the mission and goals of the Foundation.”

Thursday, June 17, 2010

Rutgers’ School of Management and Labor Relations Announces 2010-2011 Beyster Fellows

On June 16, 2010, Rutgers University’s School of Management and Labor Relations (SMLR) announced the recipients of the 2010-2011 Beyster Fellowships to support scholars in the field of employee ownership.

The annual fellowship program was established with a major gift from J. Robert Beyster and Mary Ann Beyster of La Jolla, Calif., with a grant from the Foundation for Enterprise Development in 2008. The fellowships honor Beyster’s many accomplishments in the area of employee stock ownership, profit sharing and broad-based stock options.

You can read the full release on the Rutgers University website.

Tuesday, June 22, 2010

PA/DE Chapter Hosts Congressional Visit

On April 14, 2010, the PA/DE Chapter of The ESOP Association hosted a meeting with representatives from the offices of Congressman Jim Gerlach (R-PA-6) and Congresswoman Allyson Y. Schwartz (D-PA-13). Roseline Marston, president of A.D. Marble & Co., Inc., located in Conshohocken, PA, hosted the meeting for the Chapter event.

From left to right: Jim Steiker, Chairman & CEO, SES Advisors, Inc., Philadelphia, PA; Alan Dorfman, CAS Specialist, A.D. Marble & Co., Inc., Conshohocken, PA; Scott Savett, Montgomery Country Outreach Coordinator for Congressman Gerlach; Julie Slavet, District Director for Congresswoman Schwartz; Leslie Richards, Public Involvement Specialist, A.D. Marble & Co., Inc., Conshohocken, PA.

Thursday, June 24, 2010

2010 Charles Edmunson Scholarship Winners

The Employee Ownership Foundation is proud to announce the 2010 Edmunson Scholarship winners. The Charles E. Edmunson Scholarships Program is the oldest and most recognized of the Employee Ownership Foundation’s programs. Award scholarships are provided to winning ESOP companies to help defray the cost of sending non-management employee owners to ESOP Association programs and seminars focused on ownership education.

The 2010 scholarship winners are:

Kim Berkley – Cal-Tex Protective Coatings, Schertz, TX

Wendy Kinimaka – Chart Rehabilitation of Hawaii, Honolulu, HI

Lesa Chadwick – Community Provider of Enrichment Services, Tucson, AZ

James Wales – Golden Artist Colors, Inc., New Berlin, NY

Kelly Kamlager and Synthia Adams – Holden Industries, Inc., Deerfield, IL

Jan Lee and Cindy McNally – Moody’s Collision Centers, Gorham, ME

Karen Goodsell – Padilla Speer Beardsley, Minneapolis, MN

Pam Tolbert – Pariveda Solutions, Inc., Dallas, TX

Sherri Adams and Casey Griffin – Poolmaster, Inc., Sacramento, CA

Judy Lippel and Ben Hubbard – Sletten Inc., Great Falls, MT

Monica Barrera – Webb Landscape, Inc., Bellevue, ID

Tuesday, June 29, 2010

Dr. Richard B. Freeman, Preeminent Researcher on Shared Capitalism and Employee Ownership, to be Featured on ESOP Association Website

Dr. Richard B. Freeman, a preeminent researcher in the shared capitalism and employee ownership field, holds the Herbert Ascherman Chair in Economics at Harvard University, and is a research associate at the National Bureau of Economic Research, recently addressed The ESOP Association’s membership at the 2010 Annual Conference in May. A video of his presentation is now available on The ESOP Association’s website. A link to the video is located under News on the homepage.

In the presentation, he talks about the research that went into the new book, Shared Capitalism at Work, which is co-edited with Drs. Joseph Blasi and Douglas Kruse of Rutgers University also well-known for employee ownership research.

July 2010

The following articles appeared in July 2010.

Thursday, July 01, 2010

Pro-Employee Ownership Proposals Pending on Senate Floor

This information was sent out to all ESOP Association members earlier today but we wanted to share it with readers on the blog as well.

Senators Bernard Sanders (I-VT), Patrick Leahy (D-VT), and Sherrod Brown (D-OH) have filed pro-employee amendments to H.R. 5297, the Small Business Lending Act.  One amendment would establish an initiative to promote employee ownership at the Department of Labor; the other amendment would establish a loan guarantee program at the Department of Treasury to help finance certain ESOP transactions.  To read the amendments, please click on the following amendment numbers: S. AMDT 4439 and S. AMDT 4440.

Below the text of this email, please find talking points supporting the argument for the bill.

Please consider calling, faxing, or emailing your two Senators requesting they support and vote for the Sanders-Leahy-Brown amendments S. AMDT 4439 and S. AMDT 4440 to H.R. 5297. Ask your message be given to the staff aide to the Senator who handles tax and/or small business issues.  Just the simple request is enough to register a pro-ESOP position, and dialogue with the aide is not necessary unless the person described calls back.  In any detailed conversation you can refer the staffer to personnel at The ESOP Association or to Warren Gunnels who works for Senator Sanders who drafted these proposals.  Again, following is a general argument for the proposals.

H.R. 5297 will be considered by the full Senate sometime after July 13th.

Thank you,

The ESOP Association

SUPPORT EMPLOYEE OWNERSHIP AND PARTICIPATION AMENDMENTS TO SAVE JOBS AND SUPPORT WORKERS

_________________________________________________________________

During the consideration of the Small Business Lending Act, Senators Sanders, Sherrod Brown, and Leahy will file two amendments aimed at increasing jobs through an expansion in employee ownership.

The first amendment (S.AMDT 4439), the Worker Ownership, Readiness and Knowledge (WORK) Act, would create an Employee Ownership and Participation Initiative within the Department of Labor. This initiative would promote employee ownership and employee participation in company decision making by providing education and outreach, training, grants, and technical support for local programs dedicated to the promotion of employee ownership and participation.

The second amendment (S.AMDT 4440) would create the U.S. Employee Ownership Bank to provide loans and loan guarantees to employees to purchase a business through an ESOP or a worker owned cooperative. The federal government currently provides a wide variety of federal loans, loan guarantees and other technical assistance to American companies as a way to increase U.S. jobs through exports. Providing federal loans and loan guarantees for the expansion of employee ownership would increase and retain jobs in the U.S. and strengthen the U.S. economy.

Since December 2007, employment has fallen by over 7 million, and the unemployment rate has nearly doubled to 9.7%. Although many jobs have been lost to deteriorating domestic economic conditions, many others have been shipped offshore. One way to reverse these economic trends is to provide employees with the tools they need to own their own businesses through employee stock ownership plans (ESOPs) or eligible worker owned cooperatives. Employee ownership is often the necessary component that will keep a hard-pressed business from either shutting down, or shipping its jobs overseas.

Who benefits from these employee ownership amendments?

*          The Economy, in which many businesses which otherwise would close down or ship jobs overseas stay open and keep their American employees

*          Retiring Small Business Owners, who find buyers for their business and compensation for their years of hard work;

*          Employees, who retain their jobs, share in future profits, and have greater control over their own vocation;

*          Company Performance, which often is improved through increases in productivity due to employee ownership and participation; and

*          The Community, in which the company is now more deeply rooted.

By expanding employee ownership and participation, these amendments would create stronger American companies, prevent job loss, and improve working conditions for struggling employees.

Wednesday, July 07, 2010

ESOP Outreach

Steve Sheppard is a frequent speaker to employee-owned companies and the ESOP community at large on the financial and transformational potential of employee ownership.

In partnership with the Employee Ownership Foundation, Steve is scheduling speaking engagements with business leaders and opinion makers who are not aware of the transformational power of employee ownership through an ESOP for employees and companies sponsoring ESOPs.

Steve, former CEO of the employee-owned Foldcraft Company in Kenyon, Minnesota, will travel the U.S. speaking to local groups, such as the Rotary, Lions, Kiwanis, Chambers of Commerce and other civic groups about employee ownership.

Steve’s presentation will be at NO CHARGE to the sponsoring organization.

If you would like additional information on how to contact Steve Sheppard to speak at your community event or to a civic organization, please send an email to info@employeeownershipfoundation.org.

For additional information about Steve’s speaking tour and presentations, please visit The ESOP Association’s website and download a copy of the brochure.

Friday, July 09, 2010

A Helpful Checklist When Reviewing Fiduciary Liability Insurance

In an effort to assist ESOP Association (TEA) members become better fiduciary liability insurance consumers, we have developed a checklist suggesting areas in the insurance policy that should be reviewed preferably prior to purchasing the policy. We suggest the checklist below should be reviewed prior to making any decision on purchasing the policy.

  • Is the ESOP covered in the policy definition of “Employee Benefit Plan” or “Retirement” Plan? Does it need to be listed separately in the policy?
  • Are external individual or institutional trustees covered?
  • Who is covered in the definition of “Insured Person”?
  • Are subsidiaries of the parent company covered?
  • Is the policy limit reduced by defense costs paid by the insurer? Is there a separate limit for these costs applicable?
  • Are Prior Acts covered?
  • What is the Pending and Prior Date on the policy? If moving coverage from one insurer to another make sure this date does not change.
  • How is the deductible applied to Defense Costs or Settlements?
  • Is the policy limit for Fiduciary Liability coverage shared with other coverages such as D&O or Employment Practices Liability coverage?
  • Does the insurance company providing this coverage step in and defend the ESOP right away or must you await reimbursement of costs that exceed the deductible?
  • Who elects the legal firm to represent the policyholder if a claim occurs?
  • Will the insurance company at least defend you for allegations that may not be covered?
  • Have you read all the endorsements that will be issued with the main policy form?
  • Does the insurer have the right of subrogation against an insured fiduciary with this policy?
  • How could certain answers to questions when completing the application for coverage exclude certain claims?

Finally, it is important to keep in mind that all proposals for coverage should include a sample copy of the policy form and all endorsements proposed. If not, request to see a copy of these forms.

The above commentary is provided by Jeffrey S. Gelburd, CPCU, ARM, Vice President of Murray Risk Management & Insurance. Jeff has been providing TEA members with Fiduciary Liability insurance since 1989. He serves as Program Manager for The ESOP Association Executive Liability Insurance Program. He can be reached directly at jgelburd AT murrayins.com or 1-800-533-5271. The Program is also available to insurance agents and brokers on behalf of the TEA member.

Wednesday, July 14, 2010

Leading in an Ownership Setting: The Program for CEOs

The Employee Ownership Foundation and the University of Pennsylvania’s Center for Organizational Dynamics, have partnered to offer CEOs/Presidents and/or the CEO/President designee, of ESOP companies a breakthrough Certificate Program – Leading in an Ownership Setting: The Program for CEOs.

This ESOP Leadership program is focused on enhancing each participant’s leadership effectiveness in his or her own company.

