The ESOP Association Blog

Covering ESOPs and employee ownership

Raise the Bar: More Pro-ESOP Bill Sponsors Needed

Please note, the following article originally ran as the Washington Report column in the July 2015 issue of the ESOP Report, the newsletter of The ESOP Association.

No question it was pleasing to have introduced in the House, H.R. 2096, (Promotion and Expansion of Private Employee Ownership Act of 2015), and in the Senate S. 1212 (same title) in late April and early May, with clear cut Republican and Democrat members of the House and Senate as co-sponsors. It is pleasing to see that as of July 7, the bi-partisan support grew, for as of that date, the H.R. 2096 list of sponsors had grown from the original eight to 25 — 17 Republicans and eight Democrats — and S. 1212 had grown from the original 11 to 21 — 11 Republicans and eight Democrats and two Independents, who caucus with the Democrats.

But more support is needed to not only have the provisions of these two bills become law, which would be good, as explained below, but would be very important in making sure what ESOP companies have now that increases their profit after taxes remains the law, in view that sometime in the near future all tax laws will be scrutinized, and many eliminated or reduced.

And the bar we have to measure the support for ESOPs in Congress is the bar set in 1993, when 102 members of the House sponsored pro-ESOP bills, and records indicate the high in the Senate was 29 in 1995. Those numbers made a difference when the Ways and Means Committee in 1996 and the Senate Finance Committee in 1996, without opposition, passed the law permitting S corporations to sponsor ESOPs. [As a general rule, it takes often six to eight years from the day a “new” tax benefit idea is introduced to when the tax committees put the idea into a bill it sends the House or Senate floor.]

To move the Congress to put into law the provisions of S. 1212 and H.R. 2096 that would permit a seller of S stock to an ESOP to defer her/his capital gains tax on the proceeds as the seller of C corporation stock has been able to do since 1985, per the provisions of IRS 1042, and to ease the SBA bias against ESOPs when deciding if a small business that has an SBA preference should continue to have that preference when the ESOP owns more than 50% of the company, there needs to be many more sponsors of H.R. 2096 and S. 1212.

Impossible? No, because there are 124 members of the House and Senate who are ESOP advocates because they have sponsored pro-ESOP bills before this year. So, subtract 46 current H.R. 2096 and S. 1212 sponsors, and there 78 men and women in the House and the Senate that have sponsored bills in prior Congresses that are identical to H.R. 2096 and S. 1212.

ESOP advocates just have to ask, via letter, via an ask during a company visit in August, or a town hall session in August, or at a civic club.

Go to the Advocacy Kit, where there is the suggested letter for co-sponsoring these bills — to get suggested words for the ask.

Resting on laurels because it appears that not having any bad ESOP recommendations in last year’s big tax reform proposal put forward by the former Chair of the Ways and Means Committee, Dave Camp, and recently a task force of the Senate Finance Committee recommended consideration of S. 1212 when it takes up major tax reform legislation in the next two to three years, would be dumb, and dumber.

Let’s raise the bar — let’s have the mark reached in 1993 reached again — let’s expand incentives for creation and operation of ESOPs.

It is doable.

Filed under: Employee Ownership Message, ESOP Report, Government Affairs,

New Center for American Progress Report Touts Capitalism for Everyone

The Center for American Progress, a Washington, DC think tank, released an interesting report today titled:

Capitalism for Everyone

Encouraging Companies to Adopt Employee Ownership Programs and Broad-Based Profit Sharing

By Karla Walter, David Madland, and Danielle Corley

More information and the report can be found here.

ESOP Association President, J. Michael Keeling stated, “We agree with this report that recommends that policy makers need to increase programs to ensure that more employees are able to share in owning the companies in which they work and thus able to share in the wealth they help create. Most of all, it is very welcome to read that one of our nation’s leading think tanks recognizes that broad-based ownership is a goal that all national leaders, no matter what political party she or he belongs, no matter whether so-called ‘left’ or ‘right’ should work toward.”

