The ESOP Association Blog

Covering ESOPs and employee ownership

2011

January 2011

The following articles appeared in January 2011.

Tuesday, January 04, 2011

NCEO Submits Comments Regarding DOL Proposal

The Department of Labor’s (DOL) overreaching proposal to make ESOP appraisers fiduciaries is a topic we’ve discussed often the last few weeks. We wanted to bring to your attention comments submitted by the National Center for Employee Ownership (NCEO) on the proposal. This is the first time the NCEO, a 501(c)(3), has submitted comments in regard to a DOL proposal. The comments are public record and can be found here.

You can read all comments submitted here.

Information about the proposal can be found here.

In addition to filing comments with the DOL, the NCEO’s Corey Rosen also wrote a piece about the proposal that appeared in the December 14, 2010 issue of Pensions & Benefits Reporter which is published by the Bureau of National Affairs (BNA). The BNA does require an account to access articles online. If you have an account, you can find the article here.

As additional information about the DOL proposal becomes available, we will post it here.

Friday, January 07, 2011

First Ever Conference for Minority ESOPs to be Held in New Orleans, LA in February 2011

For the first time ever, The ESOP Association will sponsor a one-day seminar for minority ESOPs only (ESOP companies where the ESOP is a minority shareholder.). 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.

The Conference for Minority ESOPs will be held February 18, 2011 at The Ritz Carlton in New Orleans, LA. An agenda and registration form are available on The ESOP Association’s website at http://www.esopassociation.org/meetings/meetings_minority_conf.asp.   For additional information or questions about the Conference, please contact the Meetings Department at meetings@esopassociation.org.

Wednesday, January 12, 2011

Corporate Member Speaks Out about DOL Proposed Rule

The following email was sent to ESOP Association corporate members earlier this week regarding the DOL proposed rule that would make ESOP valuators fiduciaries. We wanted to share the information with readers.

Dear ESOP Sponsor and Member of The ESOP Association:

I want to share with you a communication that one of our Corporate members and internal fiduciary sent to her contacts in the Association.  As a member of the Association’s Advisory Committee on Fiduciary Issues, Roseline Marston, President of A.D. Marble & Co., Inc., became concerned when she learned of the DOL proposal to make ESOP valuators fiduciaries and what it would mean to her ESOP company.  Her comments are right on, and I wanted to share with you.  Stopping a negative regulation is a tough fight, and the protest needs to be persistent, and candidly, Congressional allies are needed.  We have plenty on our website and our blog about the DOL attack on ESOPs.  Thanks for taking a look at what one of your ESOP colleagues thinks about this DOL proposal.

To read Roseline Marston’s letter, CLICK HERE.

Let me know if you have questions.

J. Michael Keeling, CAE

President

The ESOP Association

Tuesday, January 18, 2011

ESOP Association President to Speak at 2011 Employee Ownership Executive Briefing

On February 10, 2011, J. Michael Keeling, president of The ESOP Association, will take part in the Executive Speaking Series which is presented by the Beyster Institute as part of the Rady School of Management at UC San Diego. The topic of his presentation is: Employee Ownership and National Policy: Does a National Policy Even Exist? Should It? He will talk in-depth about the outlook for employee ownership, the ESOP model in the 21st Century, and the political environment.

For more information about the program or to register to attend, CLICK HERE.

Friday, January 21, 2011

The ESOP Association Submits Comments to House Ways and Means Committee on Tax Reform

We wanted to share the following press release which was sent out by The ESOP Association today.

 For Immediate Release: January 21, 2011

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

 The ESOP Association Submits Comments to House Ways and Means Committee on Tax Reform

 January 21, 2011 (Washington, DC) – On January 20, 2011, The ESOP Association submitted comments to the House Ways and Means Committee which held its first hearing on tax reform. The purpose of the hearing was to examine the Federal income tax code, understand the corporate tax structure, and look at ways to bring the tax code in line with other nations.

“The ESOP Association submitted comments to the Ways and Means Committee to emphasize that the ESOP community appreciates the need for comprehensive tax reform and that the Committee should model its work after the process that led to the 1986 Tax Reform law,” stated Association President, J. Michael Keeling. He also noted that the process the led to the 1986 law was a near four year, deliberative, transparent process permitting all interests to have voice.

A copy of the comments can be found on the Association’s website HERE.

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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Wednesday, January 26, 2011

Dr. Joseph R. Blasi Named Robert J. Beyster Professor of Employee Ownership

Dr. Joseph R. Blasi, a leading authority in the field of employee ownership, has been named to the post of Robert J. Beyster Professorship of Employee Ownership at the Rutgers’ School of Management and Labor Relations (SMLR). He will hold the professorship for five years.

The Foundation for Enterprise Development committed $2 million to the professorship. The professorship is named for the entrepreneur Robert J. Beyster, a leader for employee ownership because of his role and the story of the company he founded, SAIC.

Additional information is available on the Rutgers University website.

February 2011

The following articles appeared in February 2011.

Tuesday, February 01, 2011

The ESOP Association Submits Comments to the Department of Labor

We wanted to share the following press release which was sent out by The ESOP Association today. 

A second post later this afternoon will contain links to the comments which are in the process of being posted to the Association’s website. 

 For Immediate Release: February 1, 2011

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

 The ESOP Association Submits Comments to the Department of Labor

 February 1, 2011 (Washington, DC) – The ESOP Association submitted comments to the Department of Labor’s Employee Benefits Security Administration (DOL EBSA) regarding the proposed regulation, “Definition of the Term Fiduciary.”

Noting that many privately-held businesses would be directly impacted by the proposed regulation which would make valuators of ESOP stock fiduciaries of the ESOP trust, the Association stated five reasons that should be considered in the EBSA’s deliberations of the proposed regulation: 1.) mandating any and all valuators of private company stock be fiduciaries will increase the cost of the valuation substantially; 2.) establishing more efficient, less economically burdensome ways to ensure valuations are done properly without reducing ESOP companies’ profits is doable; 3.) creating potential lack of trustee prudent actions if the valuator services provider has an equal fiduciary role as a trustee; 4.) confusing the law on trustee decisions; and 5.) creating a big cost for ESOP companies arising from more private parties suing ESOP companies and their trustees in cases that Federal courts currently dismiss.

“Nearly 91% of corporate members of The ESOP Association are small businesses that have fewer than 500 employees that are not traded on the public stock market. These ESOP companies have pride in their ownership structures and we feel these proposed changes are not in the best interest of average pay employees,” said ESOP Association President J. Michael Keeling. “This proposed regulation will weaken companies providing local jobs; companies that are overwhelmingly furnishing average pay employees with significant retirement savings. We believe the DOL is mistakenly seeking the perfect at the expense of the good.”

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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Tuesday, February 01, 2011

The ESOP Association Submits Comments to the Department of Labor on the Proposed Regulation, “Definition of the Term Fiduciary”

As noted in an earlier post today, below is additional information about The ESOP Association’s comments submitted to the DOL along with links to the comments and letter to members of Congress.

 In our efforts to keep Association members apprised of developments regarding the Department of Labor’s (DOL) proposed regulation that would make valuators of ESOP stock fiduciaries of the ESOP trust, we wanted to alert members that The ESOP Association submitted comments to the Department of Labor’s Employee Benefits Security Administration (EBSA). The comments, which were prepared under the direction of the Association’s Advisory Committee on Legislative and Regulatory Issues with input from the Advisory Committee on Valuation, point out several reasons why this regulation would harm private company ESOPs.

Five main points of the comments:

1.) mandating any and all valuators of private company stock be fiduciaries will increase the cost of the valuation substantially;

2.) establishing more efficient, less economically burdensome ways to ensure valuations are done properly without reducing ESOP companies’ profits is doable;

3.) this regulation will create potential lack of trustee prudent actions if the valuator services provider has an equal fiduciary role as a trustee;

4.) it will confuse the law on trustee decisions; and

5.) it will create a big cost for ESOP companies arising from more private parties suing ESOP companies and their trustees in cases that currently Federal courts dismiss.

If you would like to read a copy of the comments submitted by The ESOP Association, please CLICK HERE.

It was also noted in the comments that the companies that will directly be impacted by this proposed regulation are mainly small businesses that on average have fewer than 500 employees and are not traded on the public stock exchange. Anywhere from 80% to 95% of the ESOPs created are because of an exiting shareholder of the private company that sold his or her stock an ESOP. These companies are proud of the ownership structures they have created, have healthy ESOP account balances, and over 78% of the companies also sponsor another benefit plan in addition to the ESOP. The DOL proposed regulation will harm companies that are providing local jobs and employee owners with significant retirement savings.

We ask that ESOP companies and valuation specialists write their elected officials and express their concerns and respectfully ask that his/her member of Congress consider expressing opposition and/or doubts about the DOL’s attack on private company ESOPs.

If you would like to download a sample letter to your member of Congress, please CLICK HERE.

Finally, we understand the DOL is working to ensure flim flam plans are uncovered and those responsible are held accountable, but all we ask is that DOL not seek the perfect at the expense of the good.

If you have questions about the DOL proposed regulation, please send an email to govrel@esopassociation.org.

Friday, February 04, 2011

President Reagan and Employee Ownership – Once More

In honor of President Ronald Reagan’s 100th birthday, we wanted to re-post the video that features President Reagan talking about employee ownership. As he was the only U.S. President to endorse employee ownership, we thought it would be appropriate to share the video once again.

While many ESOP advocates are not aware of President Reagan’s work for employee ownership and ESOPs, they are among the older group of advocates — i.e. they were voting age in the 80s — and many 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.

Below is a link to the 1987 video from the Center for Economic and Social Justice (CESJ), an organization that vigorously advocates for 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.

Republican advocates — work to have your Republican leaders watch this video. There is no question that Republicans and their supporters hold President Reagan in extremely high esteem. They should know how he viewed employee ownership, and the ESOP model. His remarks in the first part of the video give the core values of ESOP advocates — that employee ownership honors the individual, puts faith in every human, just as our Declaration of Independence sets forth, and confirms the belief that humankind benefits most through participation in a free enterprise society, primarily if owners.

We have not forgotten the Democrats. Keep at it with your Democratic elected officials — remember, be persistent. They too should know about policies that are designed to lift every man and woman to a participatory role, through ownership, in our economic system.

Thursday, February 10, 2011

ESOP Association President to Speak at UC San Diego

We wanted to share the following press release about the Executive Briefing event which will take place later today.

For Immediate Release: February 7, 2011

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

ESOP Association President to Speak at UC San Diego

Event presented by the Beyster Institute as part of the

Rady School of Management’s Executive Speaker Series

February 7, 2011 (Washington, DC) – J. Michael Keeling, president of The ESOP Association, will take part in the Employee Ownership Executive Briefing which is being presented by the Beyster Institute as part of the Rady School of Management’s Executive Speaker Series at the University of California, San Diego.

Mr. Keeling’s speech — Employee Ownership and National Policy: Does a National Policy Even Exist? Should It? — will explore the topic of employee ownership and the role of the ESOP (employee stock ownership plan) in the 21st Century.

The event will take place:

Thursday, February 10, 2011

5:15 – 6:30 p.m.

Otterson Hall

Room 4E106

Rady School of Management
University of California, San Diego

For additional information about the event, which is open to the public, please visit – http://rady.ucsd.edu/beyster/events/exec-briefing/.

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, February 11, 2011

It’s that time again — AACE Awards 2011

2011 Annual Awards for Communications Excellence (AACE)

The deadline for all 2011 AACE Awards entries is fast approaching. Entries must be received by AACE Awards Program Manager Pat Barnes no later than Tuesday, March 1, 2011 to be considered for this year’s competition. Additional information and entry specifications can be found in the 2011 AACE Entry Brochure (CLICK HERE to download the 2011 brochure) which was mailed to your company in mid January and is now available on The ESOP Association’s website.

Why should your company enter?

v      Organizes Your Thoughts — Preparing an entry forces you to organize your program for review by the judges.

v      Helps you review — As you put together your entry, you can get a good overview of your program.

v      Helps you evaluate — Once your program is organized, you can evaluate it in the light of what the judges will look for, and what they are likely to see from other companies.

v      Generates new ideas — As you organize your program for entry, new ideas come to you for augmenting and improving it.

v      Shares your ideas — Your entry will be displayed at the Annual Conference in May so that other ESOP companies can see what has worked for you.

v      Creates an archive — You’ll be able to look back and determine direction, growth and results.

Please consider organizing your company’s entry, packing it up, and sending it to Pat Barnes, The ESOP Association’s AACE Awards Program Manager by March 1. If you have a question, contact Pat at (304)876-3624. The judges, who are ESOP company leaders, look forward to seeing your company’s entry!

Don’t forget, if your company is planning to submit an entry for the Employee Ownership Month Poster Contest, the deadline is also March 1, 2011!

To download a copy of the poster entry form, CLICK HERE.

Tuesday, February 15, 2011

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 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.

Thursday, February 17, 2011

2011 Winter Advocacy Kit NOW AVAILABLE

The 2011 Winter Advocacy Kit is now available on The ESOP Association’s website. It can be found under News on the right side of the homepage or in the Government Affairs drop down menu at the top of the page.

If you would like to download a copy of the Kit, CLICK HERE.

Tuesday, February 22, 2011

2011 ESOP Membership Directory — Request Your Copy Today

MEMBER SERVICES

The 2011 ESOP Association Membership Directory is in the works and will be available online this spring. If you would like a hardcopy of the 2011 Directory, you must request a copy as the Directory is no longer mailed to each member.

If you would like a copy of the 2011 Directory, please send an email to membership@esopassociation.org with Request 2011 ESOP Directory in the subject line.

Thursday, February 24, 2011

2011 34th Annual Conference — ESOPs: Powering Through Uncertainty

The ESOP Association’s 2011 34th Annual Conference will be held May 12 & 13, 2011 at the Renaissance Washington Hotel in Washington, DC. Online registration is now available on The ESOP Association’s website along with a printable registration form.

Does your company have an ESOP committee? Send members of the committee to network with other companies and learn new ideas. Are you an ESOP professional looking to enhance your knowledge? Join us in Washington, DC this year. Register now for this not to be missed conference.

Don’t forget, the Annual Awards for Communications Excellence will be presented on May 11th at the Annual Awards Dinner. Tickets for this event go fast. Register now.

March 2011

The following articles appeared in March 2011.

Thursday, March 03, 2011

Update on DOL Proposed Rule Negative to ESOP Companies

We wanted to share the following ESOP Legislative Bulletin which was sent to ESOP Association members this morning about the DOL Hearing on the proposed regulation “Definition of a Fiduciary.”