The program will provide CEOs with:

• An understanding of the essential factors for effectively leading an ESOP company

• Knowledge about the leadership challenges & opportunities unique to ESOPs

• Information about how employee involvement and communication link to performance in an ESOP company

• Authentic reflection on your personal strengths and challenges as a leader

• Integration of your personal core values and beliefs into your role as a leader

• 360 feedback and coaching with regard to Emotional Intelligence, and other valuable leadership competencies

• Strategies for building a high performance ownership culture

• Understanding, skills and tools for becoming an even more effective leader

• Cutting edge concepts, tools and techniques in leadership

• Tools for broadening and deepening leadership in your company

• Insights from some of the most successful ESOP companies in America

• Development of a peer support network of leaders of other ESOP companies

• Immersion into a dynamic community of ESOP leaders

While CEOs in an ownership setting face unique challenges and opportunities, leadership effectiveness remains the critical factor in the success of the ESOP, the company and ultimately to the employee owners. This Certificate Program is the first and only program anywhere addressing formally the relationship between the distinctive nature of ESOP companies and the effectiveness of leaders. The program will examine in depth how leadership with the development and fostering of an involved culture impact the company’s bottom line.

Program Sessions:

The Certificate Program is presented in sequential sessions. Participants must attend all sessions.

Session I: January 9, 2011 (beginning at 1:00 pm) through January 14, 2011 (ending at 2:00pm)

Session II: June 5, 2011 (beginning at 4:00 pm) through June 8, 2011 (ending at 2:00pm)

Additional information about the program is available including descriptions of the program elements, a curriculum outline of the sessions, and tuition information. For a copy of the brochure, please send an email to Rosemary Clements at rose AT esopassociation.org.

Thursday, July 22, 2010

ESOPs On the Air In the Air

The next time you find yourself on a plane, plug in to the in-flight radio system. Why? Well, you could find yourself listening to an interview with ESOP Association President, J. Michael Keeling. His interview, which focuses on ESOPs and employee ownership in America, can be heard on American Airlines throughout the month of July, on Delta Airlines in September and October, and on US Airways in September and October.

In addition to the in-flight radio program, a small spot on the CNN Airport Network will run as well. Keep a look out for it on the terminal televisions during July.

You can listen to the Sky Radio interview here and watch the CNN Airport Network spot here.

Tuesday, July 27, 2010

H.R. 5207 Finds Co-Sponsors in the House

H.R. 5207, the ESOP Promotion and Improvement Act of 2010, introduced May 5, 2010 by Congressman Charles W. Boustany, Jr. (R-LA-7) and Congressman Earl Pomeroy (D-ND-ATL) has added new co-sponsors.

Co-sponsors of H.R. 5207 as of July 27, 2010 are: Congressman Rodney Alexander (R-LA-5); Congressman Jim Gerlach (R-PA-6); Congressman Brett Guthrie (R-KY-2); Congressman Phil Hare (D-IL-17); Congressman Wally Herger (R-CA-2); Congressman Maurice Hinchey (D-NY-22); Congressman Tim Holden (D-PA-17); Congressman Charlie Melancon (D-LA-3); Congressman Todd Russell Platts (R-PA-19).

The legislation is the House counterpart to S. 1612, the Senate version of the ESOP Promotion and Improvement Act of 2009 which was introduced by Senator Blanche L. Lincoln (D-AR) on August 6, 2009. We’ll be posting a new co-sponsors list for S. 1612 later in the week.

For additional information about H.R. 5207 visit The ESOP Association’s website, http://www.esopassociation.org, and click on the Government Affairs link on the top of the homepage. Information about the bill can also be found on page one of the May 2010 issue of the ESOP Report and on the Employee Ownership blog.

To learn how to persuade your member of Congress to co-sponsor H. R. 5207, download a copy of theAdvocacy Kit and the Congressional Company Visit Kit.

Thursday, July 29, 2010

S. 1612 – New Co-Sponsor in the Senate

S. 1612, the ESOP Promotion and Improvement Act of 2010, introduced August 6, 2009 by Senator Blanche. L. Lincoln (D-AR) has a new co-sponsor that we wanted to highlight – Senator Olympia J. Snowe (R-ME).

Senator Snowe serves as a senior member on the two Senate Committees with direct jurisdiction over the provisions of S. 1612: the Senate Committee on Finance, which is the Committee of original jurisdiction over all ESOP tax related causes, and as the Ranking Member of the Senate Committee on Small Business, which has jurisdiction over SBA laws and regulations that impact ESOPs.

Thanks to our New England Chapter members for taking the time to speak with Senator Snowe about ESOPs and employee ownership.

The full list of S. 1612 co-sponsors as of July 29, 2010 are: Senator Maria Cantwell (D-WA); Senator Saxby Chambliss (R-GA); Senator Mike Crapo (R-ID); Senator Johnny Isakson (R-GA); Senator Mary L. Landrieu (D-LA); Senator Patrick J. Leahy (D-VT); Senator Bernard Sanders (I-VT); Senator Olympia J. Snowe (R-ME); and Senator Sheldon Whitehouse (D-RI).

The legislation is the House counterpart to H.R. 5207, the House version of the ESOP Promotion and Improvement Act which was introduced May 5, 2010 by Congressman Charles W. Boustany, Jr. (R-LA-7) and Congressman Earl Pomeroy (D-ND-ATL).

For additional information about S. 1612 visit The ESOP Association’s website, http://www.esopassociation.org, and click on the Government Affairs link on the top of the homepage.

To learn how to persuade your member Senator to co-sponsor S. 1612, download a copy of the Advocacy Kit and the Congressional Company Visit Kit.

August 2010

The following articles appeared in August 2010.

Tuesday, August 03, 2010

Congressman Dana Rohrabacher Receives Joint Committee on Taxation Analysis of H.R. 692

Congressman Dana Rohrabacher (R-CA-46) recently received a letter from the Joint Committee on Taxation estimating the revenue effect of H.R. 692 which he introduced on January 26, 2009. If it becomes law, H.R. 692 will amend the Internal Revenue Code of 1986 to exclude from gross income compensation received by employees consisting of qualified distributions of employer stock. The letter, which is very detailed, discusses several issues of the proposal which will provide special tax treatment for a new category of stock compensation. According to the letter, the Joint Committee on Taxation estimates the proposal would have the following impact on revenue: (All numbers are in billions.)

2011    2012   2013   2014    2015    2016    2017    2018

-0.3 B  -0.4 B  -0.4 B  -0.4 B  -0.5 B   -0.5 B   -0.6 B   -0.6 B

2019        2020

-0.7 B    -0.8 B

The chart also estimates the revenue impact for 2010-15 which is -2.1 B and for 2010-20 which is -5.2 B.

If you would like a copy of the letter of the Joint Committee on Taxation’s estimation of H.R. 692, please send an email to media AT esopassociation.org with H.R. 692 in the subject line.

Thursday, August 05, 2010

Rutgers Fellowships

The Employee Ownership Foundation works to increase knowledge of employee ownership among thought leaders, academics, the media, and the general public. A more recent mandate of the Foundation has been funding academic fellowships for scholars researching broad-based employee ownership in America. The following is a quick rundown of fellowships awarded this year and administered by the Rutgers’s School of Management and Labor Relations (SMLR).

In April 2010, Rutgers SMLR announced the establishment of the Smiley Fellowship in economic history to encourage the study of significant issues related to broad-based employee ownership in American History.

Robert W. Smiley, Jr., a long time member of The ESOP Association, established the fellowship through the Foundation. Mr. Smiley is the founder, chair, and managing director of The Benefit Capital Companies Inc. with offices in California, Hawaii, Nevada, New York, and Texas. He is also the managing editor and lead author of Employee Stock Ownership Plans: ESOP Planning, Financing, Implementation, Law and Taxation, a reference work for business people and legal and financial professionals which was published by the Beyster Institute at the University of California at San Diego.

Jefferson Decker, a lecturer in history and the Hertog Postdoctoral Fellow at Columbia University, is serving as the first Smiley Fellow in economic history. He received his doctorate in history from Columbia in 2009. He is beginning a study of the political history of investment culture and retirement security in the U.S. during the 1982 – 2000 bull market in equities.

In addition to the Smiley Fellowship in economic history, Rutgers’s SMLR announced the establishment of the Louis O. Kelso Fellowships for the study of broadened ownership of capital in a democratic society on May 6th.

The Fellowships honor Dr. Louis O. Kelso, a banker, lawyer and political economist who created the ESOP as it is known today. The Employee Ownership Foundation will support the Louis O. Kelso Fellowships.

The first Kelso Fellows are: Steven Freeman, a resident scholar at the University of Pennsylvania, who is studying ESOP adoption and functioning in times of adversity; Ryan Hammond, a doctoral candidate at the Massachusetts Institute of Technology, who is examining companies in green technology industries that share ownership; Jeffrey Moriarty, an associate professor at Bentley University, who is exploring the business ethics of firms in an economic democracy; Erik Olsen, an assistant professor at the University of Missouri at Kansas City, who is researching the emergence and performance of majority employee-owned ESOPs; Frank Shipper, a professor at Salisbury University, who is writing case studies of firms with ESOPs and high employee involvement.

Earlier this year, Rutgers SMLR also announced the Beyster Fellows which are funded by the Foundation for Enterprise Development (FED). The Beyster Fellowships are in honor of Dr. J. Robert Beyster, the founder of Science Applications International Corp. (SAIC) and is its former CEO and chair. Dr. Beyster also founded the FED to carry on research into broad-based employee ownership.

Below is a list of the fellows for 2009- 2010 and 2010 – 2011.

Tuesday, August 10, 2010

Lobbying 401

Yes, 401. It might sound as if we’re skipping a lesson, or lessons, but we’re not. Trust us. Lobbying 401 is all about the finesse, the soft touch, the thank you if you will.

As we all know, people liked to be thanked. When working with members of Congress, it’s an extremely important part of the work that we are all doing to increase knowledge about employee ownership. Although, sometimes it is more than just a small thank you note.

To illustrate, let us tell you a tale…

A member of the New England Chapter of the Association set out to meet with his member of Congress. He’s a charismatic guy and isn’t afraid to speak up when a topic is close to his heart. Luckily for us, employee ownership through an ESOP holds such a place. He decided to attend a town hall meeting where his Senator would be speaking, and at the end of her presentation, stood up and asked her, in front of everyone present, to visit his company. She agreed and put him in touch with the people in her office.

Skip ahead to the Association’s Annual Conference in Washington, DC. He comes to town for the conference and schedules a meeting with his Senator’s office. While he’s meeting with the Senator’s top staff aides, being the outspoken person that he is, he mentions that the Senator has not visited his company yet. He decides that he won’t be taking no for an answer and continues to bring up the topic. By chance, the Senator walks in to the meeting to say hello and he tells her, diplomatically, they were just talking about the visit he mentioned to her earlier in the year. Well, as you can imagine, this small statement creates some tension, but being the charismatic person that he is, smoothes the situation over and a visit is agreed on. A short time later, the visit happens. It’s a success with the Senator being very impressed by the ESOP company.