Filed under: Employee Ownership Message, ,

Discussions of Capitalism

You may have seen this op-ed column in The New York Times:

Capitalism for the Rest of Us

By JOSEPH R. BLASI, RICHARD B. FREEMAN and DOUGLAS L. KRUSE

The authors of the column are well-known employee ownership researchers, Dr. Joseph Blasi and Dr. Douglas Kruse at the School of Management and Labor Relations at Rutgers University and Dr. Richard Freeman at Harvard University.

The column makes some great points about the value of employee ownership; we won’t repeat these points here. Go read the column.

What you may also have seen was criticism of the column and its ideas (well-researched ideas we should point out), by Fox News. Here’s where we get confused. Fox is saying this is all part of a liberal agenda when former President Ronald Reagan was a very strong supporter of ESOPs. We offer this video as proof.

 

 

Filed under: Employee Ownership Message, News Links

May 2015 Link Round Up

It’s June 1 it is which means this is your May news re-cap.

Leading in an Ownership Setting: The Program for CEOs

New Spring Advocacy Kit is available

We talked pro-ESOP legislation

We provided a legislative update on H.R. 2096 and S. 1212

May 2015 ESOP Report was published

We shared some talk about ESOPs

We talked ESOP company news

Dates were announced for the 2015 Employee Owner Retreat

S. 1212 was introduced in the Senate

Congrats to the 2015 ESOP Award & AACE Award winners

The 2015 Annual Conference App was announced

We connected at the Annual Conference with members

We announced new Chairs!

Filed under: AACE - Annual Awards for Communications Excellence, Conference Information, Employee Ownership Foundation, Employee Ownership Message, ESOP Report, Government Affairs, Member Services, Publication, Silver ESOP Awards, TEA Members,

Legislative Update: H.R. 2096 & S. 1212

ESOP Association President, J. Michael Keeling, provides a legislative update to members regarding new pro-ESOP bills introduced in the  House of Representatives and the Senate, H.R. 2096 and S. 1212.

More information can be found in the ESOP Bulletin.

 

Filed under: Employee Ownership Message, Government Affairs, , ,

ESOPs in the Air

Please note, the following article originally ran as the Washington Report column in the April 2015 issue of the ESOP Report, the newsletter of The ESOP Association.

If you would like additional information about newly introduced pro-ESOP legislation, read the ESOP bulletin.

This past month a set of inquires came in to The ESOP Association that the office has never really seen before.

Traditionally, when a committee, or committees, of the Congress, usually tax committees, work on revising law, or adding law pertaining to ERISA plans in general, and ESOP law in particular, it is not uncommon to have a Congressional office reach out to the Association’s office with questions. Not as frequent, but not unusual, the reach out is from a Congressional office of a member of the Congressional committees with jurisdiction over Title I of ERISA, which has the fiduciary provisions of law, along with some provisions on diversifying ERISA plan’s assets — these committees are often loosely referred to as the education and labor committees.

And we must cite one other example of why the Association might hear from a Congressional office — the member has openly and publicly co-sponsored a pro-ESOP legislative proposal, and the Association has that member listed publicly on its website as an ESOP “advocate.” Most often, and it is almost without fail, these members of Congress jumped on the pro-ESOP bandwagon due to direct visits with an ESOP company, or companies in her/his district or state.

But, here is the new development that triggered Association staff direct involvement with government relations responsibilities to sit back and wonder, “How come?”

How come over the past two months Congressional offices whose elected leader is not listed as an ESOP advocate, and who is not on the tax or labor committees of Congress, have unilaterally reached out to the Association’s DC office desiring to have a briefing on ESOP law, and to talk about new proposals the Representative or Senator is pondering to encourage ESOP creation?

While it would be dumb to set forth concrete reasons, there is reasonable speculation as to why are these not heard from before members of Congress reach out to the Association for ESOP information.

Interestingly, all of these inquiries came from a Congressional office of a Democrat.

So, what is it that has Democrats who have not been ESOP advocates, and who do not serve on a tax or labor committee, interested in promoting ESOPs?