The Department of Labor has concluded its public hearing on its proposal that appraisers of ESOP stock be fiduciaries to the ESOP, in addition to a current ESOP fiduciary.

While I have sat through other sessions where ESOP cynics’ comments made the session a nightmare for an ESOP/employee owner advocate, and while I can report that I found the DOL officials to be respectful of the ESOP concept, I must report there was no indication they would drop their desire to have the appraisers be fiduciaries.

In exchanges with witnesses who were not supportive of the proposed regulation, including the Chair of the Association’s Advisory Committee on Legislative and Regulatory Issues, Laurence Goldberg, the DOL officials put forth several ideas to ameliorate the concerns of ESOP advocates, that primarily were to limit the appraisers’ fiduciary responsibilities, but not to drop their core proposal that appraisers be fiduciaries.  Compromises are always welcomed, as no one gets 100% of everything he or she wants.

BUT…..and this is a big but:  The DOL officials might claim they only want to make sure valuations are as good as they can be, and they, the DOL enforcement arm, will not expand their current interpretation of when a valuation is wrong; but private sector lawyers do not have to read any final regulation narrowly.  In other words, making appraisers fiduciaries will not only result in existing ESOP companies paying more because their appraiser will have to buy fiduciary insurance, for which no one knows the cost as such a policy does not exist for appraisers right now, plus appraisers will probably hire their own “fiduciary” lawyer, and these costs will be paid by the ESOP company, reducing its profits, and reducing benefits to employee owners; but, and here is the but that is so worrisome, there will be many more lawsuits against ESOP companies and the appraisers as now the lawyers will have more pockets to go after.

And again, DOL has not documented its claims that bad valuations of private ESOP companies are widespread and common.

The data is overwhelming:  Most lawsuits against ESOP companies for fiduciary violations, of whatever nature, do not succeed.  But litigation is so expensive, time consuming, that many companies just settle for an amount less than the cost of winning the lawsuit.  A settlement pay day for lawyers’ bringing the law suits makes it worthwhile to find situation where suits may pay off.

What to do?

The fact that the hearings are concluded does not mean the ESOP community stops complaining about this proposal.

Please consider contacting your member of Congress, House and Senate, to protest along the lines of the suggested letter that is linked to this email bulletin. (To download a copy of the sample letter CLICK HERE.) If you have already written, and have heard nothing in return, consider a polite inquiry of how your letter was handled. If your letter resulted in a response, write again to say politely DOL is not budging from its proposal.

Bottom line — higher costs, perhaps prohibitive to ESOP creation and continued operation, is nonsensical coming from the Department of Labor, an agency that is supposedly trying to keep jobs in America, versus their being eliminated, or shipped overseas.  Our national ESOP policy is a proven engine for keeping good jobs, providing sizeable retirement benefits in nearly all instances, in high performing workplaces, right now, right here, in America.

Nice, respectful words from the DOL officials at the hearings do not alter the real world, potential impact of what they have proposed.  ESOP advocates should not sit by and let the DOL proposal become the law of the land.

Thanks for reading this bulletin.

J. Michael Keeling, CAE

President

The ESOP Association

Tuesday, March 08, 2011

Thanks to Members for Amazing Fundraising Efforts Record Broken; Over $80,000 Raised

Each Chapter President, Administrator, Chapter Officers, and Corporate and Professional Members of each Chapter are to be congratulated and thanked for their significant work and contributions on behalf of the Employee Ownership Foundation. The Executive Committee of the State and Regional Chapter Officers had set a goal to have the Chapters raise $50,000 for the Foundation in 2010. We are pleased to report that the Chapters raised a record $80,689 for the Foundation, which represented approximately 50% of the funds raised by the Foundation during 2010.

To put this in perspective, in 2002 (the year tracking efforts began for Chapter fundraising) the total raised was $14,149. In the past nine years from 2002-2010, the Chapters have contributed $342,266 to the Foundation, a very impressive record.

Thank you to all our members for their amazing support of the Employee Ownership Foundation.

Thursday, March 10, 2011

Europe Moving Forward with Employee Ownership Plans

According to the European Federation of Employee Share Ownership (EFES), the European model of employee ownership is moving forward. In France, new research on employee ownership and corporate performance has been published by the Center for Strategic Analysis of the French Republic that shows absenteeism is 62% lower in companies that have employee ownership. Austria is celebrating its 10th anniversary of employee ownership and Spain, while there are already several organizations in place that are promoting employee ownership, there is agreement that there is room for more discussion and Spain is looking at new concepts.

If you would like to read about these initiatives taking place in Europe, please visit the EFES website – http://www.efesonline.org/.

“I find it interesting, that here in the U.S., the Department of Labor is going out of its way to discourage employee ownership (please see page one of this issue for more information about the proposed DOL regulation) and the exact opposite is happening in Europe,” said J. Michael Keeling, president of the Employee Ownership Foundation.

The Employee Ownership Foundation is a member of the EFES.

Tuesday, March 15, 2011

ESOP Companies Continue Congressional Meetings

Meeting with your member of Congress is the most effective way to share the value an ESOP can bring to a company. Today we want to highlight two Congressional visits by members of The ESOP Association. Don’t forget, if you would like information on how to setup a Congressional visit download copies of the Advocacy Kit and the Congressional Company Visit Kit from The ESOP Association’s website.

Recently, the employee owners from Douglas Machine (Alexandria, MN) and Allied Builders Systems (Honolulu, HI) met with their respective members of Congress to discuss employee ownership as well as the proposed regulation by the DOL which will harm privately-held ESOP companies. (More information about the DOL’s proposed regulation can be found HERE.)

Gary Oda of Allied Builders Systems met with Senator Daniel K. Inouye (D-HI) and said that he was able to advocate the Association’s, and his company’s position, on the DOL proposed regulation. In an email to the Association, Mr. Oda said: “He was very receptive and indicated his support on the matter. He was very impressed with the impact employee ownership has had on changing the stake in life for people in Hawaii who have had the privilege of owning company stock.”

Andrew Freyholtz and the employee owners of Douglas Machine Inc. had the opportunity to meet with Senator Al Franken (D-MN) at the company’s facility in Minnesota.   Mr. Freyholtz had this to say about the event: “The visit went very well and I believe the Senator got a great feel of our business, our people, and our culture. He had a few critical questions at the beginning which gave us a great opportunity to answer some common misconceptions about ESOPs. Then Senator Franken had a chance to meet with numerous employee owners who had a chance to tell him about their ESOP experiences and how their day-to-day responsibilities are impacted by our ownership culture. The Senator and his staff were constantly amazed by our highly technical business, our people, and our success throughout the economic slowdown.”

“Meetings like this are so important to the ESOP cause,” said J. Michael Keeling, president of The ESOP Association. “With the current proposed regulation from the DOL to tax reform, getting out there and meeting with members of Congress and showing them the value of employee ownership first hand is the best thing an ESOP company can do right now to support employee ownership in the U.S.”

Wednesday, March 16, 2011

ESOP Association President Speaks at 2011 Employee Ownership Executive Briefing

On February 10, 2011, J. Michael Keeling, president of The ESOP Association, took part in the Executive Speaking Series which is presented by the Beyster Institute which is part of the Rady School of Management at the University of California, San Diego, to provide teaching and study of employee ownership.  The topic of his presentation was: Employee Ownership and National Policy: What is the Future?  He spoke in-depth about the outlook for employee ownership, the ESOP model in the 19th, 20th, and 21st Century, and the political environment.

This presentation is very similar to the remarks Mr. Keeling shares with ESOP companies and their employee owners when he visits ESOP companies across the U.S., and when making presentations to international groups. A similar speech can be found on The ESOP Association’s website HERE.   If you’re looking for an educational tool to share with your employee owners, particularly new employee owners, a new member of the employee ESOP committee, or at a special ESOP meeting of employee owners, the presentation at the Rady School of Management at UC San Diego is a good educational device to share. The presentation is an hour, but it can be segregated into shorter segments.

To watch the video of the presentation, CLICK HERE. The link will take you to the Rady School of Management’s page on the UC San Diego website.

Wednesday, March 30, 2011

The ESOP Association Hails Introduction of the “Promotion and Expansion of Private Employee Ownership Act of 2011”

We wanted to share the following press release which was sent out by The ESOP Association today.

For Immediate Release: March 30, 2011

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

The ESOP Association Hails Introduction of the “Promotion and Expansion of Private Employee Ownership Act of 2011”

March 30, 2011 (Washington, DC) – The ESOP Association expresses strong support for H.R. 1244, the “Promotion and Expansion of Private Employee Ownership Act of 2011,” introduced March 29, 2011by a bi-partisan group of key members of the House Ways and Means Committee: Congressmen David G. Reichert (R-WA), Ron Kind (D-WI), Charles W. Boustany, Jr. (R-LA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN), and Bill Pascrell (D-NJ).

“This bi-partisan declaration of support for employee ownership through the ESOP (employee stock ownership plan) model among privately held companies, especially by the popular S corporation business model, is very impressive,” stated ESOP Association President J. Michael Keeling.

Also endorsing and pledging to work for the passage of H.R. 1244 is the Employee-Owned S Corporations of America or ESCA, http://www.esca.us/.

“ESCA provides a focus in our national policy debate for S corporations sponsoring ESOPs, and the benefits these corporations provide to employee owners. ESCA’s work on this legislation will be important in expanding the number of members of Congress supporting H.R. 1244,” said Keeling.

H.R. 1244 will: 1.) permit owners of S stock to sell the stock to an ESOP and defer the capital gains tax on his/her gain if the proceeds are reinvested in the equities of U.S. operating corporations as owners of C corporations stock have done under IRC 1042 since 1984; 2.) permit lenders to S corporations with 50% or more ownership through an ESOP to exclude 50% of the interest from the loan if used to acquire stock for the ESOP; 3.) establish an office in the Department of Treasury to provide technical assistance to S corporations with ESOPs; 4.) provide that a small business, S or C, eligible for one of the many programs provided by the Small Business Administration to remain eligible for SBA programs if the company becomes owned 50% or more by an ESOP, and the workforce remains the same or nearly the same as before the establishment of the 50% ownership by employees through the ESOP.

For additional information about H.R. 1244, please visit The ESOP Association’s website, http://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. More information – http://www.esopassociation.org/.

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Thursday, March 31, 2011

More Information on H.R. 1244

The ESOP Association has posted additional information on its website regarding H.R. 1244, the “Promotion and Expansion of Private Employee Ownership Act of 2011.”

To read additional information about H.R. 1244, including the text of the bill, CLICK HERE.

April 2011

The following articles appeared in April 2011.

Monday, April 04, 2011

ESOPs Make Appearance at a House Ways and Means Committee Hearing

At the March 3, 2011, hearing on Small Business and Tax Reform, held by the Select Revenue Measures Subcommittee of the House Ways and Means Committee, ESOPs were mentioned at different points in the hearing’s Q& A section and, we are happy to report each mention of ESOPs sponsored by small businesses was positive.

In a year when corporate tax reform is being tossed about at every turn, and this being one of the first major hearings focused specifically on tax reform, it was a positive sign to have members of Congress not only ask about ESOPs, but also to have a witness answer in a positive light. This doesn’t mean that any battle regarding tax reform and ESOP law is over, but it’s nice to know that the message at this hearing was positive.

Having bi-partisan members of the Subcommittee take the time to bring up ESOPs during the hearing is also important to note. Please note Congressman Paulsen and Congressman Neal are both counted among our ESOP advocates on the Association’s website HERE.  Additionally, the witness who answered the question — Dr. Robert Carroll, Principal, Qualitative Economics and Statistics, Ernst & Young LLP, Washington, D.C. — is a former President George W. Bush Treasury Department official and to have him sing the praises of ESOPs at a tax hearing is another important fact to keep in mind.

For more information on the hearing, CLICK HERE.  On the bottom of the page there is a link to the archived hearing video.

Following are the times of the ESOP mentions and a short paraphrased summary.

NOTE: While watching the archived video, ESOP Association staff had trouble with the video cutting out. It may have to be restarted if this happens.

@ 1hr: 9 min — Congressman Erik Paulsen (R-MN) asks ESOP question: says employee owned companies are faring well in economic times, hiring employees, etc. and wanted to know what the impact would be on ESOPs if pass-through entities were stopped.

Witness Dr. Robert Carroll, Principal, Qualitative Economics and Statistics, Ernst & Young LLP, Washington, D.C., answered: he mentioned that ESOPs were good companies and had nice things to say about ESOPs in general but didn’t really answer the pass-through question.

@ 1hr: 36 min — Congressman Richard E. Neal (D- MA) asks question about ESOPs and for more explanation from witness, Dr. Robert Carroll, Principal, Qualitative Economics and Statistics, Ernst & Young LLP, Washington, D.C., who answered Congressman Paulsen’s question.

Witness Dr. Robert Carroll, Principal, Qualitative Economics and Statistics, Ernst & Young LLP, Washington, D.C., answered: ESOPs grow at faster rate, higher wages, greater retirement benefits, etc. Again, all very nice things about ESOPs.

Wednesday, April 06, 2011

Employee Ownership Foundation Awards Prize to National Essay Contest Winner

We wanted to share the following press release which was sent out by the Employee Ownership Foundation today.

For Immediate Release: April 6, 2011

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

 Employee Ownership Foundation Awards Prize to National Essay Contest Winner

 April 6, 2011 (Washington, DC) – The Employee Ownership Foundation is proud to announce Juan Mier, a student at the University of California San Diego Rady School of Management, as the recipient of a $500 prize for a winning essay on ESOPs (employee stock ownership plans) entered as part of the Foundation for Enterprise Development’s (FED) national essay contest — Creating Wealth by Sharing WealthTM. The contest, sponsored by the FED, is the first ever multi-university essay contest of its kind to focus thinking on business strategies incorporating employee ownership.

“Congratulations to Mr. Mier for his winning work in this contest. The Employee Ownership Foundation is pleased to be able to award this prize for his thoughtful essay on employee ownership,” noted Employee Ownership Foundation President, J. Michael Keeling. “Seeing work such as this done on the university level is exciting for the Foundation and the employee ownership community as a whole.”

For a complete list of the Creating Wealth by Sharing WealthTM essay contest winners, please visit FED’s website at http://www.fed.org/education-essay-contest.

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: http://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. For more information: http://www.esopassociation.org.

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Monday, April 11, 2011

The ESOP Association Announces 2011 Silver ESOP Award Recipients

We wanted to share the following press release which was sent out by The ESOP Association today.

 For Immediate Release: April 11, 2011

For More Information: Amy Gwiazdowski, 202/293-2971, amyATesopassociation.org

 The ESOP Association Announces 2011 Silver ESOP Award Recipients

 April 11, 2011 (Washington, DC) – The ESOP Association has presented 41 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 2011.