Later in the summer, the New England Chapter hosts a meeting at the company we just talked about. At that meeting, the Senator’s State Representative reads a note on behalf of the Senator that says she will be co-sponsoring S. 1612 – the ESOP Promotion and Improvement Act of 2009.

A Chapter Officer of the New England Chapter is very pleased with the news and writes a note of thanks to the Senator’s Legislative Aide in DC who in turn shares the email with the Senator. He then gets this letter from the Senator:

If you’re wondering, we’re talking about Shawn Moody of Moody’s Collision Centers, Inc. in Gorham, ME and the David in the letter above is Dave Fitz-Gerald of Carris Reels, Inc. in Proctor, VT. He is the President of the New England Chapter of the Association.

So, this is lobbying 401. It’s all about the relationships. It doesn’t stop after sending a letter. It doesn’t stop after a meeting when in DC for the Annual Conference. It doesn’t stop with a company visit. It doesn’t stop with a Chapter meeting. It doesn’t even stop with the thank you letter. It’s about communication and persistence, that’s lobbying 401.

Wednesday, August 11, 2010

The ESOP Association and the Employee Ownership Foundation Release Results of the 2010 ESOP Company Survey

We wanted to share the following press release which was sent out by The ESOP Association this morning regarding the results of the 2010 ESOP Company Survey.

 

For Immediate Release: August 11, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy AT esopassociation.org

The ESOP Association and the Employee Ownership Foundation Release Results of the 2010 ESOP Company Survey

August 11, 2010 (Washington, DC) – The ESOP Association and the Employee Ownership Foundation released today the results of a survey conducted among the Association’s 1,400 corporate members in the first quarter of 2010 which confirms positive benchmarks for ESOP (employee stock ownership plan) companies. The company survey is conducted every five years and was last completed in 2005. Prior to 2005, the survey was completed in 2000.

The eye-opening statistics of the 2010 survey are the increase in age of the ESOP and account balances. In 2010, the average age of the ESOP was reported to be 15 years as opposed to prior years where the ESOPs reporting where much younger. In addition, the average account balance has risen dramatically to $195,222.65; a much higher figure which correlates with the age of ESOPs participating in this year’s survey.

The 2010 results have also shown a rise in the number of S corporation ESOP companies which was reported as 73% this year. This figure is in line with ESOP Association membership figures that show 66% of members as S corporations. Another interesting figure was the number of C corporations considering converting to an S. In previous years, the number answering yes to this question was 45%, in 2010 the number dropped 10% to 35.5%. The reason for establishing an ESOP has not changed over the last decade, with 50% of the respondents reporting that their ESOPs were created as part of an exit strategy, or a buyout from current owners. This figure is not surprising considering this has been the driving force behind the establishment of ESOPs for more than two decades now. In addition to an exit strategy, 23% reported that the ESOP was created to provide an additional employee benefit and another 21% stated the attraction of the employee ownership concept as the reason.

The figure for the amount of stock held by the ESOP has increased dramatically to 78% in 2010, up 10% over the 2005 survey data, and up 12% compared to the 2000 data. The number of currently leveraged ESOPs has decreased with 52% of companies reporting that they are not currently leveraged and have paid off ESOP debt. These results also reflect the age of the ESOP as most ESOP loans are a 7-12 year term. Approximately 90% of members reported having retirement savings plans in addition to the ESOP including the use of 401(k) plans, pension plans, stock purchase plans, and stock options.

In terms of motivation and productivity, 84% of respondents agree that the ESOP improved motivation and productivity. In addition, 78% of companies participating in the survey advertise the fact that they are employee owned through websites, in company literature, and in marketing campaigns.

“The data from the Association’s company survey, which is done every five years, proves the case for more employee ownership,” said J. Michael Keeling, president of The ESOP Association. “When coupled with 30 plus years of research, this survey shows employee owned companies are better performing, provide greater wealth creation for employee owners, stay in business longer, have greater profitability, offer better benefits, and have more employee involvement in decision making. Shared capitalism offers new prospects for U.S. businesses, and as a community, we need to be promoting these benefits more widely.”

The above is a sampling of the data that was collected. In addition to providing members with a comprehensive summary of the results, a publication detailing all 45 questions and responses will be available for purchase by members and non-members in the fall of 2010. This year, 460 members participated in the ESOP Company Survey.

The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy.

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Monday, August 16, 2010

Employee Ownership Month 2010 – Get Your Press & Event Planning Kit Today

What will YOU be doing?

Every October, for over 20 years, The ESOP Association and its members have been celebrating Employee Ownership Month (EOM). Each summer, the Press & Event Planning Kit, which highlights EOM activities of ESOP Association members, is shared with all corporate members to help in planning events. You can download a copy of the 2010 Press & Event Planning kit here.

Employee Ownership Month is a celebration of the incredible spirit of employee ownership and an opportunity to educate employee owners about the tremendous benefits of ESOPs.  It is also an opportunity to educate the public, elected officials, and the media as to why employee ownership through ESOPs is good public policy and this Kit will help you in your endeavors.

This year, the Press Kit is bigger than ever filled with information on events, public relations strategies, and government relations information. It is estimated that a document like this would cost a minimum of $25,000 to create if you commissioned a prominent firm to research and produce the publication for your company. You’re getting it free as a member privilege from the Association.

Get started TODAY! Download your copy of the 2010 Press & Event Planning Kit from The ESOP Association’s website. A link to the Kit can be found on the Employee Ownership Month page.

If you have questions or would like to submit stories about your EOM events, please send an email to media@esopassociation.org.

All corporate members of The ESOP Association will be receiving by mail a complimentary copy of this year’s winning poster designed by Entertainment Partners of Burbank, CA.

If you would like to order additional poster copies, please be sure to use the order form which is located here.

Thursday, August 19, 2010

Advisory Committee on ESOP Valuation Releases Advanced Issue Brief

The ESOP Association is pleased to announce the release of Advanced ESOP Issue Brief # 25, Integrated Relationships of ESOP Repurchase Obligation and Valuation.  A copy of the Issue Brief can be downloaded from the Members Only section of the website. Issue Briefs are free to members of The ESOP Association.

The ESOP Association would like to express its appreciation to our Advisory Committee on Valuation, Chaired by Kathryn Daly of Columbia Financial Advisors, Inc. and the members of the committee, who comprise the top ESOP valuation experts in the country.

Since 1998, the tax relief afforded to an ESOP-owned S-Corporation has led to situations that the ESOP community did not fully anticipate, including those who provide valuation services to ESOP sponsors. These situations are:

  • An increase in the average percentages of stock ownership the ESOP owns in their respective ESOP companies.
  • Compounded growth in stock value as S-Corporation tax benefits are combined with a good economy since the early to mid-2000s.
  • Levels of repurchase obligation which should not be ignored.
  • Unique opportunities and challenges as the ESOP world and M&A world intersect.

While there can be dialogue about “which came first” in a chronological sense, these interrelated factors are exerting a growing effect on the ESOP community.

In response thereto The ESOP Association’s Advisory Committee on Valuation will in this “White Paper” articulate how an ESOP company’s repurchase obligation should be understood and managed, and how the repurchase obligation associated with the ESOP should be reflected in the valuation. Any financial and valuation analysis must go beyond the mechanics of repurchase obligation to how the ESOP company intends to manage its repurchase obligation.

This topic will be discussed at the Las Vegas ESOP Technical Conference & Trade Show, November 4 & 5, 2010.

All members of The ESOP Association have access to complimentary copies of ESOP Issue Briefs. To access a complete list of Issue Briefs and download a copy of Issue Brief #25, Integrated Relationships of ESOP Repurchase Obligation and Valuation, login to the Members Only section of the Association’s website.

Questions please contact Tony Marchena at toll free 1(866) 366-3832 or by emailing him at pubs@esopassociation.org.

Thursday, August 19, 2010

Company Survey Data on Average Account Balances of ESOP Companies Raises Eyebrows

Since the August 11, 2010, release of the data garnered by the survey of ESOP Association members that indicated that the average ESOP account balances of the respondents was nearly $200K, several experts in ERISA have pushed back with skeptical reactions based on earlier data collected by researchers. It is important to note that these account balance figures clearly are not representative of the entire ESOP universe, but are the responses of the ESOP companies that responded to this survey and should be held in that context.

Also of interesting to note: In the first 1989 survey, when the overwhelming majority if ESOP companies had had their ESOP for less than five years, the average account balance according to Association members responding was reported as $17,000.

Much of the push back revolves around the fact that no prior collection of data of ESOP account balances, or of any defined contribution account balances such as data from 401(k) plans, has ever put the average value of the balances anywhere near $100K, much less $200K.

As the President of The ESOP Association, Michael Keeling, kept emphasizing to reporters after the release of the results, the respondents to The ESOP Association/Employee Ownership Foundation survey were members of The ESOP Association, most have had their ESOPs for many years, (the average at 15 years) with ESOP leverage totally paid, and their ESOPs were large in terms of the share of company ownership.  The survey was not of the general ESOP company population, which of course includes many ESOPs recently formed, ESOPs still paying ESOP debt, and who did not have an ESOP during the boom years of the 90s up until last quarter 2008, and of ESOPs with ownership of less than 30% of the company.

So it is important to remember this fact about the company survey and the $200K number — the respondents, mature ESOP companies, and members of The ESOP Association, with large ESOPs are the crème de la crème of the ESOP world.

No one at the Association is claiming prior data on ESOPs and k plans is wrong, but that the less than $100K account balances, while accurate data for the entire universe of ESOPs and k plans, do not do justice to those companies that stick with their ESOP arrangement, and thus are providing significant retirement savings for a loyal work force.

One thing to be noted is that many ESOP service providers often express the view that their anecdotal experience is that their ESOP clients have much larger account balances to provide retirement savings for participants than their non-ESOP clients, and that they are perplexed as to why the general data does not bear out their real world experience.

Here again, we believe the answer is that ESOP service providers active in The ESOP Association are more likely to have as clients the very companies that responded to the survey — mature ESOP companies with large ESOPs as measured by share of company ownership.

Bottom line — yes prior general data is correct.  No one at the Association claims otherwise.  But we hold our heads high, as should all ESOP advocates, that with public policies to facilitate ESOP arrangements being sustainable, ESOPs are, in the vast majority of instances, amazingly good retirement savings programs.

Monday, August 30, 2010

White House Task Force Suggests Eliminating ESOP Tax Benefits

Labels ESOPs as Bad Retirement Plans

Administration’s Reaction Not Known

 

ESOP Community’s Plan?

STAY ON COURSE!

 

While not unexpected, given that tax and ERISA experts continue to attack ESOPs — take note that the last three White House/Treasury set of recommendations since 2005 have all recommended eliminating ESOP tax benefits in order to lower the corporate tax rate — it is irritating that the policy of expanding employee ownership through the ESOP model that keeps jobs in America while building wealth for employee owners is ignored by these advisors to the President of the United States.