It is a series of developments: One, the book The Citizen’s Share by respected academics Drs. Joseph Blasi and Douglas Kruse of Rutgers, and Dr. Richard Freeman of Harvard, attracted the attention of a think tank whose reputation among Democrats is very high — the Center for American Progress, or CAP. CAP staff, even before the book’s publication, was reviewing various policies that would increase the wage and wealth of average pay Americans, and broad-based ownership was on its radar screen for review. CAP staff actually had a half day roundtable discussion, with persons knowledgeable about broad-based ownership.

To highlight its work to increase income and wealth of average pay citizens, CAP sponsored a “summit” of top economists and opinion leaders that issued a paper full of recommendations to address income issues. In the paper was a straight forward endorsement of policies to increase “ownership” among more Americans, and ESOPs were specifically cited as an example of a program that did broaden ownership.

In conjunction with the CAP paper, famed economist Peter Orszag, who was President Obama’s first Director of the Office of Management and Budget, a very influential position in our government though not realized by most citizens, wrote a very straight to the point opinion piece for the widely read Bloomberg blog stating that President Obama needed to be forceful in promoting more ownership among Americans, citing ESOPs as did the CAP summit document.

Meanwhile on two recorded occasions — i.e. not a back room unpublished conversation — for the first time since Robert Reich was Secretary of Labor, the current Secretary of Labor, Thomas Perez, gave a glowing endorsement of ESOPs as good policy.

And, the Employee Ownership Foundation (EOF): You read it right, the Association’s affiliated 501(c)(3) was not directly involved, but…. Research supported by the Foundation and the publicity garnered by data gathered made its way into the discourse, woven into The Citizen’s Share in certain passages and sections — cited not as EOF materials, but citing work that neutral third parties had done on broad-based employee ownership that EOF helped fund, but certainly not controlled; data in a similar vein noted by the CAP staff people working on how to increase more ownership among average pay persons.

So, Democrats that prior to a few months ago did not take note of employee ownership, are beginning to do so.

Let it be said without hesitation; throughout the 90s and first 14 years of the 21st Century, the vocal men and women in Congress for promoting ESOPs were Republicans — much of its stemming from these men and women coming of maturity when their favorite national figure Ronald Reagan was President, and who was the best friend ESOPs ever had in the White House.

Always support for ESOPs in the tax and labor committees have been both Democrats and Republicans; and always the list of advocates is nearly balanced between the two, as when a member of Congress learns about ESOPs up close and personal on a company visit, s/he becomes a supporter.

But recently, it is pleasing to see the interest in ESOPs grow as opinion leaders that have the ear of Democrats in Congress have become more open about the value of employee stock ownership via the ESOP model.

Let us not let the “new” interest falter.

Filed under: Employee Ownership Message, ESOP Report, Publication, ,

Why You Should Attend the 38th Annual Conference

esop-slide-template - 2015 Annual Conference

Thinking of attending the ESOP Association’s Annual Conference in May? Here are a few reasons to join us.

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AACE Awards Exhibition

AACE Awards 6

Connect with employee owners and take the opportunity to view the creativity on display

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Talk with winners and network with AACE entrants to brainstorm ownership communications ideas

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Annual Awards Ceremony — Celebrate Employee Ownership!

Ownership Culture & Technical Education on ESOPs

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Take a look at the preliminary agenda

Don’s pass up this opportunity to gain ESOP insight

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Learn from your ESOP peers

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Support the Employee Ownership Foundation

Foundation

We’ve got some great prizes lined up for the silent auction!

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 WHERE:

The Renaissance Washington Hotel

999 9th Street, NW

Washington, DC

WHEN:

24th ANNUAL AWARDS CEREMONY

Wednesday, May 6, 2015

7:00 PM, Grand Ballroom

38th ANNUAL CONFERENCE

May 7 – 8, 2015

 

Register.

Filed under: AACE - Annual Awards for Communications Excellence, Conference Information, Employee Ownership Foundation, Employee Ownership Message,

Been There; Done That. Does It Have to Be?