This is the fourth year the Silver ESOP Awards have been presented by the Association. In 2008, 117 corporate members were presented with the first annual Silver ESOP Awards, in 2009, 12 companies were honored, and in 2010, 22 members were highlighted. To be named a Silver ESOP Award recipient, 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 41 companies with the 2011 Silver ESOP Award for excellence in sustaining their ESOP for 25 years,” said ESOP Association President J. Michael Keeling. “The sustaining of their employee-ownership structures demonstrates preserving locally controlled jobs in today’s global economy is more likely when employees are owners.”

2011 Silver ESOP Award Recipients:

Apache Hose & Belting, Inc., Cedar Rapids, IA

B & I Contractors, Inc., Fort Myers, FL

Bollman Hat Company, Adamstown, PA

Bolton & Co., Pasadena, CA

Caltrol, Inc., Las Vegas, NV

CCI Systems, Inc., Iron Mountain, MI

Community Financial Services ESOP, Benton, KY

Cramer Products, Inc., Gardner, KS

Dealey, Renton & Associates, Oakland, CA

DeKalb Feeds, Inc., Rock Falls, IL

Dickinson Press Inc., Grand Rapids, MI

Durden Banking Co., Inc., Twin City, GA

Employee Owned Holdings, Inc., Houston, TX

First National Bank of Bemidji, Bemidji, MN

Foldcraft Company, Kenyon, MN

Follett Corporation, Easton, PA

Foxx Equipment Company, Kansas City, MO

Gulf Industries, Inc., Mandeville, LA

Horizon Bancorp, Michigan City, IN

Insurance Associates, Inc., Rockville, MD

Jones-Hamilton Co., Walbridge, OH

Mayville Engineering Company, Inc., Mayville, WI

McNaughton-McKay Electric Company, Madison Heights, MI

Melton Machine & Control Company, Washington, MO

MidSouth Building Supply, Inc., Springfield, VA

Oswald Companies, Cleveland, OH

Overton Chicago Gear Company, Addison, IL

Perry Corporation, Lima, OH

Recology, San Francisco, CA

Reell Precision Manufacturing Corp., Saint Paul, MN

Reflexite Corporation, Avon, CT

Rieth-Riley Construction Co., Inc., Goshen, IN

Sentry Equipment Corp., Oconomowoc, WI

Shamrock Bancshares, Inc., Coalgate, OK

The Mosser Group, Fremont, OH

Web Industries, Inc., Marlborough, MA

Wikoff Color Corporation, Fort Mill, SC

Winona Agency, Inc., Winona, MN

Worzalla Publishing Company, Stevens Point, WI

Xtek, Inc., Cincinnati, OH

Zandex, Inc., Zanesville, OH

All 192 Silver ESOP Award recipients will be honored at The ESOP Association’s Annual Conference in May and highlighted at the 20th 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: http://www.esopassociation.org.

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Tuesday, April 12, 2011

Do You YouTube? We do.

The ESOP Association started a YouTube channel recently, and while there isn’t much there yet, keep watching because more videos will be added in the coming months.

If you would like to view the current ESOP Association video, CLICK HERE.

What we really want to share with you today — and the main reason for this post — are videos we found by ESOP companies that provide a laugh, thoughtful introspection on being part of an ESOP company, and the benefits of being employee owned. There are also a few policy based videos as well that bring a different perspective to the viewing. In the spirit of sharing the ESOP message, we thought we’d link to a few videos and let you see for yourself what a creative bunch ESOP people are. Keep in mind, this is just a sample, there are MANY more out there.

NOTE: If you’re a member of The ESOP Association and would like us to highlight your video here on the Employee Ownership Blog and on The ESOP Association’s website, please send an email to media@esopassociation.org with a link and we’ll include it.

And now, enjoy the show!

Hisco – Hisco. ESOP company. Tribute to company founder, Paul Merriman.

Daymon Worldwide – ESOP Barry video

Daymon Worldwide – ESOP Laura video

Daymon Worldwide – Greg Pierce video

Dominican School of Business – Entrepreneur Series: ESOP and MSOP video

Conversations with Harold Channer – featuring ESOP Association President J. Michael Keeling

Conversations with Harold Channer – featuring Norman Kurland & Gary Davis

HCSS – HCSS Employee Ownership video

HCSS – We Listen to Our Employees video

Hot Dog on a Stick – Fresh ESOP of HDOS video

Hot Dog on a Stick – Cribs video

Hot Dog on a Stick – ESOP Your Don’t Stop

Perry Corporation – ESOP Retirees 2010

Perry Corporation – ESOP Island

Monroe Publishing Company – AACE Award video

AdWorkShop – An ESOP and Employee Owned Business video

ESOP Association – Southwest Chapter video

Winning Work Places – King Arthur Flour video

Winning Work Places – Jackson’s Hardware video

KHS&S –Doing things better video

PBI Gordon (ESOP company but video is about being salesman not being employee owned) – I Am a PBI Gordon Salesman song video

Acadian Ambulance – The Acadian Companies video

Harrell Remodeling – Employee Owned Companies

Mayville Engineering Company – MEC Corporate video

Landscape Structures – Over 35 Years at Play video

MMC Corp – Employees, Companies, and Values

Scot Forge – One Stop Forge Stop video

King Arthur Flour Company – History in the Baking

Lefiell Manufacturing Company – Lefiell Story 

Forsythe Technology – Forsythe Culture and Values

Moody’s Collision Centers, Inc. – ESOP Support

Bob’s Red Mill – ESOP

Mills James – We Are Mills James

President Ronald Reagan on Employee Ownership

Senator Bernard Sanders (I-VT) – Worker-Owned Enterprises

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Senator Bernard Sanders (I-VT) – Vermont Field Hearing on Worker-Owned Businesses

Tuesday, April 19, 2011

Comment Letters Indicate DOL Proposed Regulation “Would Seriously Impede ESOPs”

Pensions & Benefits Reporter, a Bureau of National Affairs publication, ran an article in the March 8, 2011 issue covering the DOL’s March 1st and 2nd hearing on the “Definition of a Fiduciary.” While the article itself didn’t contain any surprises, it did include an interesting table in a sidebar article. The publication went through all 199 DOL comment letters regarding the proposed regulation and looked at the themes present one of which was — would seriously impede ESOPs. Tallying the list in this category found 82 of the 199 submitted comments in agreement that the DOL proposed regulation would harm ESOPs.

“This is a very enlightening insight,” said J. Michael Keeling, president of The ESOP Association. “We have looked at all of the comments letters and knew that many were against the proposed regulation as we are but have not had the opportunity to tally the results. This figure is notable — 41% believe this proposed regulation would harm ESOPs.”

In addition to the category regarding the harmful effects on ESOPs, the chart also included the following: costs outweigh benefits and/or flawed impact analysis, standards too vague and subjective, insufficient coordination with other contemporaneous rulemaking and/or existing guidance or standards, overprotective of sophisticated fiduciaries, covers certain service providers who should be presumptively excluded, exceptions too narrow, and none.

Wednesday, April 20, 2011

Key ESOP Association and Employee Ownership Foundation Leader, Dan R. Bannister, Succumbs

Dan R. Bannister, former chair, and president and CEO of DynCorp., formerly a large 100% ESOP company, died March 13, 2011 at the age of 80. Mr. Bannister was a long time supporter of both The ESOP Association and the Employee Ownership Foundation.

Mr. Bannister was well-known in the Washington, DC area technology community for his work at DynCorp which he joined in 1953 as an electronics technician. As president of the company, he oversaw over 40 acquisitions and helped DynCorp expand into a 24,000 person company that earned more than $2.4 billion in annual revenue.

Mr. Bannister served as Chair of the Employee Ownership Foundation from 1997 to 2003 and also served as Vice Chair to The ESOP Association’s Board of Directors from 1995 – 1996. In 1999, he was given the Association’s most prestigious individual award: the Life Service Award.

“In the late 80s and throughout the 90s, Dan was an incredibly important leader in shaping the Association we know today. But, it was his vision for the Employee Ownership Foundation, and it’s progress we see today, that is his biggest legacy,” said Association President J. Michael Keeling. “He was a friend and mentor. He will be missed.”

The funeral was held March 18, 2011; Mr. Bannister was buried in Arlington Cemetery.

Thursday, April 21, 2011

Dr. Joseph R. Blasi Becomes Endowed Chair of Employee Ownership at Rutgers University

As reported in the January 2011 issue of the ESOP Report, Dr. Joseph R. Blasi, a leading authority in the field of employee ownership, has been named to the post of Robert J. Beyster Professorship of Employee Ownership at the Rutgers’ School of Management and Labor Relations (SMLR). He will hold the professorship for five years.

The Foundation for Enterprise Development committed $2 million to the professorship. The professorship is named for the founder and entrepreneur Robert J. Beyster.

Dr. Blasi is the first endowed chair in the field of employee ownership and the first endowed chair focusing on employee ownership to exist anywhere in the world. Additionally, after the ceremony installing Dr. Blasi to the professorship, a symposium was held highlighting the research of Beyster, Kelso, and Rutgers Fellows. The researchers from major universities and colleges across the U.S. reported on their research which was then critiqued.  A grant from a long-time ESOP advocate and former colleague of Dr. Louis O. Kelso, John Menke, handled by the Employee Ownership Foundation, made the symposium possible.

Additional information is available on the Rutgers University website and an interview with Dr. Blasi about the professorship can be found here.

Wednesday, April 27, 2011

PUBLICATION HIGHLIGHT – Get Ownership Spirit!

Membership Services

With The ESOP Association’s 34th Annual Conference coming up May 12 & 13, we thought we’d highlight a few of the items you can find at the Membership Services booth.

Fly it proudly under, or next to, Old Glory. ESOP flag with ESOP logo and “Employee Owned” on white or royal blue nylon, 3’ x 5’. The ESOP flag meets all industry standards for outdoor display. Durability subject to weather conditions. Specify color: white with blue lettering or blue with white lettering.

 Members $68.00   Non-Members $500.00

 Visit our website, http://www.esopassociation.org, or call 202-293-2971 to purchase the ESOP flag!

Thursday, April 28, 2011

PUBLICATION HIGHLIGHT – Creating a High Performing Company

Membership Services

With The ESOP Association’s 34th Annual Conference coming up May 12 & 13, we thought we’d highlight a few of the items you can find at the Membership Services booth.

 This video features interviews from CEOs and average pay employee owners discussing why an ownership culture is important and the tactics used to create a culture of ownership, as well as, success stories. While all companies are different in size and industry, all have similar strategies, tactics, and plans to help them motivate employee owners and to move the company and its individuals to a higher level of performance. This video also features a section on the Annual Awards for Communications Excellence (AACE). The AACE Awards provides companies with an opportunity to showcase the work they do all year long to create an ownership culture. DVD format. English. 34 minutes.

Members $140.00   Non-Members $250.00

Visit our website, http://www.esopassociation.org, or call 202-293-2971 to purchase “Creating a High Performing Company.”

Friday, April 29, 2011

DOL Campaign: Not Winning: ESOP Community Needs to Be Active

The following is a legislative bulletin which was sent to all members of The ESOP Association recently. In our efforts to keep everyone informed, we are sharing the bulletin here on the blog.

            In a recent news article, Assistant Solicitor of DOL, Ted Hauser said, “The Labor Department is set (emphasis added) with its position on valuation firms…” Thus, ESOP voices are not at this time having significant impact on altering the basic position proposed by DOL that all appraisers of private company ESOP stock be ERISA fiduciaries.

Unfortunately, the ESOP issue embedded in the Department of Labor’s proposed new definition of who is an ERISA fiduciary has fallen in importance in the eyes of key members of Congress and the Department of Labor officials.

Why? The DOL proposal also negatively impacts financial institutions administering IRAs, mutual funds offering IRAs, and 401(k) plans, and major financial businesses providing financial advice. Members of Congress of the key committees are justifiably aware the 401(k) market is much, much larger than the ESOP marketplace for those selling services to their plans and many more Americans participate in these plans. (The key committees in this campaign are the House Committees on Education and Workforce; Ways and Means; and Appropriations, and the Senate Committees on Health, Education, Labor, and Pensions; Finance; and Appropriations.)

The fact is these businesses handle trillions of dollars, and have expertly mounted a significant campaign to persuade members of Congress to protest, and to threaten to overturn the DOL proposal as it impacts their interests.

Not surprisingly, key Republican members of Congress have heeded their concerns, and have registered protests to DOL.

Not surprisingly, in this day of sharp partisanship in Congress, Democratic leaders are taking positions contra to their Republican colleagues, and writing to the Secretary of Labor supporting the DOL proposal.

But to the knowledge of The ESOP Association neither Republicans nor Democrats, except for five members, say anything about ESOPs!

The five members of Congress who have conveyed concerns about DOL’s proposal to mandate that an appraiser of private company ESOP stock be fiduciaries are Senators Bernie Sanders (I-VT), and Patrick Leahy (D-VT), Congressmen Maurice Hinchey (D-NY), Charles Boustany (R-LA) and Geoff Davis (R-KY).

Many ESOP advocates have written their Senators and Representatives.

If you can, please let us know what your Senators and/or Representatives have done, as this list of five may be incomplete. No matter when the campaign ends (probably fourth quarter of this year) the ESOP community needs to express appreciation to their elected officials who stood up for ESOPs.

DOL staffers have fanned out to key Congressional offices, making an effective argument to Congressional staff that the ESOP proposal is a minor tweak that will not impact “good” ESOPs and their “qualified” appraisers. (Keep in mind, these DOL staffers would not give our side of the argument about this proposal to members of Congress or their aides.)

Not true. See http://www.dol.gov/ebsa/newsroom/fsfiduciary.html

So,

1. If you have not contacted your elected officials in Congress. Please do so. See

http://www.esopassociation.org/pdfs/Letter_to_Members_of_Cong_DOL_Proposal.pdf

for suggested communication.

2. If you have, call 202-224-3121, ask to speak to the office you contacted, then ask to speak to the staff person responsible for retirement savings policy and/or tax policy; when connected, refer to your communication, and ask politely if the [Senator] [Representative] has had time to review the issue you raised in your communication. If so, has s/he contacted DOL, and if not, ask respectfully that she/he do so, noting you will “check” again in a week or so.

This ESOP community is threatened by the DOL proposal. Since 1974, when threatened, the voice of ESOP advocates has consistently beaten back the threat 80% of the time.

Let’s keep this wining percentage!

May 2011

The following articles appeared in May 2011.