It is not clear what the impact of the so-called President’s Economic Recovery Advisory Board: The Report on Tax Reform Options: Simplification, Compliance, and Corporate Taxation, August 2010 will be. It is doubtful that Congress will specifically take up the report’s suggestions, but it will have an influence when Congress takes steps to either increase tax revenues to lower the Federal deficit and/or to lower the corporate tax rate on C corporations.

From The ESOP Association’s vantage point, major overhaul of Federal tax laws has been predicted over the past 15 months for the upcoming next two years.

What are ESOP advocates to do?

Stay the course. The ESOP community has over 100 friends of ESOPs in the current Congress. Our community needs to continue to stay, in a polite and civil way, on the radar screens of these men and women with positive ESOP stories.

With regard to those members of Congress who have no track record of being “for” ESOPs, the ESOP community needs to expose these women and men to positive ESOP stories in their states and Congressional Districts.

The proven fact is: The best defense against attacks on ESOP law is a good offense. We need members of Congress to declare FOR pro-ESOP proposals such as S. 1612 and H.R. 5207. To download “how to” guides, click here for the Advocacy Kit and here for the Congressional Company Visit Kit, and for information on pro-ESOP legislation such as S. 1612 and H.R. 5207.

Keep up with developments and details by reading the ESOP Report, the Employee Ownership Blog, and legislative bulletins from the Association.

Call or email The ESOP Association for immediate answers to any questions you might have.

Our ESOP community must continue to be proactive in persuading members of Congress that it would be foolish to snuff out ESOPs. Clearly, the unelected “experts” do not listen, and/or take the time to learn about the success of employee ownership through ESOPs.

September 2010

The following articles appeared in September 2010.

Thursday, September 02, 2010

Senator Bernard Sanders Holds Vermont Hearing on Employee Ownership

ESOP Association Members Testify in Support of Legislation

On August 26, 2010, Senator Bernard Sanders (I-VT) held a Congressional hearing in the Vermont Statehouse regarding legislation he introduced in 2009 that would increase employee ownership in America.

The hearing highlighted the following legislation: S. 2909 which would provide state programs to encourage employee ownership and participation in business decision making throughout the United States.  The second, S. 2914, would provide for the establishment of the United States Employee Ownership Bank. Both pieces of legislation are pending amendments to H.R. 5297, the Small Business Lending Act, which is awaiting action in the Senate. You can read about the Small Business Lending Act on the Association’s website here.   Additional information about Sanders’s legislation can be found here.

Several members of The ESOP Association took part in the hearing including:

Steve Voigt, President & CEO, King Arthur Flour Company, Norwich, VT

Cindy Turcot, Chief Operating Officer, Gardener’s Supply Company, Burlington, VT

Christopher Mackin, President, Ownership Associates, Inc., Cambridge, MA

Jon Crystal of the Vermont Employee Ownership Center and Bill McIntyre of the Ohio Employee Ownership Center also testified.

You can watch videos of the hearing here.

If you saw our post of August 30 (White House Task Force Suggests Eliminating ESOP Tax Benefits), then you know what we’re about to say next — telling your ESOP stories is important for keeping and creating jobs in America. Watch these videos by ESOP company executives and advocates talk about why ESOPs can save the economy. Then go out there are tell a few stories of your own, preferably to your member of Congress.

Tuesday, September 07, 2010

New H.R. 5207 Co-Sponsors in the House

H.R. 5207, the ESOP Promotion and Improvement Act of 2010, introduced May 5, 2010 by Congressman Charles W. Boustany (R-LA) and Congressman Earl Pomeroy (D-ND) has two new co-sponsors: Congressman Walter B. Jones, Jr. (R-NC) and Congressman Collin C. Peterson (D-MN).

The full list of co-sponsors as of September 7, 2010:

Congressman Rodney Alexander (R-LA)

Congressman Jim Gerlach (R-PA)

Congressman Brett Guthrie (R-KY)

Congressman Phil Hare (D-IL)

Congressman Wally Herger (R-CA)

Congressman Maurice D. Hinchey (D-NY)

Congressman Tim Holden (D-PA)

Congressman Walter B. Jones, Jr. (R-NC)

Congressman Charlie Melancon (D-LA)

Congressman Collin C. Peterson (D-MN)

Congressman Todd Russell Platts (R-PA)

H.R. 5207 is the House counterpart to S. 1612, the Senate version of the ESOP Promotion and Improvement Act which was introduced August 6, 2009 by Senator Blanche. L. Lincoln (D-AR).

For additional information about H.R. 5207 visit The ESOP Association’s website and click on the Government Affairs link on the top of the homepage.

To learn how to persuade your member of Congress to co-sponsor H.R. 5207, download a copy of the Advocacy Kit and the Congressional Company Visit Kit.

Thursday, September 09, 2010

Early Bird Registration Deadline for the Las Vegas Conference & Trade Show Approaching

The 2010 Las Vegas Conference & Trade Show, which will take place at Caesar’s Palace on November 4 & 5, is closing in on the early bird registration rate deadline.

You can register on The ESOP Association’s website.

Don’t miss out on your chance to attend the largest ESOP conference in the world.

If you have any questions about the Conference or Trade Show, please send an email to meetings@esopassociation.org.

Monday, September 13, 2010

ESOP Companies Hit by Great Recession in 2009 but Track Record Remains Positive

We wanted to share the following press release which was sent out by The ESOP Association today regarding the results of the 2010 Economic Performance Survey.

___________________________________

 

For Immediate Release: September 13, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

ESOP Companies Hit by Great Recession in 2009 but

Track Record Remains Positive

 

September 13, 2010 (Washington, DC) – Results from the Employee Ownership Foundation’s 19th Annual Economic Performance Survey of ESOP (employee stock ownership plan) companies that are members of The ESOP Association show that ESOPs are not immune to economic developments beyond their control. The Survey also evidences, however, that despite the most severe economic downturn since the Great Depression, ESOP companies on the whole continue to have increased share value, better productivity, and overwhelming support among leaders of the companies.

For example, as has been the case in all 19 years the survey has been conducted, a very large majority, 91% of survey respondents, reported that creating employee ownership through an ESOP was “a good business decision that has helped the company.” This number demonstrates that even though ESOPs were not immune to impacts of the Great Recession, leaders of ESOP companies still feel strongly that the company is better off than their non-ESOP counterparts. In addition, 63% of respondents indicated the ESOP positively affected the overall productivity of the employees. In terms of profitability and revenue, as expected, both were down from previous years — 63% of respondents reported that profitability decreased and 71% of respondents noted that revenue decreased. On the other hand, for a majority of respondents (59%), the company’s stock value increased as determined by outside independent valuations, 37% of the respondents did report a decline in share value, and 4% reported no change. Of those who did report a decreased share value, 87.3% reported the decline was less than 30% from prior years.

“Despite a downturn in the economy that has no comparison since the Great Depression, this survey shows overwhelmingly ESOP companies that responded still felt the ESOP made their companies competitive and productive,” said J. Michael Keeling, president of the Employee Ownership Foundation. “At no time has the ESOP community ever claimed that an employee-owned company was immune to economic trials and tribulations, or the risks of ownership in a free enterprise economy. Evidence clearly shows that for many employee owners their share price decreased, but not at the levels we saw in the public stock market. While a free enterprise system never guarantees full economic security, the numbers in this survey do justify the need to promote policies that will expand ownership of productive, connected assets, such as employer securities.”

The survey asked companies to indicate their performance in 2008 relative to 2009:

  • 33.5% indicated a better performance; 54.3% indicated a worse performance; and 12.2% indicated a nearly identical performance to the previous year
  • 29% indicated revenue increased; 71% indicated revenue decreased
  • 37% indicated profitability increased; 63% indicated profitability decreased
  • 61% of companies indicated they have created an ESOP education program or ESOP advisory committee since establishing the ESOP

The 2010 Economic Performance Survey was distributed to The ESOP Association’s over 1,400 members in May 2010. The results are based on 418 responses, a 30% response rate.

For additional information about the survey, please visit The ESOP Association’s website at www.esopassociation.org.

The Employee Ownership Foundation is The ESOP Association’s affiliated 501 (c)(3) organization dedicated to promoting employee ownership.

Founded in 1978, The ESOP Association represents over 1,400 ESOP companies who believe that employee ownership will improve American competitiveness, increase productivity through greater employee participation and strengthen our free enterprise economy.

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Wednesday, September 15, 2010

The Employee Ownership Foundation Releases Study on ESOPs as Retirement Benefits

We wanted to share the following press release which was sent out by The ESOP Association today regarding the results a study on ESOPs as retirement benefits.

______________________________________________________

 

For Immediate Release: September 15, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

The Employee Ownership Foundation Releases Study on ESOPs as Retirement Benefits

September 15, 2010 (Washington, DC) – The Employee Ownership Foundation released today the results of an extensive study that evidences that ESOPs (employee stock ownership plans) provide more employee benefits than non-ESOP companies.

The study, which reviewed data from the Department of Labor Form 5500 on defined contribution retirement plans, found:

  • ESOP companies have at least one plan, the ESOP, but more than half (56%) have a second retirement savings/defined contribution plan, likely a 401(k) plan. In comparison, the Bureau of Labor statistics reports that 47% of companies have some sort of defined contribution plan which shows that an ESOP company is more than likely to have two defined contribution plans than the average company is to have one plan.
  • The average ESOP company contributed $4,443 per active participant; in comparison to a non-ESOP company with a defined contribution plan which contributed on average $2,533 per active participant. This study found that on average ESOP companies contributed over 75% more to their ESOPs than other companies contributed to their primary plan.
  • The study found that the value of assets contributed by the ESOP company to all defined contribution plans is substantially higher than in non-ESOP companies. The study estimates that the average ESOP participant has company-sourced plan assets that are more than twice as much as participants in non-ESOP companies.
  • An ESOP participant in the average ESOP company has company-sourced plan assets worth 2.2 to 2.29 times as much as the assets held by the average participant in an average non-ESOP company.
  • The study estimates that the average ESOP participant has $55,836 in combined defined contribution plans, compared with $50,525 participants in non-ESOP companies. Controlling for company size, industry, and age of plan suggests that total assets per participant are approximately 20% higher in ESOP companies when compared with non-ESOP companies.

“This evidence justifies laws that encourage ESOP creation,” states J. Michael Keeling, president of the Employee Ownership Foundation. “This study of all ESOPs, no matter their age and/or ESOP debt status, combined with data from other sources shows that ESOP benefits can be very substantial for employee owners.”

This project was commissioned by the Employee Ownership Foundation and performed by the National Center for Employee Ownership (NCEO). The NCEO consulted with two trustees of the Employee Ownership Foundation: Hugh E. Reynolds, III, Crowe Horwath LLP, Fort Lauderdale, FL and Robert W. Edwards, Steiker, Fischer, Edwards & Greenapple, P.C., Providence, RI.