The following article originally ran as the President’s Page column in the February 2015 issue of the ESOP Report, the newsletter of The ESOP Association.

Human nature is often an enemy of enthusiasm. By this statement I mean it is normal for a mature ESOP company to react with a ‘been there, done that,’ attitude when pondering how to keep the enthusiasm for employee ownership vibrant among the company employees.

In recent years, when I visit ESOP companies, I often find myself talking to company executives, ESOP committee members, or HR professionals of a company that has had an ESOP for 10, 15, 20, 25, or even more years.

Often, here is the story I hear:

“Well, when we finally put the ESOP in place, needless to say, we were somewhat focused on the details of being sure we met the law and regulations. We were somewhat surprised how creating the ESOP tapped our resources, both money and time wise.

We had our ESOP advisors, and felt that they could keep us posted on all we needed to know.

We told the employees we had an ESOP, but most just scratched their heads, wondering what kind of scheme had been cooked up, as no one was seeing any extra money in her or his pocket.

In sum, we were what one might say a “sleepy” ESOP, assuming that employees would be excited about being owners, and would want to do more and be better.

After some employees left vested, and others saw that the person did get real value, interest seemed to perk up, and we could sense the employees wanted to be more attuned to what this ESOP and their role in being a beneficial owner meant.

So in about year five or so, we began to have employees exposed to other men and women like them at Association Chapter meetings, the national Annual Conference, and the Foundation’s Employee Owner Retreat, for example.

Top level executives, and average pay employees saw the AACE entries, heard about winners of AACE, ESOP Company of the Year, Employee Owner of the Year, attended the Annual Awards Banquet. Some employees became the ‘champions’ for making sure others in the company knew we were special, and everyone would benefit the better if we maximized the human side of ESOPs as a company.

So we entered AACE. We put in applications for awards with our Chapter and thus nationally. We created an ESOP communications committee; we made sure average pay employees were at meetings, networking with others in ESOP companies, and going to break out sessions about ownership culture and the human side of ESOPs.

But after five years or more of going, going, entering, entering, it sort of became old hat all of this intangible ‘love’ of being ESOP.

We need a revival so to speak. We are a good company, don’t get me wrong; but we just wonder if all of this ‘going, participating, entering’ stuff is worth it as we have been down that road, and we do not regret it; but the enthusiasm is gone.”

Well, after hearing this story, I do not jump up and down preaching that persistence is the key to an ESOP company maximizing their ownership structure; persistence is in keeping the enthusiasm alive. But the truth is each company, for many different reasons — growth, or new employees, or new business initiatives — needs to be engaged with the ESOP community year in and year out.

Accepting that the ‘old’ stuff has no more intrinsic value can diminish the subjective impact that being employee-owned has on a better performing company, with a more dedicated, and a more experienced work force, that builds wealth for all.

So, exposing ESOP people to the various tactics used to build a good company, learning about new tactics not used before, is a major way to end ennui that can arise in a mature ESOP company.

Filed under: Employee Ownership Message, Member Services, Publication, , , ,

New Study Shows Big Returns for S ESOPs

A new study by the Employee-Owned S Corporations of America (ESCA) shows that S ESOPs outperformed the S&P 500 Total Returns Index in terms of total return per participant by an impressively large margin (62%), net assets increased over 300%, and distributions to participants totaled nearly $30 billion from 2002 to 2012. The data was compiled by EY’s Quantitative Economics and Statistics (QUEST) practice.

Take a look at the press release here.

Filed under: Employee Ownership Message,

An ESOP Question Answered

At a March 18, 2015 Education & the Workforce Hearing with Department of Labor Secretary Thomas Perez, Congressman Brett Guthrie (R-KY) asked the Secretary about ESOPs. Below is Secretary Perez’s response.

Watch the video.

We plan to share this clip with our Kentucky members, but given the recent, and ongoing, discussions with the Department of Labor regarding ESOPs, we thought we’d share with our readers here.

Filed under: Employee Ownership Message, ,

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