Monday, May 02, 2011

Ohio Employee Ownership Center — Weighing in on the DOL Proposed Regulation

The Ohio Employee Ownership Center’s (OEOC) recent magazine issue, Owners at Work, Winter 2011, contains a particularly good opinion piece on the DOL’s proposed regulation to make appraisers fiduciaries. Written by the OEOC’s Program Director, Bill McIntyre, the article is a re-cap of statements and opinions already presented to the DOL and an interesting list of points that are important to the discussion.

You can download and read the Owners at Work Winter issue from the OEOC’s website HERE.  Bill McIntyre’s article is on page 14 of the issue.

With many people attending the Association’s Annual Conference in Washington, DC next week and possibly meeting with their members of Congress, we wanted to share this article with members to assist them in their discussions with members of Congress. As we mentioned in an update posted here on April 29 (DOL Campaign: Not Winning: ESOP Community Needs to Be Active) there is still much work to be done on this issue.

Take a look at the OEOC article and our thanks goes out to Bill for his insightful piece.

Wednesday, May 04, 2011

Attending the 2011 Annual Conference? Here’s what you need to know.

The rundown:

1 – Location

34th Annual ESOP Conference
ESOPs: Powering Through Uncertainty

May 12 & 13, 2011
Renaissance Washington Hotel

999 9th Street, NW
Washington, DC

2 – AgendaCLICK HERE.

3 – Meeting with your member of Congress?

Download your Lobbying Kit materials HERE.

Download the 2011 Spring Advocacy Kit HERE.

The Spring 2011 Congressional Company Visit Kit is also available. CLICK HERE.

4 – Need information on the DOL proposed regulation to make appraisers fiduciaries?

CLICK HERE.

And CLICK HERE.

5 – Want to know more about the AACE Awards before visiting the display? CLICK HERE.

6 – Buzz about ESOPs & YouTubeCLICK HERE.

Thursday, May 12, 2011

The ESOP Association Announces 2011 AACE and ESOP Award Winners

The following award winners were announced at The ESOP Association’s 20th Annual Awards Banquet held in Washington, DC on the evening of May 11th.

 Congratulations to all of this year’s winners.

For Immediate Release: May 12, 2011

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

 The ESOP Association Honors Members for Excellence in

Employee Ownership Communications

 The ESOP Association is pleased to announce the 2011 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 34th Annual Conference in Washington, DC to companies who have excelled in communicating the ESOP 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 2011 AACE Award winners are:

Category 1-A, Total Communications Program, 100 or Fewer Employees

Winner:            Cal-Tex Protective Coatings, Inc., Schertz, TX

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

Winner:            Flippo Construction Co. Inc., Forestville, MD

Runner Up:       Carl Warren & Company, Placentia, CA

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

Winner:            Glatfelter Insurance Group, York, PA

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

Category 1-D, Total Communications Program, Over 1,000 Employees

Winner:            D&H Distributing, Inc., Harrisburg, PA

Runner Up:       CCC Group, Inc., San Antonio, TX

Category 2, Audio Visual

Winner:            Perry Corporation, Lima, OH

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

Category 3-A, Printed Materials, 250 or Fewer Employees

Winner:            Mid South Building Supply, Inc., Springfield, VA

Runner Up:       The Onyx Group, Alexandria, VA

Category 3-B, Printed Materials, Over 250 Employees

Winner:            Carris Reels, Inc., Proctor, VT

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

 Category 4-A, Educational Materials, Print

Winner:            The Haskell Company , Jacksonville, FL

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

Category4-B, Educational Materials, Electronic, Including ESOP Intranet

Winner:            CCC Group, Inc., San Antonio, TX

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

Category 5-A, External ESOP Advertising – Print Advertising

Winner:            Hot Dog on a Stick, Carlsbad, CA

Runner Up:       Mid South Building Supply, Inc., Springfield, VA

Category 5B, External ESOP Advertising – Web Sites

Winner:           Van Meter Inc., Cedar Rapids, IA

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

Category 6-A, Special Events & Promotions, 1 Outstanding Event, 250 or Fewer Employees

Winner:            Caltrol, Inc., Las Vegas, NV

Runner Up:       Cal-Tex Protective Coatings, Inc., Schertz, TX

 Category 6-B, Special Events & Promotions, 1 Outstanding Event, Over 250 Employees

Winner:            Holden Industries, Inc., Deerfield, IL

Runner Up:       KAPCO, Brea, CA

Category 7-A, Special Events, Promotions, Series, 250 or Fewer Employees

Winner:            ComSonics Inc., Harrisonburg, VA

Runner Up:       Vista Technology Services, Inc., Herndon, VA

Category 7-B, Special Events, Promotions, Series, Over 250 Employees

Winner:            Woodward Communications, Inc., Dubuque, IA

Runner Up:       Walman Optical, Minneapolis, MN

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Missy McManigle of Walman Optical Company Named 2011 Employee Owner of the Year by The ESOP Association

 Missy McManigle of Walman Optical Company located in Minneapolis, Minnesota, has been named the 2011 Employee Owner of the Year by The ESOP Association.

Ms. McManigle does everything with an eye toward customers and co-workers, with an emphasis on the ownership aspect which has helped foster the company’s ownership culture. An active member, and chairperson, of the company’s ESOP Communication Committee, she’s instrumental in putting together Employee Ownership Month activities, designing and publishing a quarterly newsletter, developing, editing, and designing an employee owner manual, and coordinating efforts for the company’s Wellness Committee. She also takes time to encourage her fellow employee owners to get to know each other through a yearbook program that allows individuals to submit information about themselves and get to know each other better. Ms. McManigle is actively involved with The ESOP Association, attending both Chapter events and national conferences, and has been instrumental in arranging visits with Congressional representatives for members from her region.

“Missy is the type of person you want as an advocate for your cause. She knows her facts but is able to offer more than just that — Missy can put a face on a fact,” said J. Michael Keeling, ESOP Association President. “She is a true leader and a great supporter of the employee ownership cause and not just at her company. She also met with members of Congress to help spread our message. Missy competed against 16 of the Association’s Employee Owner of the Year Chapter winners for this award and her winning is testimony to her special commitment to making ownership very real for her co-workers.”

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 Van Meter Industrial Named 2011 ESOP Company of the Year by

The ESOP Association

 Van Meter Industrial, an employee-owned company headquartered in Cedar Rapids, Iowa, has been selected by The ESOP Association as the 2011 ESOP Company of the Year.

Founded in 1928 by R.L. Van Meter and R.W. (Pete) Lemley, Van Meter Industrial prides itself on setting the standard for innovation. When most businesses were failing during the Great Depression, Van Meter Industrial thrived and the company’s success can be attributed to the belief that owners, employees, and customers should be treated as family. This belief, 80 years later, still holds strong for the company. With over 350 employee owners, this 100% ESOP company remains committed to the principals of their founders, but still strives to meet the ever changing needs of its customers. For more information: http://www.vanmeterindustrial.com.

Van Meter Industrial is a strong supporter of employee ownership and The ESOP Association. Employee owners take an active role in the Iowa/Nebraska Chapter of the Association and participate in Chapter meetings, present programs at these events, write articles for Association publications, and participate in Employee Ownership Month activities every October. In addition to Association activities, the company also hosts several of their own including: Guess the Value Contest in which every employee owner has a chance to guess the company’s stock value; an Annual ESOP Statement Roundtable to educate employee owners in all locations; and a Work 10 Years and Get 5 Free Years which helps employee owners understand more about the ESOP and think about their future with the company.

“I had the opportunity to visit with the employee of Van Meter Industrial in 2010 at an employee owner town hall meeting which was an eye-opening experience,” stated ESOP Association President, J. Michael Keeling. “Van Meter Industrial is an ESOP company that values employee involvement, strives to communicate it goals, and accomplishes them. VMI competed against 17 of the Association’s Company of the Year Chapter winners. These 17 companies are excellent examples of the power of a well-managed employee-owned company. To have VMI’s peers elevate the company to the top of the group is a tribute to how special VMI is.”

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 Illinois Chapter of The ESOP Association Named 2011 ESOP Chapter of the Year

 The Illinois Chapter of The ESOP Association has been named the 2011 ESOP Chapter of the Year by The ESOP Association

The Illinois Chapter of the Association was not in its early years a Chapter leader, but in the last decade, strong leadership began to alter its profile. In 2010 the hard work paid off, as the Chapter set records for attendance, increased membership, and has become involved with government relations activities on the national level. The Illinois Chapter was selected from 18 Association Chapters across the United States for this honor.

“The leaders of the Illinois Chapter work hard and provide excellent programming and value to ESOP Association members in their state. I’m proud to honor the Illinois Chapter for their efforts,” said J. Michael Keeling, ESOP Association President.

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David Fitz-Gerald of Carris Reels, Inc. Named

2011 Chapter Officer of the Year by The ESOP Association

 David Fitz-Gerald, Vice President and Chief Financial Officer of Carris Reels, Inc. located in Proctor, Vermont, has been named the 2011 Chapter Officer of the Year by The ESOP Association.

Mr. Fitz-Gerald is the current President of The ESOP Association’s New England Chapter and has been actively involved with the Chapter and with the Association on the national level for several years. He has provided unmatched leadership for the Chapter’s innovative programming, government relations work, membership development, and the Employee Ownership Foundation. The New England Chapter includes members in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.

“Dave is a dynamic force in the New England ESOP world. His work in all aspects of the New England Chapter’s activities has set a standard of excellence that will be hard to repeat. I am pleased to be able to present him with the 2011 Chapter Officer of the Year Award,” said J. Michael Keeling, ESOP Association President. “Dave is very deserving of this honor.”

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Sharon B. Hearn of Krieg DeVault LLP Receives 2011 Membership Recruitment Award from The ESOP Association

 Sharon B. Hearn of Krieg DeVault LLP located in Indianapolis, Indiana, has been presented with the 2011 Membership Recruitment Award for a Professional Member by The ESOP Association.

Ms. Hearn is an active member of the Indiana Chapter currently serving as the Chapter’s Treasurer. She has been involved with the ESOP community for many years and her commitment to employee ownership in evident in the work she does to promote the cause of employee ownership by encouraging ESOP companies to become members of the Association.

“It is my pleasure to present Sharon with the 2011 Professional Membership Recruitment Award for the outstanding work she has done to promote employee ownership through the ESOP model,” said J. Michael Keeling, ESOP Association President. “A major part of her promotion of employee ownership is successfully leading her clients to be members of The ESOP Association.”

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Andrew J. Kulesza of R.E. Kramig & Co., Inc. Named Outstanding Board of Governors Member by The ESOP Association

 Andrew J. Kulesza, Chief Financial Officer of R.E. Kramig & Co., Inc. located in Cincinnati, Ohio, has been named the 2011 Outstanding Board of Governors Member by The ESOP Association.

Mr. Kulesza is an active member of The ESOP Association’s Board of Governors serving in many volunteer capacities. He is a strong supporter of the Association’s government affairs activities over the years meeting with members of Congress and working to educate officials and the public about employee ownership.

“Andrew has worked enthusiastically to advance the cause of employee ownership, particularly with leading think tanks and with Federal officials,” said J. Michael Keeling, ESOP Association President. “I am pleased to be able to present him with the award for Outstanding Board of Governors Member.”

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New England Chapter Recognized for Outstanding Membership Development by

The ESOP Association

 The New England Chapter of The ESOP Association has been recognized for its commitment to membership development at the Association’s 34th Annual Conference in Washington, DC.

The New England Chapter demonstrated a focused commitment to membership in the last year and as a result, directly increased membership in the Chapter. The New England Chapter includes Association members in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont.

“I am pleased to present the Outstanding Membership Development Award to the New England Chapter for their demonstrated commitment to increasing membership in The ESOP Association,” said J. Michael Keeling, ESOP Association President.

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Alexander P. Moss Receives Life Service Award

 For his unexcelled contributions to the employee ownership community and The ESOP Association, Alexander P. Moss has been awarded The ESOP Association’s Life Service Award, the Association’s highest honor.

Mr. Moss, Principal at Praxis Consulting Group, Inc., Philadelphia, Pennsylvania, has been active in the Association for many years. He has been a member of the Board of Directors, is a current Trustee of the Employee Ownership Foundation, the affiliated 501(c)(3) foundation of the Association, is the current Chair of the Association’s Advisory Committee on Fiduciary Issues and also a past Chair of the Association’s Advisory Committee on Ownership Culture.

“Alex has been active in the ESOP community for many years and is always enthusiastic about his work for the Association,” said J. Michael Keeling, President of The ESOP Association. “He consistently goes above and beyond the call of duty to advocate for ESOPs and employee ownership in America. His counsel to other Association and Employee Ownership Foundation leaders, and staff, has made both organizations better and I am proud to present him with this honor.”

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Mark R. Lomele Elected Chair of The ESOP Association

Members Installed to Board Positions

 Mark R. Lomele, Senior Vice President and Chief Financial Officer of Recology located in San Francisco, California, has been elected to serve as Chair of The ESOP Association.

Mr. Lomele is an active member of The ESOP Association and the California/Western States Chapter. He has served as Vice Chair of The ESOP Association for the last two years.

The Recology operating companies provide collection, recycling, and disposal services to homes and businesses in California and Oregon. Recology is the parent company to over three-dozen subsidiaries serving more than 50 communities and is the largest employee-owned company in the industry, providing services to more than 600,000 residential and 60,000 commercial customers. For more information: http://www.recology.com.

“Mark has been active in the ESOP community and with the Association in particular for many years,” said J. Michael Keeling, President of The ESOP Association. “His contributions have increased the effectiveness of Association services and we are excited Mark will be the Chief Elected Officer of the Association and the primary driver of the Association’s mission to advocate and educate for employee ownership.”

In addition to Mark Lomele’s election to Chair, David Kelly, Executive Vice President and Chief Financial Officer of Acadian Ambulance Service, Inc., Lafayette, LA, has been elected to the position of Vice Chair. Cindy Turcot, Chief Operating Officer of Gardener’s Supply Company, Burlington, VT will become Secretary/Treasurer of the Association. As an At-Large Board Member representing a professional member, Pamela T. Hill, Vice President of Commerce Bank, N.A., Kansas City, MO will join the Board. Returning Board members are: Ellis E. Moseley, Executive Vice President and CFO of FREEMAN, Dallas, TX; Karen Ng, Partner at Sedgwick, Detert, Moran & Arnold LLP, San Francisco, CA; Frieda S. Takaki, President/CEO of CHART Rehabilitation of Hawaii, Inc., Honolulu, HI; Caryn Siebert, President/CEO, Carl Warren & Company, Placentia, CA; Carey Chen, Vice President and CFO, Hypertherm, Inc., Hanover, NH; and Lonnie Peppler-Moyer, President and Publisher, Monroe Publishing Company, Monroe, MI.