For additional information about the study, please visit The ESOP Association’s website at www.esopassociation.org.

The Employee Ownership Foundation is The ESOP Association’s affiliated 501 (c)(3) organization dedicated to promoting employee ownership.

Founded in 1978, The ESOP Association represents over 1,400 ESOP companies who believe that employee ownership will improve American competitiveness, increase productivity through greater employee participation and strengthen our free enterprise economy.

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Friday, September 17, 2010

Hotel Room Block Cut-off Date for the Las Vegas Conference & Trade Show Approaching

The 2010 Las Vegas Conference & Trade Show, which will take place at Caesar’s Palace on November 4 & 5, is closing in on the hotel room block cut-off date. If you would like to take advantage of the room block rate, you need to register NOW.

You can find hotel information here.

Don’t miss out on your chance to attend the largest ESOP conference in the world.

If you have any questions about the Conference or Trade Show, please send an email to meetings@esopassociation.org.

Monday, September 20, 2010

Easy to Get Annoyed

One thing that is a tradition at the national ESOP Association office is reading, religiously, the Daily Tax Report and the Pension & Benefits Reporter weekly report published by the Bureau of National Affairs, Inc. No complaint about the materials in these publications, as both give it straight, and give both sides of the coin in its coverage of tax and benefits issues.

But because it gives equal voice to both sides of hot issues, it is easy to get very annoyed when reading the drum beat, candidly endorsed by the current officials at the Department of Labor’s Employee Benefits and Security Administration, by the so-called “plaintiff’s bar” that the law requires the trustees of an ESOP to ditch company stock when its value goes down.

Or they might say that this characterization is a stretch of their position, as they claim they are after the “crooks” that cheat and steal, causing company share value to go down.

For a close read of what they say, see the September 14, 2010, issue of Pension & Benefits Reporter as two prominent class-action lawyers make a case that trustees violate ERISA when company stock value drops. This article demonstrates more than a goal to get the liars, cheaters, flim-flamers, etc. It makes clear a view that Congress’s endorsement of ESOPs and employee stock ownership is very narrow, and that company stock is a stupid asset in a retirement savings plan. [Their views are made clear in the last part of the 15th paragraph on page 2042 of the September 14th issue. It is basically that the Congress only exempted ESOPs from the diversification rule, and otherwise Congress has done nothing to encourage ESOPs. Duh…did someone forget that the Internal Revenue Code’s provisions promoting ESOPs have been reviewed and debated many times in the tax committees of both the House and the Senate and on the floor of the U.S. Senate many times, with ESOPs always being overwhelmingly endorsed and promoted? It is like the ERISA experts who fight ESOPs believe that the tax code provisions on retirement savings plans are nonsense.]

And recently, a top DC official of the Department of Labor’s Solicitor’s Office, which has filed several amicus briefs in support of the plaintiff lawyer’s attacks on ESOPs, made it clear that in his view the law had little support of ESOPs as retirement savings plans in comparison to his department’s view of what trustees should do when company stock value drops.

Extremely annoying to say the least when the data is overwhelmingly positive that in the 30 plus year history of ESOPs, with three new studies and surveys out just this past month — see blogs of August 11th, September 13th, and September 15th — show that in the vast majority of instances, the ESOP companies do much better for employees’ retirement savings than non-ESOP companies.

In fairness to the class action lawyers and DOL’s DC officials, they are not alone, as recall that a recent White House task force suggested eliminating all specific tax benefits for ESOPs, because the report said, ESOPs are bad retirement savings plans.

Well, being annoyed is stupid and a better outcome would be just to have a debate about ESOPs with the critics. The ESOP community can hold its own.

Thursday, September 23, 2010

Employee Ownership Overseas: The European Federation of Employee Share Ownership and Australian Employee Buyout Centre Make Push for U.S. ESOP Model

The Employee Ownership Foundation is a member of the European Federation of Employee Share Ownership (EFES) and gets periodic updates on the group’s work. You can find more information about the work of the EFES here. Quick fact — it’s the organization that represents employee owners, employee-owned companies and others in the European employee ownership community

While scanning through the EFES’s Annual Report, we came across a few things that we wanted to share about the organization’s lobbying efforts. We won’t be going into specifics about the organization’s lobbying efforts, but if you’re interested in that, you can probably find information on the EFES’s website; we, however, wanted to note a point of interest to us.

The EFES’s report sets forth the fact that a large portion of business owners in Europe will soon be retiring —- about one third of European entrepreneurs, mainly those running family enterprises — which would affect close to three million jobs each year in the coming decade. It is believed that this mass retirement will threaten the structure of family-owned businesses in the European Union.

While this in it itself is an interesting fact, what is really interesting is that ESOP-like structures are recommended as a vehicle for business succession that can help alleviate problems that might occur as business owners retire in the coming decade. The report states that full or partial ESOP buyouts provide an ideal vehicle to facilitate transitions. It would be an attractive alternative to selling the business to outsiders and to allow employees to keep control.

Does this sound familiar at all? We thought it might. It’s interesting to see the U.S. model of employee ownership being promoted as a means of business succession planning. What’s even more interesting is that, according to the EFES’s report, the European Parliament agreed to take the first steps toward making this policy a reality.

Another overseas group we wanted to highlight was the Australian Employee Buyout Centre. You can find information about the Centre here. According to the Centre’s website its mission is to preserve, protect, and enhance jobs through employee ownership. What is even more interesting — the project is being funded by the Australian Government. Yep, another country with government interest in employee ownership. Why isn’t the U.S. government at the highest levels doing that?

Information about both the EFES’s lobbying efforts and the Australian Employee Buyout Centre came from the most recent September EFES newsletter which is online here.

Thoughts?

Monday, September 27, 2010

New Speakers Announced for the Las Vegas Conference & Trade Show

New speakers have been announced for the 2010 Las Vegas Conference & Trade Show. The Conference will take place at Caesar’s Palace on November 4 & 5.

To view an updated agenda with speakers and breakout session descriptions, click here.

Don’t miss out on your chance to attend the largest ESOP conference in the world.  There is still time to register.

If you have any questions about the Conference or Trade Show, please send an email to meetings@esopassociation.org.

Wednesday, September 29, 2010

New Employee Ownership Foundation Website Launches

The Employee Ownership Foundation has a brand new website! The re-designed site was launched this week and contains information about Foundation projects, the Rutgers Fellows program, and more.

The link is the same — http://www.employeeownershipfoundation.org/ — but the look and information is all new. Stop by and visit the new and improved Employee Ownership Foundation website.

Thursday, September 30, 2010

President Obama Responds to ESOP Question at Richmond, VA Town Hall Meeting

On September 29, 2010, Tom Roback, Managing Director of Blue Ridge ESOP Associates located in Charlottesville, VA, had the opportunity to attend a town hall meeting with President Obama held in Richmond, VA. He also had the good fortune to ask a question. And, yes, he did ask about ESOPs.

You can watch video of the question courtesy of WTVR, the local CBS channel in Richmond, VA here.

Below is the excerpt of Tom’s question to the President from the White House Transcript which you can read in full here.

Seeing the video is interesting because it reveals President Obama’s body language when listening and responding to Tom’s question.

Q    Thanks, Mr. President.  I manage a small business.  We serve ESOP companies — hundreds of ESOP companies.  And I’ve just found it extraordinary in visiting many of these ESOP companies with the culture that they’ve developed, and the productivity and competitiveness, and it’s a good model for keeping jobs here in the U.S.
 
     THE PRESIDENT:  You want to just explain to everybody what ESOPs are?  These are employee-owned businesses — I just want to make sure everybody understands.
 
     Q    Exactly, exactly.  And I wanted to just — the ESOP laws that have been in place for over 35 years have allowed employee owners to share a piece of the action of the business while not having to get in their — dig in their own pockets for that, so it’s helped them get to retirement, which is tough these days long term.
 
     My main question is just, with your good initiatives — you’re for focusing on small business in the new act — will you consider encouraging or expanding the law to help more small privately held companies look to the ESOP model?  Thank you.
 
     THE PRESIDENT:  I would absolutely be interested in taking a look at it.  The idea behind these ESOPs is that if employees have a piece of the action — they’re essentially shareholders in these companies — then you are aligning the interests of workers with the interests of the company as a whole.  
 
Now, what that means is, is that when a company has a tough time, workers have to take a hit because they’re owners, essentially.  On the other hand, when things are going well, they’re getting a share of the profits.  And so theoretically, at least, it’s something that can help grow companies, because the workers feel like they’re working for themselves, and they’re putting more of themselves into their job each and every day.
 
     I think that it’s something that can be encouraged.  I have not seen specific proposals that are out there legislatively, but I’m sure you can share them with me.
 
     Q    Yes, there actually has been a lot of strong research recently.
 
     THE PRESIDENT:  Good.  So I’ll be interested in taking a look at that stuff.

Many thanks to Tom for putting the ESOP issue straight to the highest elected official in America — the President of the United States of America. God job Tom!

We welcome your view of President Obama’s comment about ESOPs. (Please don’t take off either pro or con on other Administration policies or action. Those views we can all express at the ballot box.)

October 2010

The following articles appeared in October 2010.

Friday, October 01, 2010

Employee Ownership Month 2010

We wanted to share the following press release which was sent out by The ESOP Association this morning regarding the start of this year’s Employee Ownership Month.  If you would like additional information about Employee Ownership Month, please visit The ESOP Association’s website.

 

For Immediate Release: October 1, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

Employee Ownership Community to

Celebrate Employee Ownership Month in October

October 1, 2010 (Washington, DC) – This October, The ESOP Association and the employee ownership community will celebrate Employee Ownership Month, which is a tribute to the tremendous spirit of employee ownership.

Employee Ownership Month is an opportunity for ESOP (employee stock ownership plan) companies across the nation to educate employee owners, the public, and government officials about the incredible benefits of ESOPs. Companies celebrate with picnics, roundtable discussions, and award ceremonies to honor outstanding employee owners.

“Once again, I’m proud to announce October as Employee Ownership Month. Our members work to promote employee ownership and its benefits and deserve to be honored for their efforts,” said J. Michael Keeling, president of The ESOP Association. “In 2010, the Economic Performance Survey, which is conducted by the Employee Ownership Foundation, found that 91% of ESOP companies declared that creating employee ownership through an ESOP was ‘a good decision that has helped the company.’ That’s saying a great deal in these challenging times.”

Facts about employee ownership in the U.S.:

  • There are approximately 11,500 ESOPs in place in the U.S., covering 10 million employees (10% of the private sector workforce).
  • Total assets owned by U.S. ESOPs was estimated to be $901 billion at the end of 2007.
  • The 19th Annual Economic Performance Survey conducted in 2010 by the Employee Ownership Foundation found:

·        91% of survey respondents reported that creating employee ownership through an ESOP was ‘a good business decision that has helped the company.’

·        61% of companies indicated they have created an ESOP education program or ESOP advisory committee since establishing the ESOP.

  • In August 2010, The ESOP Association and the Employee Ownership Foundation released the results of a survey conducted among the Association’s 1,400 corporate members which confirmed positive benchmarks for ESOPs.  The eye-opening statistics of the 2010 survey are the increase in age of the ESOP and account balances.
  • In September 2010, the Employee Ownership Foundation released the results of an extensive study it funded that evidenced that ESOPs provide more employee benefits than non-ESOP companies. The project was done by the National Center for Employee Ownership (NCEO).

For more information on ESOPs and Employee Ownership Month, please visit The ESOP Association’s website at http://www.esopassociation.org.

The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy.

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Friday, October 01, 2010

Q&A with Tom Roback Regarding President Obama’s Response to His ESOP Question at the Richmond, VA Town Hall Meeting on September 29, 2010

You may have already read the blog post — President Obama Responds to ESOP Question at Richmond, VA Town Hall Meeting— if you didn’t, please feel free to take a minute to pop over and read it.

You can watch a video here and read the White House transcript here.

We wanted to follow up that post with a short interview with Tom Roback, Managing Director of Blue Ridge ESOP Associates located in Charlottesville, VA, about how he was chosen to ask President Obama a question.

Employee Ownership Blog — Thanks for joining us Tom. Thanks also for asking President Obama about ESOPs during the town hall meeting. It’s an exciting moment in the sun for ESOPs. How did you come to be in the audience for the event?

Tom — My sister, a teacher in Richmond, invited my wife and me. My brother-in-law owns a small business in Richmond, Riverside Outfitters, and President Obama was looking for a middle-class family to sit down with and discuss the economy and his new Small Business Jobs Act. They were going to hold it in their backyard, but it was pouring rain.

Employee Ownership Blog — As a small business owner that works with employee-owned companies, you get to see first hand the impact an ESOP can have on a company. What was your impression of President Obama’s comments to you?

Tom — He seemed genuinely interested in learning more about the ESOP expansion bills that are out there. I wish I had time to explain to him that most ESOPs are small businesses and that an ESOP is just “gravy” for employees – in addition to their 401(k) plan.

Employee Ownership Blog — In your work with ESOPs over the years, did you ever think you’d be asking the President about employee-owned companies one day? And, what would you tell others who would like to get involved in helping to encourage ESOP growth in the US?

Tom — Never thought I would get the opportunity. I would encourage every ESOP in America to invite their politicians in for a company visit so they can see first hand how effective the ESOP model can be.

Employee Ownership Blog — Thanks for joining us today.

Wednesday, October 06, 2010

Winners Of 2010 Dissertation Proposal Award

The following press release regarding the winners of the 2010 Dissertation Proposal Award was sent out this morning and we wanted to share the news here on the blog.

 

FOR IMMEDIATE RELEASE

Contact: Linda Lehrer

The Aspen Institute

(212) 895-8002

Linda.Lehrer@aspeninstitute.org

Wai-Lean Roos

Foundation for Enterprise Development

(858) 754-3559

wroos@fed.org

Amy Gwiazdowski

The ESOP Association/Employee Ownership Foundation

(202) 293-2971

amy@esopassociation.org

The Aspen Institute Announces Karen Bernhardt-Walther And

Natascha Van Der Zwan As Winners Of 2010 Dissertation Proposal Award

Collaborative Initiative on Shared Capitalism Through Employee Ownership

New York, NY, October 6, 2010 – The Center for Business Education at The Aspen Institute, in collaboration with the Foundation for Enterprise Development (FED) and the Employee Ownership Foundation (EOF), today announced Karen Bernhardt-Walther and Natascha van der Zwan as winners for the 2010 Shared Capitalism Dissertation Proposal Award, now in its second year. This award for promising dissertation research in the realm of broad-based employee ownership is intended to identify innovative research and high-impact ideas about business and society focusing specifically on Shared Capitalism through Employee Ownership.

Karen Bernhardt-Walther, a doctoral candidate in economics at the University of Chicago Booth School of Business, studies how the tasks that a firm expects to solve drive the way the firm organizes. Her work provides a theoretical framework that shows that frequently repeated tasks such as manufacturing require a different organizational form than one-of-a-kind tasks such as innovation. Karen’s work illuminates the tension that can arise when a firm engages in both manufacturing and innovation and has to balance competing organizational needs. Her work also provides a starting point for exploring when and to what extent employee needs and the pursuit of optimal organizational forms may conflict.

Natascha van der Zwan, a doctoral candidate in political science at the New School for Social Research, investigates how labor unions in the U.S. have responded to the rise of financial capitalism by using employee ownership and shareholder activism to challenge the pursuit of shareholder value maximization at the expense of jobs and compensation; she compares U.S. results with a case study of Germany. Her work not only has implications for our understanding of labor politics in these two countries, but also raises broader questions regarding the distribution of ownership and control in the modern corporation.

“As we see 21st century businesses embrace employee ownership in a variety of models, it is important that our emerging scholars delve into the impact of shared capitalism on these businesses,” said Joseph Cabral, chair of the Employee Ownership Foundation. “Thus we are proud to join the Foundation for Enterprise Development and the Aspen Institute in saluting Ms. Bernhardt-Walther and Ms. Van der Zwan, and the two finalists, for being part of the growing research on the dynamics of employee ownership.”

“The latest economic crisis has called much into question about how business is conducted,” remarked Nancy McGaw, deputy director of The Aspen Institute Business & Society Program. “And so we salute these scholars who are investigating alternative governance approaches and ownership structures that aim to capture the spirit of capitalism at its best—empowering entrepreneurs to include employees, their local communities, and other stakeholders in wealth creation.”

 

Two finalists for the Shared Capitalism award were selected this year: Dustin Avent-Holt, a doctoral candidate in sociology at the University of Massachusetts – Amherst, and Vernon Woodley, a doctoral candidate in sociology at The University of Iowa.

The winners and finalists of this award were selected through a multi-round review process. The five final round judges represented a wide spectrum of high-caliber institutions, and included Joseph Blasi (Rutgers University), Richard Freeman (Harvard University), Takao Kato (Colgate University), Corey Rosen (Executive Director, The National Center for Employee Ownership), and Maureen Scully (University of Massachusetts, Boston).

“While the right financial capital models are critical for sustained firm and economic performance, fixes to financial models are not sufficient for our nation’s recovery. Human capital—employees—play a critical role, “said Mary Ann Beyster, FED president.   “It is exciting to see the interest by new scholars to study the role and stake of employees in improving a capitalist system. My deep appreciation goes to the judging panel and other faculty encouraging academic excellence in this inter-disciplinary area of study.”

Karen Bernhardt-Walther and Natascha van der Zwan will be given honorariums from the sponsoring organizations, receive research guidance from scholars in their areas of study, and be recognized as part of the 2nd Aspen in New York Business & Society Annual Forum being held in New York City on October 26-27, 2010 (www.AspenInNYC.org).

For more information about this award, please visit:

http://www.aspencbe.org/awards/dissertation/2010EOApp.html

About The Employee Ownership Foundation

The Employee Ownership Foundation supports research, education and public awareness of programs that will increase the level of understanding and appreciation of the benefits of employee ownership and increase the number of employees who have access to this benefit. For more information, visit: www.employeeownershipfoundation.org.

About The Foundation for Enterprise Development

The Foundation for Enterprise Development, established by Dr. J. Robert Beyster, has programs for new research, educational materials, policy development, and knowledge sharing that helps cultivate young and senior scholars and supports future generations of science and technology leaders interested in the combined principles of broad-based, participative employee ownership and entrepreneurialism. For more information, visit: www.fed.org.

About the Aspen Institute Center for Business Education

The Aspen Institute Center for Business Education equips business leaders for the 21st century with a new management paradigm: the vision and knowledge to integrate corporate profitability and social value. As part of The Aspen Institute Business & Society Program, the Center aims to foster values-based leadership, encouraging individuals to reflect on the ideals and ideas that define a good society, and to provide a neutral and balanced venue for discussing and acting on critical issues. www.aspencbe.org

The Aspen Institute mission is twofold: to foster values-based leadership, encouraging individuals to reflect on the ideals and ideas that define a good society, and to provide a neutral and balanced venue for discussing and acting on critical issues. The Aspen Institute does this primarily in four ways: seminars, young-leader fellowships around the globe, policy programs, and public conferences and events. The Institute is based in Washington, DC; Aspen, Colorado; and on the Wye River on Maryland’s Eastern Shore. It also has an international network of partners. For more information, visit www.aspeninstitute.org.

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Tuesday, October 12, 2010

ESOP Association President Featured in Financier Worldwide Publication

J. Michael Keeling, the president of The ESOP Association, is featured in Financier Worldwide’s October 2010 Talking Point feature on the benefits of ESOPs in structured buyouts.

If you would like to read the article in full, click here.

Thursday, October 14, 2010

Employee Ownership Month 2010

Well, what are you doing this month? We know many members of The ESOP Association are celebrating and we invite you to stop by and share your plans.

If you’re still wondering what to do, download a copy of the 2010 Press & Event Planning Kit from The ESOP Association’s website.   A link to the Kit can be found on the Employee Ownership Month page.  You still have time to celebrate!

If you have questions or would like to submit stories about your EOM events, please send an email to media@esopassociation.org.

This year’s winning poster was designed by Entertainment Partners in Burbank, CA. A graphic of the poster is below. If you would like to order additional copies, you can order online here.

Tuesday, October 19, 2010

Reaction to President Obama’s Comments on ESOPs

This article originally ran as the President’s Page column in the October 2010 issue of the ESOP Report. A copy of the October 2010 issue can be downloaded from the Members Only section of The ESOP Association’s website.

On September 29, 2010, ESOP Association member Tom Roback, Managing Director of Blue Ridge ESOP Associates located in Charlottesville, VA, had the opportunity to dialogue directly with the most powerful person on earth, the President of the United States, about ESOPs. [If you have not read the dialogue, or seen the video, click here.]

Many have conveyed to me their reaction to the President’s comments on ESOPs to Tom, and some ask what my reaction is, or was.

First, I want to thank Tom for taking the initiative to speak up directly for ESOPs to the President of the United States. [As a side bar comment, there are at least two examples since 1975 when the President, not President Obama, was touring and holding an open forum in an ESOP company. The leaders of the companies did not mention, nor did any employee in the audience, mention that the company sponsored employee ownership through an ESOP. Tom did not hesitate to tout ESOPs.]

Second, a broad brushed comment. It should come as no surprise that individuals who are not supporters of President Obama were not impressed with his comments, labeling them as wishy-washy, or cynical. These people, who I would assume did not vote for President Obama, noted that he said it was a “theory” that employees who were owners would work better, and improve the company’s performance. They also note that his first reference was to an ESOP company not helping the employees when share value declined due to poor company performance.