The Board of Directors is the premier governing body of The ESOP Association. Seven members of its ten person Board of Directors are elected by the Association’s Board of Governors who are elected by Association members.

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Frieda S. Takaki Elected Chair of the Employee Ownership Foundation

 The Employee Ownership Foundation announced today that Frieda S. Takaki, President and Chief Executive Officer of CHART Rehabilitation of Hawaii, Inc. located in Honolulu, Hawaii, will take over as the new Chair of the Foundation.

Ms. Takaki is active in the Hawaii Chapter of The ESOP Association has served on the Executive Committee’s State & Regional Chapter Council. From 2007 – 2009, Ms. Takaki served as Chair of The ESOP Association.

CHART Rehabilitation of Hawaii, Inc. is a multi-disciplinary outpatient physical rehabilitation clinic and is one of the most innovative and comprehensive orthopedic rehabilitation centers in the country. CHART pioneered the active rehab concept in the state of Hawaii in 1979 specializing in work injury and auto accident patients. Ms. Takaki has been with CHART since 1983 and was promoted to President and CEO in 1989.

Effective May 1, 2011, Ms. Takaki will take the reigns from outgoing Chair Joseph Cabral. Mr. Cabral served as Chair of the Employee Ownership Foundation for the past four years.

“We are excited Frieda will be taking over as Chair of the Employee Ownership Foundation,” said J. Michael Keeling, President of the Employee Ownership Foundation. “She is a dynamic leader with many new ideas to lead the Foundation forward.”

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Monday, May 23, 2011

Taking a Crack at ESOPs

Many of you may have read this article, Sam Zell’s Nightmare Continues, by Holman W. Jenkins, Jr. which ran in The Wall Street Journal on May 20, 2011. In the article, Mr. Jenkins mentions it might be time to call for a repeal of the tax benefits for ESOPs. We wanted to share with readers the response by ESOP Association President, J. Michael Keeling.  (Note: you may have to login to read the full article.)

See below:

In response to the Holman W. Jenkins, Jr. article (Sam Zell’s Nightmare Continues, May 20, 2011) — expanded ownership is not a silver bullet, however, common sense dictates owners more often than not end up with more money than those who depend solely on wages. And the most direct method of spreading ownership is through employee ownership.

The Tribune Company was not a typical ESOP (employee stock ownership plan). Most ESOP companies have less than 250 employees and 99% are closely-held, private companies. Almost 90% of ESOP transactions are exit strategies for small business owners looking to cash out and want to leave the company to individuals who understand it best, the employees.

The ESOP is not a panacea. Ownership is risky; any type of ownership bears risk but carries with it rewards. Using the Tribune’s failure to call for a repeal of ESOP tax benefits is short-sighted in light of the 10 million employees drawing compensation from this so-called tax loophole.

Tuesday, May 24, 2011

DOL’s Goals with Appraiser Proposal Coming into Focus

Ever since last October when the Department of Labor (DOL) proposed a regulation primarily dealing with financial advisors to persons with 401(k) plans, which included a very brief but unexplained recommendation that appraisers of private ESOP company stock be ERISA fiduciaries, the ESOP community has pondered — precisely what was is the DOL seeking in the world of ESOPs.

DOL, in public comments and in letters to members of Congress, has stated “many” ESOP private company stocks are “overvalued” to the detriment of employees participating in the ESOP.  ESOP advocates have consistently asked “how many is many?”  The answer has always been just “many.”

Recently, in response to written questions submitted by a member of Congress serving on the House committee with jurisdiction over the DOL, the DOL position seems to be coming into focus.  And, as the picture becomes clear, it is not getting any prettier, and somewhat belies the broad brushed DOL claim the agency is trying to clamp down on “rouge” appraisers.  [The Congressman was Todd Rokita, 4th District Indiana, serving his first term.  If you are interested in reading the exchange, please send an email to media@esopassociation.org and a copy will be sent to you.  His questions and the DOL response are public record, as they are part of the official transcript of a Congressional hearing.]

What the DOL response indicates is that DOL officials do not agree with some valuation practices which candidly are debated among ESOP appraisers.  In fact, the highly respected ESOP Association Advisory Committee on Valuation has written white papers on the topics; and honorable people can disagree what is the “best” valuation position.  Specifically, there is a practice in appraising private company stock to add back to the discount for lack of marketability a “control” premium should the ESOP hold more, or is to hold more than 50% of the corporation’s voting stock.  Another area discussed among professional appraisers is whether an ESOP company’s repurchase obligation be taken into consideration when valuing shares in a manner that lowers share price.

In other words, it is very reasonable to assume the proposed DOL regulation is not about “rouge, unqualified” appraisers, but a goal by DOL to impose valuation practices they, the DOL officials, think are correct.

Another way to put it:  DOL is moving to establish the “details” of what is a correct private ESOP company appraisal as opposed to having the transparency to say, “We do not like the way nearly all ESOPs are valued by appraisers that claim to be good appraisers, who probably do all the appraisals of the ESOP companies who are members of The ESOP Association.”

In sum, victory by the DOL in making appraisers ERISA fiduciaries is not just about reigning in unqualified individuals doing appraisals but about lowering the price an exiting shareholder may get when selling to an ESOP; such a result will mean fewer ESOPs.

June 2011

The following articles appeared in June 2011.

Monday, June 06, 2011

Is the DOL Ignoring the Obama Administration?

The Administration is making a big deal over its Executive Order (EO 13563) that supposedly guides Executive Branch agencies to only issue regulations, or to at least use a process in developing regulations, that does not impose harsh burdens on business — especially small businesses.  Below is letter that sets forth what we at The ESOP Association consider to be the facts that Department of Labor (DOL), in preparing and issuing the proposed regulation that ESOP appraisers be ERISA fiduciaries, ignored the Executive Order from the White House about how to develop and issue regulations.

We think it’s persuasive to show members of Congress that DOL is thumbing its nose at business, and particularly small businesses, in spite of what is being said by the Administration that it is “business” friendly.

Please feel free to use the information in the letter below in communications with your members of Congress. Thoughts and comments are welcome.

______

May 23, 2011

Mr. Cass R. Sunstein

Administrator

Office of Information and Regulatory Affairs

Executive Office of the President

Office of Management and Budget

Washington, DC 20503

RE: Department of Labor Ignores Executive Order 13563

Dear Administrator Sunstein:

On behalf of the approximately 2,500 members of The ESOP Association, I write setting forth some of the points made in your February 2, 2011, memorandum to the Heads of Executive Department and Agencies, explaining Executive Order 13563 (EO 13563), “Improving Regulations and Regulatory Review.” I do so to contrast its purposes and directions to Executive Agencies to the approach the Department of Labor (DOL) took in proposing a rule to expand the definition of the term “fiduciary” to include appraisers of the stock held in employee stock ownership plans (ESOPs) sponsored by U.S. corporations that are not publicly-traded (referred to as “private” companies, or private ESOP companies.) See 75 Fed Reg. 65263 (Oct. 22, 2010) (referred to as proposed DOL regulation.)

This communication does not repeat the policy critique The ESOP Association has made on the proposed DOL regulation, but to note to you and your colleagues in the Executive Office of the President the obvious inconsistencies of certain provisions of EO 13563 and the process DOL followed in issuing the proposed DOL regulation.

 Section 1: Cost Analysis Guidelines

             Your February 2nd memorandum reiterates five principles from an earlier Executive Order 12866 in Section 1 of EO 13563 that agencies “use the best available techniques to quantify anticipated present costs as accurately as possible.”

The proposed DOL regulation preamble states the “best” cost analysis as to costs the proposed DOL regulation will impose on private ESOP companies, is based on the assumption professional appraisers charged an average $119 per hour for their work in the past.

$119 per hour is a ridiculous number to use. Any cost analysis based on $119 per hour is not accurate. 98% to 99% of U.S. corporations sponsoring ESOPs are private companies, approximately 92% of these private companies have fewer than 500 employees, and just over 50% have fewer than 100 employees.   Thus the majority of U.S. corporations impacted by the proposed DOL regulation with regard to their appraisers becoming ERISA fiduciaries are small businesses, and the costs they will bear if their appraisers are fiduciaries is way more than additional work by appraisers at $119 per hour. While one may submit that the drafters of the proposed DOL regulation were using the $119 per hour rate as an example of the rate years ago, the mere fact DOL did not seek to obtain a more realistic per hour rate to cite is a flaunting of EO 12866 and EO 13563.

 Section 2: Seek Input Before Regulation Proposed

              Section 2 of EO 13563 “directs agencies, where feasible and appropriate, to seek the views of those who are likely to be affected by rulemaking, even before issuing a notice of proposed rulemaking.” (Underline and italics added for emphasis.)

Private ESOP companies, individually, and in ad hoc groups, and through trade associations, in addition to The ESOP Association, and through individual member organizations of service providers to private ESOP companies, are all well known to DOL personnel in its Employee Benefits Security Administration (EBSA), dating back to the late 70s.

The proposal to mandate private company ESOP appraisers be ERISA fiduciaries was never, ever, discussed by anyone at DOL with any party in the ESOP community.

 Section 3: Urges and Instructs Agencies to Co-ordinate

             Section 3 of EO 13563 urges Executive Branch agencies to have more “co-ordination across agencies” to produce simplification and harmonization of rules.

In the matter of appraisers valuating shares of private ESOP companies, the IRS has a major responsibility to ensure Internal Revenue Code Section 401(a)(28)(C), which mandates an annual valuation of non-traded company stock in an ESOP be independently valued, or whenever circumstances might have a significant impact on ESOP share value, is adhered to by private ESOP companies. Because the IRS has for many years policed the accuracy of hard to value assets in areas of estate tax, charitable contributions, and ESOPs, the agency has several approaches to ensure appraisals are professionally done, and as accurate as possible.

Section 3 of EO 13563 instructs (note EO 13563 does not “ask,” “encourage,” recommend,” but instructs) agencies (1) to consider the combined effects their regulations… on particular sectors… and (2) to promote coordination across agencies and harmonization of regulatory requirements. Section 3, thus emphasizes the crucial importance of simplifying and harmonizing regulations and acknowledges that, at times, regulated entities might be subject to requirements that, even if individually justified, may have cumulative effects imposing undue, unduly complex, or inconsistent burdens. Section 3 is designed to reduce burdens, redundancy, and conflict, and at the same time to promote predictability, certainty, and innovation.

While no one disputes DOL’s primary role in determining who is an ERISA fiduciary and its primary role in enforcing ERISA’s requirement that a private ESOP company acquire company stock only for fair-market value as determined by an appraiser, common sense says that DOL should follow EO 13563 Section 3’s instructions, and confer with IRS/Treasury officials who have expansive experience with making sure IRC Section 401(a)(28)(C) is complied with by private ESOP companies when their stock is appraised.

There is no evidence DOL personnel have discussed, even briefly, its proposed regulation making appraisers of private ESOP company stock with appropriate IRS/Treasury personnel before drafting and proposing appraisers of private ESOP company stock be ERISA fiduciaries. (Underline added for emphasis.)

The ESOP community has frequent communications with IRS/Treasury personnel.

 Section 4: Admonishes Agencies to Seek Goals in Least Burdensome Manner

             Section 4 of EO 13563 states that “each agency shall identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice… Such approaches include “warnings, appropriate default rules, and disclosure requirements…”

Section 4 acknowledges the importance of considering flexible approaches and alterations to mandate… EO 13563 directs agencies to consider the use of tools to promote regulatory goals through actions that are less expensive…

The DOL proposed rule mandating appraisers of private company ESOP stock ignores all of the admonitions of Section 4. The ESOP appraiser mandate ignores the fact other Federal agencies use a variety of approaches to regulate appraisers of non-marketable assets. Particularly instructive are approaches taken by the IRS, which also has responsibility of enforcing ERISA statues and regulations.

 Summary

             In sum, the DOL proposed regulation ignores provisions of Sections 1, 2, 3, and 4 of EO 13563 by:

1. Using a ridiculous number as the per hour charge by appraisers of private ESOP company stock;

2. Refusing to seek any input from the ESOP community before issuing the proposed regulation;

3. Ignoring input from other Federal agencies on their policies with regard to appraisers of non-marketable assets, particularly the IRS; and

4. Disregarding the less burdensome alternatives to reach its goal of ensuring professional and qualified appraisals of private ESOP company stock tools used by other Federal agencies to ensure appraisers, required under laws and regulations they are responsible for, are professional and qualified.

Your review of this communication is appreciated.

Sincerely yours,

J. Michael Keeling, CAE

President, The ESOP Association

Tuesday, June 07, 2011

Rutgers University Announces Fellowship Recipients

On June 7, 2011, Rutgers University’s School of Management and Labor Relations announced this year’s fellowship recipients.

To read the press release CLICK HERE.

To view the complete list of fellowship recipients, CLICK HERE.

For additional information about the Louis O. Kelso Fellowships funded by the Employee Ownership Foundation, visit the Foundation’s website HERE.

Monday, June 13, 2011

Rutgers University Announces Louis O. Kelso Fellowship Recipients

On Monday, June 13th, Rutgers University’s School of Management and Labor Relations announced this year’s Louis O. Kelso Fellowship recipients in a press release titled — Rutgers’ School of Management and Labor Relations Announces the Louis O. Kelso Fellowships to Study Employee Stock Ownership.

The new Kelso Fellows are:

Dustin Avent-Holt, a Louis O. Kelso Fellow, who is studying wage and stock-based income in the deregulated U.S. airline industry.  He is a Ph.D. candidate in sociology at the University of Massachusetts at Amherst.

Francesco Bova, a Louis O. Kelso Fellow, who is examining the effect of employee ownership such as ESOPs, on improving a firm’s transparency with its employees and the market in general. He is an assistant professor of accounting at the University of Toronto Rotman School of Management with a doctorate in accounting from the Yale University School of Management.

Adam Cobb, a Louis O. Kelso Fellow, who is analyzing the role played by power differences between owners, managers and employees in determining how the corporate-based retirement system emerged and has evolved.  He will be an assistant professor, University of Pennsylvania Wharton School of Finance in the fall and has a doctorate in management and organizations from the University of Michigan Ross School of Business.

Phillip Melizzo, a Louis O. Kelso Fellow, who is using experimental laboratory methods to help isolate the independent and complementary motivational effects of employee ownership and participation in decision-making.   He is an assistant professor of economics at the College of Wooster and has a doctorate in economics from the University of Massachusetts at Amherst.