Those, however, who are supporters of President Obama felt his comments indicated that he recognized ESOPs as something that should be “encouraged,” his last sentence to Tom. I assume those making these comments to me probably voted for President Obama.

Well, let me give a reaction I truly feel is neither “for” President Obama, nor “against” as measured by what he thinks of ESOPs.

Before doing so, I will answer some who have said to me they were bothered that Tom spoke of small businesses only. Tom was showing respect to the office of the President, which I think in these times of yelling and shouting on TV has woefully slipped. The session was to talk about small business policy. Those invited knew what the agenda was. Tom respected that agenda, and to start talking about ESOPs and all size businesses would not have been in order.

Now, what do I think about President Obama’s comments on ESOPs? What do I think might foretell what he intends to do with regard to ESOP law in a White House initiative to reform all tax law?

In my view, President Obama expressed exactly the same view of ESOPs that he expressed as a Senator in a 2005 letter to an Illinois constituent who asked that he co-sponsor pro-ESOP legislation introduced by Senator Blanche Lincoln. We read the letter to the Vegas Conference luncheon in 2008, and reprinted it in the August, 2008 issue of the ESOP Report. [All members can access prior newsletters through our website, members only section.]

The letter was interesting in that it says that he, then Senator Obama, believes that ESOPs are here to stay, but he was concerned that if an ESOP company went bankrupt, the employees would not have retirement savings. He then signs off, like many members of Congress do when a constituent writes a letter asking for support of specific legislation, that if Senator Lincoln’s bill comes forward, he will remember the position of the writer. Since Senator Obama was not on the Senate committee with jurisdiction over tax issues, he would not “see” the bill unless that Committee approved it, or provisions of the bill. And believe me, if in a bill from the Senate Finance Committee came to the Senate floor, it would pass the entire Senate.

Here is my speculation, as unlike Tom, I have never had a conversation with President Obama about anything: As a former Illinois State Senator, as he walked and talked in his South Chicago State Senate district, he probably heard an earful from employees of United Airlines after it went belly up post its becoming ESOP owned. And I suspect some of those giving him an earful were flight attendants, who did not want the ESOP, and who did not participate in United’s ESOP in the first place.

At the same time, both as he moved around his State Senate district, and then as he moved around Illinois when he ran for the U.S. Senate, he probably interacted with several of the really good ESOP companies in Illinois, and with employee owners who liked their ESOPs. Thus, he knows that ESOPs are not just headlines in the newspapers, like the one he has probably read about, The Chicago Tribune.

In sum, I do not believe President Obama will be a President Reagan, who led the charge for ESOPs in 1984 and 1986 in partnership with former Senator Russell Long. At the same time, I do not believe he sees ESOPs as an evil policy, or really bad policy that needs to be eliminated. But I do believe that if his staff, or the Treasury staff came forward with proposals to limit ESOP tax incentives, or to change how ESOP companies are governed, he would not out of hand reject these kinds of proposals if made in the name of revenue neutral tax reform, and in an effort to lower C corporation tax rates.

In sum, he would be more or less in the same camp that we had with President Clinton, who both signed the S ESOP law, who dialogued with an employee owner about ESOPs once in his first term, and who tried to trim back S ESOP law.

Finally, you should watch the video instead of just reading the transcript, or listening to the exchange. When the event took place, Tom had informed me he was going to ask President Obama about ESOPs, so I was on the White House website to see and hear. But the White House only did audio from the meeting. The audio left me with some disappointment, as the negative words seemed to stick in my mind. Later, I learned a local Richmond TV station had a video stream of the exchange. Watching, I was comforted, not with a change in my view above, but with what I saw as positive body language as President Obama listened to Tom, and as he commented on ESOPs. The old adage that a picture is worth a thousand words has truth in it.

Thursday, October 21, 2010

President Reagan and Employee Ownership

There is a theme this week at the Employee Ownership Blog — U.S. Presidents and perspectives on employee ownership.

On Tuesday, October 19th, we featured a re-print of the October 2010 ESOP Report President’s Page column by ESOP Association President, J. Michael Keeling in which he spoke about the September 29th town hall meeting where President Obama answered a question about ESOPs. You can read the full post here. If you are interested in more information about the town hall meeting, click here and here.

While many ESOP advocates are not aware of President Reagan’s work for employee ownership and ESOPs, there are among the older group of advocates — i.e. they were voting age in the 80s — who are skeptical of ESOP Association President Keeling’s citation of President Reagan’s support of ESOPs. Well, as President Reagan would say, the proof is in the pudding. See the link to the video below.

And, I am personally aware of the major role President Reagan played in passage of ESOP tax incentives in 1984 and 1986.

Below is a link to the 1987 video from the Center for Economic and Social Justice (CESJ), an organization that vigorously advocates employee ownership, which features President Reagan talking about employee ownership. To view the video click here. The video is about 10 minutes in length and the section about employee ownership is at the four to five minute mark. This particular speech was given in regard to the 1986 Report released by the Presidential Task Force on Project Economic Justice. These remarks were made at the ceremony where President Reagan received the Report on how employee ownership could counter Communism in Central America. The first four minutes are remarks about individual rights and freedom. President Reagan in the last six minutes speaks directly about employee ownership as key to economic justice.

Tuesday, October 26, 2010

Minnesota/Dakotas Chapter Reaches Goal of $100,000 Donation to Employee Ownership Foundation

A big congratulations and thanks to the sponsors and participants who helped make the 10th Annual MN/Dakotas Chapter Employee Ownership Foundation Golf Fundraiser a great success! This year, 42 sponsors and 160 golfers participated which was a record over the 10 years the event has taken place.   The Chapter set a goal of $17,000, realizing that $83,000 had already been raised for the Foundation during the first nine years of this event.  The ultimate goal was to culminate the 10 years of the fundraiser with a total of $100,000 being donated to the Employee Ownership Foundation. THE CHAPTER REACHED ITS GOAL!

Thanks go to Employee Benefits Group and ALL of the sponsors and golfers for their support of this fundraiser.

The 11th annual golf tournament will be held at Bunker Hills Golf Course in Coon Rapids, MN on Thursday, July 28, 2011.  Photos of this year’s tournament and hole sponsors are now posted on the MN/Dakotas Chapter website – http://www.mndak-esop.org – Quick Find.

Thank you to the 2010 MN/Dakota Chapter Employee Ownership Foundation Golf Fundraiser sponsors:

Sponsors:

Alerus Financial

AMCON

Barnes & Thornburg

Bauer Welding

BNC Bank

Border States

Boulay, Heutmaker, Zibell

Braas Co.

Bremer Bank

BTC ESOP Services

Chartwell Capital Solutions

Christensen Group

Dakota Supply Group

DCI

Dorsey & Whitney

Employee Benefits Group

Foldcraft

Force America

Fredrikson & Byron

Gray Plant Mooty

HLB Tautges Redpath

LarsonAllen LLP

Leonard Street

Lindquist & Vennum

London & Bullard

Molin Concrete

North States Industries

Oxygen Services

Padilla Speer Beardsley

Principal Financial Group

Quality Ingredients

Quazar Capital Corp.

RSM McGladrey

SJE Rhombus

TKDA

Toll Co.

UBS

Value Consulting

Viking Engineering

Walman Optical

Wells Fargo

Wenck Associates

Wilkerson Guthman

Windings

Winona Nat’l Bank

Additional Donations:

Barnes & Thornburg

BNC Bank

BTC ESOP Services

Chartwell  Capital Solutions

Dakota Supply Group

Employee Benefits Group

Gray Plant Mooty

Quazar Capital Corp.

UBS

Value Consulting

Walman Optical

November 2010

The following articles appeared in November 2010.

Thursday, November 11, 2010

Las Vegas Conference & Trade Show Short Re-Cap: President Ronald Reagan and Employee Ownership

If you had the opportunity to join us at The ESOP Association’s Las Vegas Conference & Trade Show on November 4 and 5, you may have already seen the video we’re planning to highlight below but we wanted to share it with those who couldn’t join us.

At the Friday lunch, ESOP Association President J. Michael Keeling spoke to the attendees about the elections. As part of his presentation, he showed a video that features President Ronald Reagan talking about employee ownership. As a means of background, the speech was given in 1987 at a ceremony where President Reagan was presented with a report from a Presidential Task Force on Economic Justice.

To view the video click here.

Some of you might be saying to yourselves, “Didn’t you post this already?”

Yes, we did post this previously (You can read that post here.) but since it was a highlight of the Conference, and was mentioned at the lunch, we wanted to repost the link for readers.

If you’re curious about Michael Keeling’s thoughts on the election, a reprint of his speech will run in the November 2010 issue of the ESOP Report which will be out in the next few weeks.

Monday, November 22, 2010

New Meetings in 2011

In 2011, The ESOP Association’s meetings portfolio will add two new meetings to the calendar. We wanted to take a moment to share some information about the new programs.

The ESOP Association’s Advisory Committee Invitational for Professional Members of the Association Only

February 17, 2011
The Ritz Carlton
New Orleans, LA
(Registration limited to Professional Members of The ESOP Association ONLY!)

For the first time ever, The ESOP Association is holding a day-long open discussion forum led by chairs of the Advisory Committees for Professional Members of The ESOP Association. [Professional Members of The Association are sellers of services to ESOP plan sponsors and to parties considering creating an ESOP. Examples of the services are legal, third party administration, valuation, finance, management consulting, financial advise, trustee, and similar services. Professional members are often referred to as service providers.]

Led by the chairs of the highly respected Association Advisory Committees on Valuation, Finance, Legislative and Regulatory Affairs, Administration, Ownership Culture and Fiduciary Issues, this one day program will lay bare the tough issues facing ESOP professionals, and present the pros and cons of different views. The goal is not only to air different view points but to move towards consensus as to “best practices” by the ESOP service provider community.

An agenda and registration form are available on the Association’s website.

This “invitation” meeting is only for Professional members of the Association and Advisory Committee members.

Conference for Minority ESOPs

(ESOP companies where the ESOP is a minority shareholder.)

February 18, 2011
The Ritz Carlton
New Orleans, LA

Since the late 90s ESOP sponsors of ESOPs holding less than 50% of the plan sponsor’s stock have become almost the “forgotten” backbone of employee-ownership through the ESOP model. The ESOP Association serves everyone in the ESOP community, and values the contribution so-called “minority” ESOPs have made to the advancement of employee ownership in America.

Often at the large ESOP seminars and conferences with hundreds, or even 1,000 + attendees, it seems only the unique issues facing majority-owned, or 100%-owned ESOPs are addressed.