Trevor Young-Hyman, a Louis O. Kelso Fellow, who is researching worker ownership, ESOPs, and innovation in automated manufacturing in the Midwestern United States.  He is a Ph.D. candidate in sociology at the University of Wisconsin at Madison.

To read the full press release containing additional information about the Louis O. Kelso Fellows, CLICK HERE.

For additional information about the Louis O. Kelso Fellowships funded by the Employee Ownership Foundation, visit the Foundation’s website HERE.

Tuesday, June 14, 2011

Acadian Ambulance Service, Inc. Named 2011 Employee Ownership Month Poster Contest Winner

Since people have asked, we wanted to announce the winner of the 2011 Employee Ownership Month Poster Contest here — congratulations to Acadian Ambulance Service, Inc.

Acadian Ambulance Service, Inc., an employee-owned company located in Lafayette, Louisiana, has been selected by The ESOP Association as its 2011 Employee Ownership Month Poster Contest Winner.

Acadian Ambulance is committed to providing the highest level of emergency medical care and transportation possible. The company has ground and air ambulance facilities strategically located in areas across Louisiana, Texas, and Mississippi, medics supporting offshore facilities across the Gulf, and monitoring services that are available across the country. For more information: http://www.acadian.com.

Acadian Ambulance’s poster was selected because of the idea it expressed: “Growth. Ownership. Success. Teamwork.” 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.

Tuesday, June 14, 2011

Pending Amendment in Senate to Stop Department of Labor’s (DOL) Regulatory Attack on ESOPs

The following legislative alert was sent out by The ESOP Association this afternoon. We wanted to share it with readers here.  Information will also be made available on The ESOP Association’s website.

 Legislative Alert

 ESOP Bulletin

 Pending Amendment in Senate to Stop Department of Labor’s (DOL) Regulatory Attack on ESOPs

 CONTACT YOUR SENATORS AND URGE THEM TO BE “FOR” THE PRO-ESOP POSITION

 Senator Kelly Ayotte (R) of New Hampshire has proposed an amendment to S. 782 that would amend ERISA to make clear that appraisers of private company ESOP stock are not ERISA fiduciaries.  She is joined by Senators Olympia Snowe (R) of Maine and Scott Brown of Massachusetts (R).

Their amendment would stop the DOL proposed regulation mandating all private company ESOP appraisers be ERISA fiduciaries.  Briefly, if DOL has its way, all private ESOP companies would pay significantly higher fees for appraisals, there would be extreme confusion over whether the appraiser or the trustee[s] and other current fiduciaries make the decisions about acquisition of shares, and most troubling, would leave private ESOP companies sitting ducks anytime aggressive trial lawyers could find anyone upset over a share value determination.  [See The ESOP Association website, and the 12 blog posts, about the harm the DOL proposal will do to the ESOP community if finalized.]

To read the amendment, CLICK HERE.

Please call your Senators’ offices, or call and get permission to send an email to the appropriate staff person who works on tax, labor, or retirement savings issues for the Senator, and urge them to be for S. AMDT 467 to S. 782 to reauthorize the Public Works and Economic Development Act of 1965.

Your message is: “I am ______ of (name of company) in (location) and I urge Senator _____ to be for Senator Ayotte’s amendment number 467 to S. 782 to stop a very negative ESOP position being proposed by the Department of Labor.” Call 202/224-3121 and ask for your Senators’ offices.

If you live in New Hampshire, Maine, or Massachusetts, call the offices of Senators Ayotte, Snowe, and Brown and say, “Thank you, thank you!”

If needed, go to http://www.esopassociation.org/docs/255%20-%20DOL%20Proposal.doc to learn more about the DOL’s proposed regulation.

If you want direct numbers for your Senators’ offices, go the U.S. Senate, http://www.senate.gov, and click “Find Your Senator” in the upper right hand corner. The U.S. Senate website lists all Senators’ office numbers.

No matter the final handling of the Ayotte amendment, it is extremely important that Senators hear the voice of the ESOP community, and that they are then more committed to making sure the current negative attitude towards ESOPs at DOL is dampened, if not silenced.

Friday, June 17, 2011

Insert ESOPs into Presidential Campaigns

For many years, ESOP advocates have wondered, “How do we get a candidate for President to think about ESOPs, much less endorse ESOPs?”

One clue: DON’T WAIT UNTIL THE FALL OF 2012 AFTER THE TWO MAJOR CANDIDATES ARE PICKED BY THEIR CONVENTIONS.

And here is an example of how to insert ESOPs into the discussion early, especially in the key early primary states such as Iowa — a caucus state — New Hampshire, and South Carolina, to name the first big three.

Recently, a much respected ESOP company, Cirtronics in Milford, New Hampshire, hosted a company visit with former Minnesota Governor Tim Pawlenty. No question the former Governor did not come because he wanted to visit an ESOP company; no question his remarks were a general introduction as to why he should be the candidate for President from the Republican Party. But also no question at all that Cirtronics’ leaders informed him of the company’s ownership structure. In turn, when he talked to the employees and others, he noted that Cirtronics was an example of successful employee ownership. See the links below.

Sure, maybe such remarks do not sound like a big deal, but the fact is that this man who just might be President some day, has had planted in his mind a positive image of ESOPs and employee ownership.

One wins in the advocacy game just like any other game: It is not one thing, one big home run, or Hail Mary pass; but a slow, foundation building effort that grows in the mind of the decision maker at the level of a Presidential campaign, or in the office of the President.

As the primaries unfold in your state, exercise your values in interacting with the candidates you think would be best for America. If there is an interest in the entire field, so be it. Just try to get them out to your ESOP company so they will be exposed to the “truth” about employee ownership through the ESOP model.

Following are a few links to articles about the Cirtronics/Pawlenty visit:

The Cabinet

Boston Globe

Union Leader

Tuesday, June 21, 2011

ESOP Legislative Bulletin – Senator Kelly Ayotte Introduces Pro-ESOP Bill S. 1232

The following information was sent to ESOP Association members this morning.  We also wanted to share with readers here.

Senator Kelly Ayotte’s Floor Amendment #467 Becomes S. 1232 — A bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans. 

Urge Your Senators to Co-Sponsor!

 Because the underlying bill pending on the Senate floor, S. 782 to reauthorize the Public Works and Economic Development Act of 1965, has bogged down and is not likely to be adopted, Senator Kelly Ayotte, and her colleagues Senators Olympia Snowe (R-ME), Susan Collins (R-ME), Scott Brown (R-MA), and Mary Landrieu (D-LA), decided a more effective pathway to stop DOL’s proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries, was to take S. AMDT 467 word for word and introduce it as a free standing legislative proposal. It is now S. 1232.

Please consider, and then ask your Senators to co-Sponsor S. 1232. Call 202/224-3121 and ask for your Senators’ offices. Ask to speak to the aid responsible for following tax, labor, or retirement savings law and follow-up with a suggested letter.

CLICK HERE for a suggested letter.

If you would like information on the DOL’s proposed regulation, CLICK HERE.

Go to http://www.senate.gov for information on contacting your Senators’ offices.

Contact govrel@esopassociation.org with any questions.

 If you live in New Hampshire, Maine, Massachusetts, or Louisiana, say thank you to these Senators who are standing up for ESOPs.

Wednesday, June 22, 2011

Senator Kelly Ayotte Introduces Pro-ESOP Bill, S. 1232

We wanted to share the following press release which was sent out by The ESOP Association.

 For Immediate Release: June 21, 2011

For More Information: Amy Gwiazdowski, amy AT esopassociation.org

 Senator Kelly Ayotte Introduces Pro-ESOP Bill, S. 1232

The bill would modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans.

 June 21, 2011 (Washington, DC) – Senator Kelly Ayotte (R-NH) introduced today S. 1232, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans. The bill is co-sponsored by Senators Olympia Snowe (R-ME), Susan Collins (R-ME), Scott Brown (R-MA), and Mary Landrieu (D-LA).

This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries. If the proposed regulation were to be finalized as is, there would be extreme confusion over whether the appraiser or the trustee[s] and other current fiduciaries make the decisions about acquisition of shares, and most troubling, would leave private ESOP companies open to lawsuits.

“We’re very pleased to see Senator Ayotte take the lead on this issue,” said ESOP Association President, J. Michael Keeling. “The DOL needs to wake up to the fact that private company ESOPs have tremendous positive records of creating jobs that are locally controlled in high performing companies. ESOPs are good for employees, companies, and our communities.”

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, June 24, 2011

Does Anybody Ever Think About ESOPs and Employee Ownership?

Earlier blogs have noted the DOL proposed regulation mandating all appraisers of private ESOP company stock be fiduciaries seems to be lost in the onslaught of effective lobbying by mutual funds, banks, and stock brokerage firms, rightfully upset over the DOL’s proposal’s potential impact on K plans and IRAs.

Evidence of ESOPs not being front and center or even on the mind of DOL officials supporting the ESOP appraiser mandate was a May 30th article in Pensions & Investments. The article features Assistant Secretary Phyllis Borzi discussing the proposed regulation. She only talks about concerns expressed by the mutual funds, banks, brokerage houses, and employer groups interested in K plans and IRAs. CLICK HERE to read the article.

Not begrudging employers and their service providers trying to maintain affordable, reasonable, and workable ERISA requirements for K plans and IRA products, but it would be a shame if DOL hears and responds to their concerns, while not budging on its ESOP proposal because the ESOPs are just the “little” people.

Monday, June 27, 2011

DOL’s Claim that an Appraiser can be an ERISA Fiduciary and still be Independent

At the Department of Labor’s (DOL) public hearings on the anti-ESOP proposal that appraisers of private company ESOP stock automatically be ERISA fiduciaries, DOL top EBSA (Employee Benefits Security Administration) officials scoffed at claims from private sector witnesses that an appraiser could not be independent, and at the same time, be an ERISA fiduciary. Phrases like, “I just don’t get it” were thrown out by DOL leaders at the hearing when this seeming contradiction of being independent and being an ERISA fiduciary was raised.

Well, maybe it’s time for ESOP advocates to say back to the DOL, “We just don’t get it” when “You just don’t get it.”

Congress authorized the Appraisal Standards Board in 1989 as the source of appraisal standards. On June 15, 2011, the Chair of the Appraisal Standards Board wrote to the DOL EBSA saying that there was no way an appraiser could be independent and also be a fiduciary. CLICK HERE to read the letter.

But noted in our blog post – Is the DOL Ignoring the Obama Administration? - the EBSA does not seem to care what the White House and OMB have ordered in terms of promulgating regulations.  It is no surprise that ESBA doesn’t really care what a Congressionally authorized group to set appraisal standards thinks either. Guess EBSA top leaders just “don’t get” what the White House and the Appraisal Standards Board say.

If you are dialoguing with your member of Congress about the DOL attack on ESOPs, here is another piece of evidence that what DOL is proposing has no support in rational reading of law, Executive Order, or in current appraiser standards.

Wednesday, June 29, 2011

Inc. Magazine Names 2011 Top Small Company Workplaces

In May 2011, Winning Workplaces and Inc. Magazine announced the winners of the 2011 Top Small Workplaces, and it should be no surprise to anyone reading, that several ESOP Association members were among the winners. The Top Small Workplaces competition is an annual contest to recognize the nation’s best small workplaces. For additional information CLICK HERE.

Among this year’s winners, we wanted to congratulate six Association members: Cal-Tex Protective Coatings, Schertz, TX; Golden Artist Colors, New Berlin, NY; Harrell Remodeling, Mountain View, CA; Hopkins Printing, Columbus, OH; ITA Group, West Des Moines, IA; n-Link, Bend, OR. Additionally, two members were named finalists in 2011: McManis & Monsalve Associates, Erie, PA and Normandeau Associates, Bedford, NH.

Congratulations to this year’s winning Top Small Workplaces.

July 2011

The following articles appeared in July 2011.

Friday, July 01, 2011

Empower Your Employee Owners!

Empower Your Employee Owners!

The Employee Ownership Foundation’s 2011 Employee Owner Retreats

 2011 Dates
Honolulu, HI
– August 3-5, 2011
Downers Grove/Chicago, IL – August 11-13, 2011

The Employee Owner Retreat is a two-and-a-half day, off-site training seminars staffed by the Ohio Employee Ownership Center (OEOC), where non-managerial employee owners learn from and interact with their peers from other ESOP companies. The Retreats introduce employee owners to skills and knowledge that will make their participation as owners even more effective. Program includes:

·        Ownership Communication Forum & Knowledge Sharing

·        ABCs of ESOPs & The ESOP Game

·        Understanding Financial Information & Financial Analysis

·        Team Problem Solving Skills

·        Sharing Experiences

CLICK HERE to download a brochure.  More information can be found HERE.

Employee Owner Retreat alumni say:

“I shared ideas with and gained valuable knowledge from interacting with a diverse group of fellow employee owners from all types of businesses all over the U.S. about what we are doing to inspire and motivate, which, in turn, makes all of us stronger and better employee owners.”

“I highly recommend the Employee Owner Retreat. Attendees from our company have raved about the Employee Owner Retreat. One attendee was promoted after attending the Employee Owner Retreat. The enthusiasm he displayed after attending the Retreat was a factor in his being able to be promoted.”

If you have questions or need more information call: The OEOC, Karen Thomas, 330-672-3028 or the ESOP Association, Rosemary Clements, 202-293-2971

Wednesday, July 06, 2011

DOL Problem: Is Bad Getting Worse?

This article ran as the Washington Report column in the June 2011 issue of the ESOP Report, the newsletter of The ESOP Association.

 Maybe this column will sound like a little “fussin,’” but some ESOP advocates still think what the Department of Labor (DOL) is doing with its proposed regulation making all ESOP appraisers fiduciaries is a minor problem that will be handled once the regulation is finalized. It is not a minor problem, and the seeming agenda that the current DOL agency called the Employee Benefits Security Administration (EBSA) has for ESOPs grows darker. At the same time, this agency and its leadership seems to continue to hide what its goals are for its new “attitude” towards ESOPs.

Let’s start with what everyone seems to know: the proposed regulation states that all ESOP appraisers be ERISA fiduciaries. The formal justification set forth by DOL officials, including the Secretary of Labor, is that EBSA had this special task force reviewing ESOP transactions and found that “many” ESOPs were overvalued, and it was the most “common” problem with private company ESOPs. These statements about private company ESOPs have been repeated over and over by DOL officials in the form letters to members of Congress and in interviews with media, and at seminars of ERISA service providers.

We have also seen on several occasions DOL officials say, on the record, that while they are pondering alterations to the proposed regulation’s impact on 401(k) plans and IRAs, the proposed regulation on ESOP appraisers is set, with no changes anticipated.

Both, the citation that there is some kind of nationwide scandal involving private company ESOPs, and that no changes will be made in the proposal’s impact on ESOPs, gave rise to the ESOP community wanting to have the details so the community could assist DOL in proper enforcement. Also to have the regulation be more in sync with what other Federal agencies do to ensure appraisals of non-marketable properties are in accord with professional appraisal standards. So the ESOP community made suggestions for enforcement enhancement, and continued to ask what the definition of “many” is — 5%, 10%, 20%, 50%, etc? DOL has never responded to the offer to cooperate, or to define “many.”

But a letter to a freshman Congressman from Indiana, Todd Rokita (R-IN), from Secretary of Labor Hilda Solis, that was of course written in the office of the Assistant Secretary of Labor for EBSA, gave a hint as to the true agenda of DOL. The letter justified the proposed regulation by citing cases where appraisals were made using valuation theories that candidly are debated among qualified professional appraisers, and under ERISA law can be argued both ways. The letter in several instances cited as an overvaluation an appraisal that took a position on share value in one of these gray areas, that experts debate, that resulted in a higher share value. The letter thus implies that unless the appraiser always gives the lowest value it violates ERISA.

But this letter to Congressman Rokita is not the only piece of evidence of what is the intent of DOL in its campaign against ESOP appraisals. The ESOP Association is hearing report after report that appraisal approaches that have been blessed in DOL and IRS audits of ESOPs for the past 35 years are now being labeled as overvaluation that result in the ESOP being labeled a prohibited transaction. Reports are coming in that a DOL auditor will leave a room to call Washington D.C. DOL offices to learn what the “correct” value should be. In every instance, the D.C. office responds the correct value is always the lower value. In many instances, the ESOP company had an independent outside trustee, and used a very well known appraisal firm with years of ESOP appraisal experience.

Bottom line: If the ESOP community does not stand with people in Congress, such as Senators Ayotte, Snowe, Brown, Collins, and Landrieu who know what the ESOP means in keeping locally controlled jobs that provide good benefits in their states, the ESOP community will be deemed as weak, the number of ESOPs will shrink, and candidly, preserving ESOP tax benefits will be unlikely. The ESOP community cannot afford to abandon its Congressional allies, as it cannot afford to have fewer ESOPs, and thus a smaller voice in the days ahead.

Tuesday, July 12, 2011

Summer Editions of the Advocacy and Congressional Company Visit Kits Now Available

Looking for information on the DOL proposed regulation? Need the most recent pro-ESOP bill and the latest Congressional information?  Download a copy of the Advocacy Kit.  Want to know how to setup a meeting with your member of Congress? The Congressional Company Visit Kit is what you need.

Summer editions of the Advocacy Kit and Congressional Company Visit Kit are available for download from The ESOP Association’s website. Check under News on the right side of the homepage.

Wednesday, July 13, 2011

Membership Services

Publications Highlight

ESOP Accounting Standards

 

This booklet is your guide to SOP 93-6. The ESOP Association’s Advisory Committee on Finance produced this valuable tool to make ESOP accounting easier and more understandable.

Topics covered in this publication:

·        Traditional Leveraged ESOP Rules

·        Two-Step Loans/Inside ESOP Loans/Mirror Loans

·        Current Liability

·        ESOP Dividends

Members $12.00 Non-Members $38.00

Visit our website or call 202/293-2971 to purchase ESOP Accounting Standards.

Friday, July 15, 2011

Photos! Pics! Snapshots!

We want ‘em! The ESOP Association is looking for member photos to use on its website. In the coming year, the Association’s website will be given a facelift, and as part of the new look, we want to showcase what being an ESOP company means which is of course where our wonderful members fit in.

If you have photos of:

  • Association conferences/seminars
  • Chapter events/conferences/seminars
  • Employee Ownership Month events
  • Annual reports
  • Company profile photos
  • Company events/meetings/brown bag lunches
  • ESOP themed events
  • Meetings with members of Congress

Please share them with The ESOP Association. Please include all relevant information including names, places, events, etc. Photo credit will be provided.

Photos can be sent to media AT esopassociation.org with the subject line — Photos.

Tuesday, July 19, 2011

Cal-Tex Employee Owners Take Repurchase Obligation to New Understanding

Member News

 Cal-Tex Employee Owners Take Repurchase Obligation to New Understanding

 The employee owners of Cal-Tex Protective Coatings Inc., located in Schertz, TX, have given the term repurchase obligation a new meaning. At Cal-Tex, the employee owners believe they are the repurchase obligation and to prove it, take a look at the photo below which was sent to The ESOP Association by Cal-Tex. The back of the t-shirt states: “I am a repurchase obligation.”

“This is an extraordinary way to create an understanding of what a repurchase obligation means,” said J. Michael Keeling, ESOP Association president. “I had the opportunity to visit Cal-Tex recently and was amazed by the company’s educational efforts and the ownership culture created. It is a reminder to all: management and co-workers will be the payoff of ownership.”

Have educational events and ideas to share? Let us know and we’ll share your ideas here.

Friday, July 22, 2011

Part I – To Everyone Who Cares About ESOPs…

PART I

To Everyone Who Cares About ESOPs…

         A recent article written by Nina Wasow, an associate attorney with Lewis, Feinberg, Lee, Renaker & Jackson in Oakland, CA which appeared in a July 12, 2011 issue of Pensions & Benefits Reporter, spells outthe truth about how the DOL proposal to make private ESOP company appraisers ERISA fiduciaries will harm private ESOP companies.

The author unexplainably creates several myths and in a series of blog posts over the next few days, we’ll be examining each. Today:

  • Myth number one: Protests against DOL’s proposal are the result of the powerful, inside the beltway ESOP lobbying machine compared to the author’s pure desire to help employees.

Give me a break! The powerful ESOP lobbying machine compared to the trial lawyers — note ESOP PAC contributes about $140,000 in a two year election cycle to its true friends on the Hill, while the author’s association, and big law firms contributed $234 million in the last election cycle according to public records obtained by the Center for Responsive Politics.

I have trouble shedding crocodile tears for the poor trial lawyers fighting to save employees from evil ESOP advocates when the trial lawyers probably have more influence with their big donations to Federal office holders than any group in America.

You can read the outrageous article by going to BNA’s Pensions and Benefits website.   All BNA material is copyrighted and you will have to login and pay to obtain the article.  An ERISA law firm probably has a subscription to Pension & Benefits Reporter, and you can ask for your lawyers to share on a client-attorney basis, or summarize the article for you.  The article is in the July 12, 2011 issue, pages 1308 to 1311.

Share your concerns about this article that is circulating on the Hill with staffers who handle ERISA issues with your members of Congress.

Comments? Let’s hear them!

Monday, July 25, 2011

Part II – To Everyone Who Cares About ESOPs…

PART II

To Everyone Who Cares About ESOPs…

         A recent article written by Nina Wasow, an associate attorney with Lewis, Feinberg, Lee, Renaker & Jackson in Oakland, CA which appeared in a July 12, 2011 issue of Pensions & Benefits Reporter, spells outthe truth about how the DOL proposal to make private ESOP company appraisers ERISA fiduciaries will harm private ESOP companies.

The author unexplainably creates several myths and in a series of blog posts over the next few days, we’ll be examining each. Today:

  • Myth number two: There are many, many flim flam appraisals that will be stopped if the DOL proposal is adopted, and the bad actors will stop cheating employees out of their retirement funds.

          The author, which is active in suing ESOP companies — just won a “whopping” $2 million lawsuit against an ESOP company in Arkansas and will split its proceeds with two other firms — blasts The ESOP Association for saying to DOL, “Where is the scandal?” by citing seven lawsuits since 1993 that found the valuation of ESOP shares to be woefully wrong.  Let’s see, since 1993 there have probably been around 25,000 appraisals of private company ESOP stock, meaning that the author’s cites have a flim flam in 3/100th of the appraisals.  What a scandal!  There have been many more malpractice cases against trial lawyers since 1993 than against private ESOP companies.

As side note, the author notes several cases in making her point that this proposed regulation would be in line with current case law and cites seven (Yes, a total of SEVEN cases!); two she cites twice. You would think if this problem of bad valuations was so wide spread, more than seven cases would be used as examples or at least cite a general number to provide a larger scope of the problem.

          It seems that the plaintiffs’ lawyers have finally heard what The ESOP Association has been saying from day one about the proposal — it will give the plaintiffs’ firms more business.  Isn’t it odd that the author acts like the desire is to give DOL more enforcement power to lower the number of bad ESOPs when if that were true the law firms would have fewer lawsuits to bring.  I doubt the law firms hustling to sue ESOP companies really want to eliminate their business opportunities.  We think that they doth protest too much.

You can read the outrageous article by going to BNA’s Pensions and Benefits website.   All BNA material is copyrighted and you will have to login and pay to obtain the article.  An ERISA law firm probably has a subscription to Pension & Benefits Reporter, and you can ask for your lawyers to share on a client-attorney basis, or summarize the article for you.  The article is in the July 12, 2011 issue, pages 1308 to 1311.

Share your concerns about this article that is circulating on the Hill with staffers who handle ERISA issues with your members of Congress.

Comments? Let’s hear them!

Tuesday, July 26, 2011

Part III – To Everyone Who Cares About ESOPs…

PART III

To Everyone Who Cares About ESOPs…

         A recent article written by Nina Wasow, an associate attorney with Lewis, Feinberg, Lee, Renaker & Jackson in Oakland, CA which appeared in a July 12, 2011 issue of Pensions & Benefits Reporter, spells out the truth about how the DOL proposal to make private ESOP company appraisers ERISA fiduciaries will harm private ESOP companies.

The author unexplainably creates several myths and in a series of blog posts over the next few days, we’ll be examining each. Today:

  • Myth number three: Appraisers can be ERISA fiduciaries and still be independent.

No one, but officials at DOL, think appraisers can be ERISA fiduciaries and still be independent, in conflict with law, and appraisal standards set by the Congressionally sanctioned Appraiser Standards Board [see blog post here].

[In making the claim that appraisers can be independent and be ERISA fiduciaries, the author makes a snarky reference in a footnote to a comment from Dave Fitz-Gerald, an employee owner of ESOP Association member, Carris Reels in Proctor, VT.  Guess the author could not fathom that a real live ESOP company executive might be protesting.  Dave is President of the Association’s New England Chapter and a member of the Executive Committee of the State and Regional Chapter Council.]

You can read the outrageous article by going to BNA’s Pensions and Benefits website.   All BNA material is copyrighted and you will have to login and pay to obtain the article.  An ERISA law firm probably has a subscription to Pension & Benefits Reporter, and you can ask for your lawyers to share on a client-attorney basis, or summarize the article for you.  The article is in the July 12, 2011 issue, pages 1308 to 1311.

Share your concerns about this article that is circulating on the Hill with staffers who handle ERISA issues with your members of Congress.

Comments? Let’s hear them!

Wednesday, July 27, 2011

Part IV – To Everyone Who Cares About ESOPs…

PART IV

To Everyone Who Cares About ESOPs…

 A recent article written by Nina Wasow, an associate attorney with Lewis, Feinberg, Lee, Renaker & Jackson in Oakland, CA which appeared in a July 12, 2011 issue of Pensions & Benefits Reporter, spells outthe truth about how the DOL proposal to make private ESOP company appraisers ERISA fiduciaries will harm private ESOP companies.

The author unexplainably creates several myths and in a series of blog posts over the next few days, we’ll be examining each. Today:

  • Myth number four: ESOPs are big business.

Citing NCEO data selectively, the author ignores that 99% of ESOPs are closely held, private businesses, and that probably 90% plus have fewer than 500 employees, thus meeting the definition of small businesses.

It would be a shame if a proposal that hurts one of the best job policies in America is sacrificed to satisfy the desire of some plaintiff law firms to be able to sue more ESOP companies.

You can read the outrageous article by going to BNA’s Pensions and Benefits website.   All BNA material is copyrighted and you will have to login and pay to obtain the article.  An ERISA law firm probably has a subscription to Pension & Benefits Reporter, and you can ask for your lawyers to share on a client-attorney basis, or summarize the article for you.  The article is in the July 12, 2011 issue, pages 1308 to 1311.

Share your concerns about this article that is circulating on the Hill with staffers who handle ERISA issues with your members of Congress.

Comments? Let’s hear them!

Thursday, July 28, 2011

Congressional Hearing Thoughts on DOL Proposed Regulation

The following is a legislative bulletin which was sent to all members of The ESOP Association recently. In our efforts to keep everyone informed, we are sharing the bulletin here on the blog.

Congressional Hearing Confirms DOL Proposal to Make Appraisers of ESOP Stock is Not to Stop “Rogue,” “Fly by Night,” Unqualified Appraisers, but Mainstream ESOP Appraisers, One of Whom Probably Appraises Your ESOP Stock!

 On July 26, Assistant Secretary Phyllis Borzi, head of the Department of Labor’s Employee Security Benefits Administration (EBSA), during testimony to the Subcommittee on Health, Employment, Labor, and Pensions of the House Education and Workforce Committee confirmed what The ESOP Association has said from the day the proposed regulation was published:

DOL’s proposal to mandate all appraisers of private ESOP company’s shares are ERISA fiduciaries is NOT just to police rogue, fly by night, unqualified persons performing ESOP appraisals.

During her testimony, in response to a question, Secretary Borzi made clear that she and her agency had found that prominent ESOP appraisers are often using “wrong methodologies” when appraising ESOP stock.

MESSAGE: If the DOL proposal mandating that all ESOP private company appraisers be ERISA fiduciaries as proposed, not only will your company pay more for an appraisal, the chances are high that a DOL audit will deem your ESOP share value to be a violation of ERISA, or such a claim will be made by plaintiff lawyers.

The ESOP community must continue its protests to members of Congress about this DOL proposed regulation.

If your Representative or Senators have already protested, thank her or him again; and ask if they have heard anything from DOL indicating a willingness to alter the proposed regulation. If Senators, ask that they consider cosponsoring the Ayotte et al bill, S. 1232, stopping the DOL regulation in its tracks.

If you have no evidence that your Representative or Senators have contacted the DOL, and you have contacted their offices already, call and ask if you can expect a response. [Dial 202.224.3121, and ask the operator to connect you to the member’s office.]

If you have not yet contacted your Representative or Senators, please considering doing so. Click here for suggested letter that can also be used as a phone script.

Remember: it is your ESOP in the line of fire. Not some weird ESOP outlier company!!!

August 2011

The following articles appeared in August 2011.

Tuesday, August 02, 2011

AACE Awards Videos

While the 2012 AACE Awards may be a while off yet, who says we can’t celebrate the 2011 winners again!