For the first time ever, The ESOP Association will sponsor a one-day seminar for minority ESOPs only. Come and hear the experienced leaders of the Association’s Advisory Committees address the unique issues of minority ESOPs, such as sustaining a minority ESOP, creating an ownership culture, handling different equity ownership arrangements outside of the ESOP, valuation impacts arising from less than 50% ESOPs, among other topics.

An agenda and registration form are available on the Association’s website.

If you have questions or would like additional information about the above meetings, please send an email to meetings@esopassociation.org.

Monday, November 29, 2010

Why the Department of Labor’s Proposed Regulation Will Harm Private Company ESOPs Cont…

Background: The proposal reverses 34 years of DOL policy that valuators of ESOP stock are not ESOP fiduciaries.

(Note: this 34 year policy was developed under President Ford, a Republican; continued by DOL under Presidents Carter (Democrat), Reagan (Republican), Bush I (Republican), Clinton (Democrat), and Bush II (Republican). Why now the proposed attack on ESOPs?)

1. The proposal if finalized will significantly increase the costs of establishing and maintaining an ESOP, because valuators will have to purchase fiduciary insurance.

2. The proposal, if finalized, will hinder an ESOP company’s desire to acquire another company, or to expand, or to be acquired, as any person rendering a fairness opinion for an ESOP trustee will be a fiduciary, increasing the cost of the transaction.

3. Many valuation firms may drop their ESOP practice due to exposure to lawsuits, as many trial lawyers who now troll for lawsuits against ESOP public companies, will now have better monetary opportunities with lawsuits against private ESOP companies. (One impact of the proposal, if finalized, is one disgruntled employee can bring a lawsuit against the plan fiduciaries over the valuation.)  Less competition among valuation firms doing private ESOP company valuations also mean higher costs, and more hassles finding competent valuation firms.

4. If DOL has evidence, as it claims without data in preamble to proposed regulation, that many private company ESOP shares are wrongly valued, DOL currently has enforcement powers against current ESOP fiduciaries and trustee[s].

5. Finally, the DOL proposal, if finalized, would create a contradiction. Internal Revenue Code § 401(a)(28)(c) mandates the appraiser of private company ESOP stock be independent. If a valuator becomes a fiduciary to the ESOP, s/he per se would not independent!

The DOL proposal is not needed and its real purpose seems to be to hinder creation and operation of private company ESOPs in contradiction of P.L. 94-455, 90 Stat. 1520.

Also below is a link to a brief “talking points” paper on the potential negative impact of the DOL proposal, and a suggested letter to a member of Congress.

Coincidently, the view towards private company ESOPs by the current leadership of the DOL’s Employee Benefits Security Administration is not positive, and the ESOP community should not ignore this attempt to squeeze ESOPs so hard they diminish in number.

Click here to read entire proposal.

Click here for attachment P.L. 94-455, 90 Stat. 1520.   

Click here for suggested letter to your Senators and your members of Congress.  

Click here for talking points.   

If you have questions, please contact J. Michael Keeling at The ESOP Association — michael AT esopassociation.org or call 202/293-2971.

 

11/29/2010 UPDATE:

To add another reason, which is obvious, and embarrassed not to have included this bullet point in the first communication about the Department of Labor’s (DOL) attack on ESOPs, see below:

  • Current law mandates that an appraiser of shares of a private company that are to be, or are, ESOP shares be independent (26 U.S. Code 401(a)(28)(c)). In If the DOL proposal to make all ESOP valuators (appraisers) fiduciaries to the ESOP, how could the valuator/appraisers be independent?

In sum, a strong case may be made that DOL’s proposed regulation not only violates current law P.L. 94-455, 90 Stat. 1520 but also 26 USC 401(a)(28)(c)!!

Click here to read the proposed regulation.

Click here to read P.L. 94-455, 90 Stat. 1520.

Click here to read 26 USC 401(a)(28)(c).

December 2010

The following articles appeared in December 2010.

Wednesday, December 01, 2010

Employee Ownership Foundation’s Last Call for University of Pennsylvania Certificate Program

The deadline for registering for the “one-of-a-kind” Executive Leadership Program “Leading in an Ownership Setting: The Program for CEOs” is December 6, 2010.

This program is for CEOs, COOs, and Presidents of employee-owned companies through the ESOP model.

See the links below for program details and registration information. Please contact The ESOP Association if more information is desired – meetings@esopassociation.org.

[Note: For ESOP professionals, please consider passing along to your ESOP clients.]

Click here for a copy of the brochure.

Friday, December 03, 2010

Two New Case Studies on Employee-Owned Companies Released

We wanted to share the following press release which was sent out by The Employee Ownership Foundation today.

 

For Immediate Release: December 3, 2010

For More Information: Amy Gwiazdowski, 202/293-2971, amy@esopassociation.org

Two New Case Studies on Employee-Owned Companies Released

December 3, 2010 (Washington, DC) – The Employee Ownership Foundation is pleased to announce the release of two new case studies highlighting employee-owned companies. The new employee ownership case studies were done through a Kelso Fellowship administered by the School of Management and Labor Relations at Rutgers University. The case studies were published by Professor Frank Shipper, PhD of the Perdue School of Business at Salisbury University. Kelso Fellowship funding is provided by the Employee Ownership Foundation. In addition to the Employee Ownership Foundation funding, Dr. Shipper also received funds from the Foundation for Enterprise Development.

The two case studies — KCI Technologies, Inc.: Engineering the Future, One Employee at a Time (co-authored with Professors Vera L. Street, PhD and Christy Weer, PhD also of the Perdue School of Business at Salisbury University) and Heavy Construction Systems Specialists [HCSS] (co-authored with Professor Olivier Roche, PhD of the Perdue School of Business at Salisbury University) — are both available through Caseplace.org which is a library of teaching resources for business school faculty. More information about Caseplace.org is available at http://www.caseplace.org.

“We are thrilled to be part of the expansion of employee ownership study and research in academia,” noted Joseph Cabral, chair of the Employee Ownership Foundation. “It’s a long-standing goal of the Foundation to increase knowledge of employee ownership among the world’s academic centers.”

The Kelso Fellowship honors the late Dr. Louis O. Kelso, the thought leader who developed the ESOP model of employee ownership in order to improve capitalism.

The Employee Ownership Foundation supports research, education and public awareness of programs that will increase the level of understanding and appreciation of the benefits of employee ownership and increase the number of employees who have access to this benefit. For more information, visit: www.employeeownershipfoundation.org. The Employee Ownership Foundation is The ESOP Association’s affiliated 501 (c)(3) organization dedicated to promoting employee ownership.

Founded in 1978, The ESOP Association represents over 1,400 ESOP companies who believe that employee ownership will improve American competitiveness, increase productivity through greater employee participation and strengthen our free enterprise economy.

###

Monday, December 13, 2010

ABCs of ESOPs — Become an ESOP Guru

The ABCs of ESOPs is available exclusively to members of The ESOP Association as an interactive learning tool for ESOP participants. It includes lessons, quizzes, a glossary of ESOP terms, frequently asked questions, and games.

To access the ABCs of ESOPs, visit the Association’s website, http://www.esopassociation.org, and click on the Members Only link at the top right of the page and follow the login instructions.

If you would like copies of the ABCs of ESOPs free tutorial CD, send an email to membership@esopassociation.org with ABCs of ESOPs in the subject line.

Wednesday, December 15, 2010

Board of Governors Looking for a Few Good Members

The elections for new members of The ESOP Association’s Board of Governors will take place first quarter 2011. The Nominating Committee will soon make the nominations for this year’s elections. All voting members of the Association are eligible for nomination.

Corporate and Professional members of the Association will vote on these nominees for Board of Governors if there is, or are, no nominees by petition. Article IX, Section 2.c. II provides that any member qualified to be a member of the Board of Governors may have his or her name submitted to the voting membership, along with the slate nominated if a petition signed by the 50 voting members of the Association is presented by that person to the President of the Association.

If representing a Corporate member, that person must also submit evidence that his or her employer consents to her or his seeking election to the Board of Governors. If no one is nominated by petition the Association’s bylaws provide the current Secretary/Treasurer will cast a proxy vote for all voting members for the Nomination Committee slate. This article serves as notice of this procedure for nomination by petition.

To be considered for service on the Board of Governors, please write, fax, or email your message expressing your interest to ESOP Association President J. Michael Keeling, by February 1, 2011. A packet of information, including paperwork to be completed for presentation to the Nominating Committee, will be mailed to you. Email Michael AT esopassociation.org, fax 202/293-7568 or mail requests to: 1726 M Street, NW, Suite 501, Washington, DC 20036.

Wednesday, December 22, 2010

Employee Ownership Foundation Raises Over $65,000 at Las Vegas Conference & Trade Show in November 2010

At The ESOP Association’s Las Vegas Conference and Trade Show held November 4th and 5th at Caesar’s Palace in Las Vegas, NV, the Employee Ownership Foundation raised over $65,000 with the generous help and support of the employee ownership community.

This is the third year in a row the Employee Ownership Foundation has asked Association members to help meet a fundraising goal at the annual Las Vegas Conference and Trade Show. In 2010, donations from professional members increased and the largest donation came from a corporate member, Recology, Inc., located in San Francisco, CA.

Thank you to all the members that donated generously to help support employee ownership in America.

For additional information about the Employee Ownership Foundation, please visit the Foundation’s website at http://www.employeeownershipfoundation.org.

Wednesday, December 22, 2010

DOL to Hold Public Hearing on Proposed Rule Mandating Valuators of Private ESOP Companies be Fiduciaries

The Department of Labor’s Employee Benefits Security Administration (DOL EBSA) announced in a press release today that it will hold a public hearing on March 1, 2011 in Washington, D.C. on the proposed rule regarding the definition of a fiduciary, which included mandating all valuators of private company ESOPs be fiduciaries to the ESOPs they valuate. You can find a copy of the proposed rule on the DOL’s website here.

According to the DOL’s press release, a formal notice regarding the hearing will be issued in January 2011. The DOL will not consider requests to testify in advance of the formal notice.

Also noted, the DOL will accept public comments until Feb. 3, 2011. This is two weeks after the close of the Jan. 20, 2011 comment period.

President of The ESOP Association, J. Michael Keeling, noted, “This announcement is positive news. We applaud EBSA’s decision to have an open discussion about its proposal that would impact 98% of the ESOPs in America. Now, we will be able to hear DOL’s concerns explained in full, and we ESOP advocates will be able to voice our thoughts in public.”

The press release is available on the DOL’s website here.

If you would like additional information about the rule and The ESOP Association’s position, please click here.

Additionally, information can be found on the blog here.

Thursday, December 23, 2010

Winter Break of Sorts

With the holidays upon us, we wanted to take a moment to wish all of our readers a happy holiday and New Year.

During the last week of December, the Employee Ownership Blog will take a few days off but will be back the week of January 3, 2011 with news about conferences, Foundation updates, and information on the proposed DOL rule on the definition of a fiduciary.

Enjoy the holidays and see you in 2011!

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