We want to share with you AACE Awards videos we’ve posted to YouTube.  The Association hasn’t posted many videos yet (Keep checking, we’re working on it!) but in trying to figure out how to use photos from this year’s AACE Awards judging, we came up with the idea for short videos featuring photos of the winning entries and the AACE Awards Annual Conference display.

Onto the videos!

The ESOP Association’s 2011 AACE Awards Winners

The ESOP Association’s 2011 AACE Awards Display at the 2011 Annual Conference

We plan to use these videos to promote the AACE Awards in 2012.  If you want to know more about the AACE program, please visit the Association’s YouTube channel and to the Association’s website to learn more about the program.

Also, don’t forget to follow us on —

Facebook

LinkedIn (you have to login to join our group)

YouTube

Flickr

Friday, August 05, 2011

August Recess – Time to Setup a Meeting with Your Member of Congress

August means one thing in Washington, DC – summer recess for members of Congress. In August, every member decamps for home and this is a great time to setup meetings and invite your member of Congress to visit your company. There’s no greater way to show a member the power of an ESOP than to have him or her visit your company and see firsthand.

The data/history is overwhelming that a company visit cements ESOP support. Since 1984, the Association has pushed and pleaded for ESOP companies to “show off” for their members of Congress. Since 1984, of the hundreds of Congressional company visits, only one member of Congress did not become an ESOP advocate. And that one was neutral, not negative.

If you would like information on how to setup a meeting, visit The ESOP Association’s website and download a copy of the Congressional Company Visit Kit: Practical Steps for Unparalleled Results. It is available on the homepage under News.

Having a member of Congress visit your company is one of the most important government relations activities you can undertake. It is that the most effective activity for obtaining support for ESOPs from a member of Congress. 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.

Has a member of Congress been to your company? Tell us about the visit. Drop us a comment here or send an email to mediaATesopassociation.org with a short re-cap.

Monday, August 08, 2011

ESOP Advocates

On Friday, August 5th, we talked about meeting with your member of Congress — August Recess – Time to Setup a Meeting with Your Member of Congress. Today, we thought it would be a good idea to share the list of ESOP advocates once more. Don’t forget, this list (which is updated frequently) is always available on The ESOP Association’s website.

These members of Congress were ESOP champions in the recent Congresses as sponsors and co-sponsors of pro-employee ownership legislation, and who will serve in the 112th Congress.

House of Representatives

Congressman Todd W. Akin (R-MO)

Congressman Rodney Alexander (R-LA)

Congressman Robert E. Andrews (D-NJ)

Congresswoman Tammy Baldwin (D-WI)

Congressman Rick Berg (R-ND)

Congressman Earl Blumenauer (D-OR)

Congressman John Boehner (R-OH)

Congresswoman Mary Bono Mack (R-CA)

Congresswoman Madeleine Z. Bordallo (D-GU)

Congressman Leonard L. Boswell (D-IA)

Congressman Charles W. Boustany, Jr. (R-LA)

Congressman Kevin Brady (R-TX)

Congressman Bruce L. Braley (D-IA)

Congressman Larry Bucshon (R-IN)

Congressman Ken Calvert (R-CA)

Congressman Dave Camp (R-MI)

Congressman Eric I. Cantor (R-VA)

Congressman Russ Carnahan (D-MO)

Congresswoman Donna M. Christensen (D-VI)

Congressman Emanuel Cleaver (D-MO)

Congressman James Clyburn (D-SC)

Congressman Howard Coble (R-NC)

Congressman Joe Courtney (D-CT)

Congressman John Culberson (R-TX)

Congressman Danny Davis (D-IL)

Congressman David Dreier (R-CA)

Congressman John Duncan, Jr. (R-TN)

Congresswoman Jo Ann Emerson (R-MO)

Congressman Barney Frank (D-MA)

Congressman Elton Gallegly (R-CA)

Congressman Jim Gerlach (R-PA)

Congressman Charles A. Gonzalez (D-TX)

Congressman Bob Goodlatte (R-VA)

Congressman Sam Graves (R-MO)

Congressman Gene Green (D-TX)

Congressman Raul Grijalva (D-AZ)

Congressman Brett Guthrie (R-KY)

Congressman Wally Herger (R-CA)

Congressman Maurice D. Hinchey (D -NY)

Congressman Tim Holden (D-PA)

Congressman Randy Hultgren (R-IL)

Congresswoman Lynn Jenkins (R-KS)

Congresswoman Eddie Bernice Johnson (D-TX)

Congressman Sam Johnson (R-TX)

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

Congresswoman Marcy Kaptur (D-OH)

Congressman Ron Kind (D-WI)

Congressman Dennis Kucinich (D-OH)

Congressman John Larson (D-CT)

Congresswoman Barbara Lee (D-CA)

Congressman Sander Levin (D-MI)

Congressman John Lewis (D-GA)

Congressman David Loebsack (D-IA)

Congressman Frank D. Lucas (R-OK)

Congresswoman Carolyn Maloney (D-NY)

Congressman Donald A. Manzullo (R-IL)

Congressman Kenny Marchant (R-TX)

Congressman Thaddeus G. McCotter (R-MI)

Congressman Howard McKeon (R-CA)

Congressman David B. McKinley (R-WV)

Congressman Michael H. Michaud (D-ME)

Congresswoman Gwen Moore (D-WI)

Congressman Tim Murphy (R-PA)

Congressman Richard Neal (D-MA)

Congressman Alan Nunnelee (R-MS)

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 Todd Russell Platts (R-PA)

Congressman Jared Polis (D-CO)

Congressman Bill Posey (R-FL)

Congressman Nick Rahall (D-WV)

Congressman Charles Rangel (D-NY)

Congressman David G. Reichert (R-WA)

Congressman David Rivera (R-FL)

Congressman Dana Rohrabacher (R-CA)

Congressman Todd Rokita (R-IN)

Congressman Peter J. Roskam (R-IL)

Congresswoman Ileana Ros-Lehtinen (R-FL)

Congressman Edward Royce (R-CA)

Congressman Paul Ryan (R-WI)

Congresswoman Jean Schmidt (R-OH)

Congressman Aaron Schrock (R-IL)

Congresswoman Allyson Y. Schwartz (D-PA)

Congressman Jose E. Serrano (D-NY)

Congressman Pete Sessions (R-TX)

Congressman Lee Terry (R-NE)

Congressman Mike Thompson (D-CA)

Congressman William Thornberry (R-TX)

Congressman Patrick J. Tiberi (R-OH)

Congressman Timothy J. Walz (D -MN)

Congressman Melvin Watt (D-NC)

Congressman Peter Welch (D-VT)

Congressman Todd Young (R-IN)

Senate

Senator Kelly Ayotte (R-NH)

Senator Max Baucus (D-MT)

Senator Jeff Bingaman (D-NM)

Senator Roy Blunt (D-MO)

Senator Scott P. Brown ((R-MA)

Senator Sherrod Brown (D-OH)

Senator Richard Burr (R-NC)

Senator Maria Cantwell (D-WA)

Senator Ben Cardin (D-MD)

Senator Saxby Chambliss (R-GA)

Senator Susan M. Collins (R-ME)

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 John McCain (R-AZ)

Senator Mitch McConnell (R-KY)

Senator Robert Menendez (D-NJ)

Senator Jerry Moran (R-KS)

Senator Pat Roberts (R-KS)

Senator John D. Rockefeller (D-WV)

Senator Bernard Sanders (I-VT)

Senator Jeanne Shaheen (D-NH)

Senator Olympia J. Snowe (R-ME)

Senator Sheldon Whitehouse (D-RI)

Senator Ron Wyden (D-OR)

Wednesday, August 10, 2011

Letters to the Department of Labor

During this year’s Annual Conference in Washington, D.C., many ESOP Association members paid visits to Capital Hill to meet with their members of Congress to discuss ESOPs and employee ownership. Among the numerous discussions that took place, the Department of Labor’s (DOL) proposed regulation to make appraisers fiduciaries was also on the agenda. Several members of Congress including: Senator Susan M. Collins (R-ME); Senator Scott P. Brown, (R-MA); Senator Kelly Ayotte (R-NH); Congressman David Loebsack (D-IA); Congressman Leonard Boswell (D-IA); Congressman Bruce Braley (D-IA); Congressman Todd Rokita (R-IN); Congressman Todd Young (R-IN); Congressman Brett Guthrie (R-KY); Congressman Larry Bucshon (R-IN); Congressman David McKinley (R-WV); and Congressman Alan Nunnelee (R-MS) have written to the U.S. Secretary of Labor, Hilda L. Solis, in regard to the proposed regulation. Many, if not all, of these letters came out of meetings with ESOP company representatives.

We want to thank members in New England and Iowa that made these letters happen. By taking the time to meet with members and explain how this proposed rule will affect small businesses directly they have garnered the attention of their representatives who have taken action on their behalf. As we have stated in prior emails and blog posts, the DOL seems set on its position in regard to valuation firms. We need to have more ESOP companies step up and ask their members of Congress to protest and question the proposed regulation to the DOL. See the blog on August Recess – Time to Setup a Meeting with Your Member of Congress.

Additionally, if you have received a reply from your members of Congress in regard to a letter to the DOL, please let us know. This list above is far from complete and we know many companies have been working with their members of Congress on this issue. If you would like information on how to ask your member of Congress to send a letter to the DOL, please visit the Association’s website for additional information.

Friday, August 12, 2011

Wall Street Journal Editorial Questions DOL Proposed Fiduciary Regulation

The Friday, August 12, 2011 edition of The Wall Street Journal ran an editorial titled, “The Borzi Savings Bomb,” questioning the Department of Labor’s (DOL) proposed rule on the definition of a fiduciary including making all appraisers of private ESOP companies ERISA fiduciaries.

If you haven’t seen it, the major thrust of the editorial is that the DOL hasn’t justified the need for the regulation.

We’ve said from the beginning:

DOL’s proposal to mandate all appraisers of private ESOP company’s shares are ERISA fiduciaries is NOT just to police rogue, fly by night, unqualified persons performing ESOP appraisals.

We’ve asked for proof and received none. Congressman Todd Rokita (R-IN) has asked for proof and received noneThe Wall Street Journal has asked for proof and received none.

To propose a regulation that will have major consequences for the entire retirement industry — and especially the ESOP community — without proof the rule is needed is, well, we’ve never been able to wrap our heads around the DOL’s thought process. And it seems we aren’t the only ones.

You can read the full editorial on the House Education and the Workforce Committee website.

The editorial on The Wall Street Journal website is here.  You will need a Journal account to read it online.

The editorial refers to a recent House Education and the Workforce Committee hearing held on July 26th where several members of Congress strongly questioned the value of and need for the proposed regulation. You can find additional information about the hearing here.  You can find our thoughts on the outcome here.

Wednesday, August 24, 2011

Curriculum Library on Employee Ownership

As many of our readers know, the Employee Ownership Foundation provides scholars and university professors with funding for research on employee ownership. As part of the ongoing work to encourage colleges and universities to incorporate employee ownership information into curriculums, we would like to share a link with readers to the Curriculum Library on Employee Ownership, or CLEO, on Caseplace.org which is an online, searchable library of teaching and background materials on employee ownership.

For more information on CLEO, visit the website.

Below is a short list of CLEO authors and case studies the Employee Ownership Foundation has provided funding to that are currently available on CLEO. Please note: there are now 540 cases listed on the site searchable by discipline, industry, topic, region, product type, author name, and publication year. Over the last year, much has been added to the website and what is listed below is but a very small sample.

Frank Shipper, Vera L. Street, and Christy Weer

Case Study: KCI Technologies, Inc.

Brent Kramer

Excerpt from Doctoral Dissertation: Employee Ownership and Participation Effects on Firm Outcomes

Steve Freeman

Policy and Issue Reports: Effects of ESOP Adoption and Employee Ownership: Thirty Years of Research and Experience

Michael Keeling (The ESOP Association)

2011 Employee Ownership Executive Briefing Featuring Michael Keeling

Friday, August 26, 2011

ESOP Calendar of Events

With summer coming to a close, we thought it might be a good time to share information on upcoming conferences, seminars, and Chapter events. Below are links to events offered by the Association.

Board of Directors Retreat

Limited to Board of Director Members (inside or outside), CEOs, Internal Trustees and Significant Non-Trust shareholders.  Restricted to 125 attendees.)

A new program in the Association’s portfolio that is modeled after the highly successful New England Chapter Board of Directors retreat. With heightened interest by members of ESOP company boards in fiduciary, and governance issues that may be unique to ESOP companies, this program for both inside and outside board members becomes a necessity.  Attendance will be limited to enhance the learning experience.

Board of Directors Retreat

September 26 & 27, 2011
The Renaissance Chicago Downtown
1 West Wacker Dirve
Chicago, IL  60601
(800) 468-3571

Agenda and registration information are available on The ESOP Association website here.

The ESOP Association’s Las Vegas Conference & Trade Show

2011 Las Vegas Technical Conference & Trade Show
November 3 & 4, 2011
Caesar’s Palace
Las Vegas, NV

Preliminary agenda, registration information, and trade show information are available on The ESOP Association’s website here.

Chapter Events

Looking for a Chapter event in your area? A complete list is available on The ESOP Association’s website here.

Tuesday, August 30, 2011

Membership Services

Publications Highlight

Structuring Leveraged ESOP Transactions

The ESOP Association’s Advisory Committee on Finance has put together a spectacular guide for anyone who wants to finance an ESOP. This booklet tackles issues such as:

  • Lending Considerations for ESOPs
  • Second Stage ESOP Financing
  • ESOP Refinancing
  • Multi-Investor Transactions
  • Differences Between Leveraged & Non-Leveraged ESOPs
  • Communicating the Leveraged ESOP to Employees

This publication is packed with quality information from investment bankers, attorneys, financial advisors and investment specialists.

Members $24.00 Non-Members $72.00

Visit our website or call 202-293-2971 to purchase Structuring Leveraged ESOP Transactions.

Wednesday, August 31, 2011

August 2011 Wrap-Up

Since August is at an end, we thought we’d take a minute to re-cap this month’s highlights.

We started off the month with AACE Awards videos.

Reminded everyone to meet with their member of Congress.

Listed the ESOP advocates.

Discussed letters to the Department of Labor.

Linked to a Wall Street Journal article about the Department of Labor’s proposed fiduciary regulation.

Highlighted the Curriculum Library on Employee Ownership.

Reminded everyone about upcoming events.

And shared a publication highlight.

In September, look for information about Employee Ownership Month, a guest blog on a new ESOPs en Español program, and continuing coverage of the DOL’s proposed fiduciary regulation.

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