The ESOP Association Blog

Covering ESOPs and employee ownership

Supreme Court ESOP Decision a Disappointing Mish-Mash

The ESOP Association sent out the following release today.

For Immediate Release: June 25, 2014

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

Supreme Court ESOP Decision a Disappointing Mish-Mash

(Washington, DC) June 25, 2014: “Today’s Supreme Court decision that says Congress’s near 40 year history of promoting employee ownership does not protect fiduciaries of employee stock ownership plans, or ESOPs, from lawsuits triggered by company stock price declines, is a disappointing mish-mash,” said ESOP Association President, J. Michael Keeling.

President Keeling’s statement is in response to the Court’s decision in Fifth Third Bancorp v. Dudenhoeffer. Congress has sanctioned ESOPs since 1974, and since the Moench decision in the mid-1990s, and thus the so-called Moench presumption, that lower Federal courts have all upheld, created a presumption that the ESOP fiduciary should hold company stock unless the company was collapsing. It is this pro-ESOP position the Court overruled in today’s case. Part IV of the decision, relevant primarily to publicly-traded companies, sets forth standards for future lawsuits to be used by lower Federal Courts that strongly suggest that “dumping” company stock from the ESOP is not required when share price declines, and leaves a more muddied guideline for a publicly-traded company fiduciary acquiring more shares for the ESOP when the share price is declining. The Supreme Court gives no standard for the “extent” of decline that would perhaps require halting the acquisition of shares.

“So even though Part IV of the decision is not a flat out requirement that the fiduciary dump the company stock, or quit acquiring company stock for the ESOP, it is unclear guidance for fiduciaries of non-traded companies with ESOPs, which are 99% of the ESOP sponsors in the U.S., when the share value of the private company declines,” said Keeling.

In sum, how this opinion affects ESOP plan sponsors is a mish-mash: more guidance on when a fiduciary of an ESOP is not prudent when acquiring stock for the ESOP, and almost a clear statement that dumping the stock on the market is not prudent, while leaving fiduciaries of non-traded companies with ESOPs, which are nearly all the ESOPs in the U.S., without guidance. It will probably result in more lawsuits.

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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. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

Filed under: Government Affairs,

New Issue Brief: Issue Brief #29: Treatment of ESOP Transaction Debt

New Publication Highlight

Pubs Highlight - new issue briefIssue Brief #29: Treatment of ESOP Transaction Debt

Issue Briefs discuss a variety of legal, financial, and operational issues relating to ESOPs and are updated regularly.

Members receive complimentary copies of all ESOP Issue Briefs upon request by emailing pubs@esopassociation.org or by contacting the Publications Department at the national office. All Issue Briefs can be accessed/downloaded by members logged into the website under “Learn About ESOPs” menu item “Issue Briefs.” Non-members may purchase Issue Briefs in the “ESOP Store” through the website, or contact the national office.

Member FREE / Non-member $6.00

Visit the Association’s website, email pubs AT esopassociation.org call 202/293-2971 to purchase Issue Brief # 29: Treatment of ESOP Transaction Debt.

The ESOP Association would like to thank to Valuation Advisory Committee Chair, Jeffrey Tarbell, ASA, CFA, Director, Houlihan Lokey, San Francisco, California and the members of the Association’s Advisory Committee on Valuation who worked on this project.

Filed under: Member Services, Publication, ,

June 2014 ESOP Report is Available

The June 2014 ESOP Report is now available. To access this month’s issue, you’ll need to sign into the website. The Member Sign In button is located at the top of the page. To get to the ESOP Report, click Meet & Learn. A link to the ESOP Report is located on the left side menu.

June2014ESOPReportCOVERsmall

Filed under: Publication, ,

New Pro-ESOP Bill, H.R. 4837

ESOP Association President, J. Michael Keeling, provides a legislative update to members regarding a new pro-ESOP bill introduced in the U.S. House of Representatives, bill number H.R. 4837.

 

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

Pro-ESOP Bill Introduced in House

The ESOP Association sent out the following release today. We are also sharing the information with readers here.

For Immediate Release: June 12, 2014

Pro-ESOP Bill Introduced in House

June 12, 2014 (Washington, DC) – The ESOP Association expresses strong support for H.R. 4837, the Promotion and Expansion of Private Employee Ownership Act, introduced June 11, 2014 by Congressmen David G. Reichert (R-WA), Ron Kind (D-WI), Earl Blumenauer (D-OR), Charles W. Boustany, Jr. (R-LA), Richard E. Neal (D-MA), Bill Pascrell, Jr. (D-NJ), Erik Paulsen (R-MN), and Pat Tiberi (R-OH).

H.R. 4837 is similar to S. 742, which was introduced in early 2013 by a bi-partisan group of Senators led by Senator Ben Cardin (D-MD). H.R. 4837 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans (ESOPs) in S corporations.

“Research proves that ESOPs are more profitable, more productive, and provide sustainable jobs. We need policies to encourage employee stock ownership, and the proposed policies in H.R. 4837, modest in approach, should address core social issues such as adequate retirement security and making sure working Americans have an ownership stake in our capitalistic system,” stated ESOP Association President, J. Michael Keeling.

Keeling continued, “It is extremely pleasing to see these House members, all members of the House Ways and Means Committee, four Republicans and four Democrats, stand up for employee stock ownership through ESOPs. The ESOP Association notes its appreciation for the leadership role of its ally in the employee ownership community, the Employee-Owned S Corporations of America, in championing this new pro-ESOP legislation.”

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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. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

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

Feel Good Bad?

The following article originally ran as the May 2014 President’s Page column in the ESOP Report. The ESOP Report is the newsletter of The ESOP Association. The full issue can be found on the Association’s website under Meet & Learn.

Obviously feeling good is not a bad thing. And with regard to The ESOP Association’s 37th Annual Conference attendees, especially those who visited members of Congress, overall reported “feeling good.” The “feeling good” feeling arises from the fact that the tax reform proposal put forward by the Chair of the House Ways and Means Committee Chair, Dave Camp (R-MI), did not denigrate specific ESOP tax benefits designed to encourage the creation and operation of ESOPs. The handouts provided to those traveling to the Hill had a big “we are appreciative” message for members of the House Ways and Means Committee, where tax law originates under the U.S. Constitution.

Probably the most positive report came from a group of attendees from Congressman Richard Neal’s district, the 1st district of Massachusetts. In a brief upbeat meeting, it was reported that Congressman Neal (D-MA) noted that visits from ESOP advocates were always pleasant, and enjoyable, as it was a mix of women and men that represented all pay grades at the companies. My personal comment to add is that while people working in ESOP companies have all the same characteristics of humans, in general, women and men of an ESOP company tend to be enthusiastic, and passionate, about being “owners” of stock of a free enterprise operation — a for-profit, American company. And candidly, nearly all politicians, and members of Congress are successful politicians, whether left or right, have the ability to read the mood of those they visit with. In other words, they can sense negativism, gloom and doom words, body language, and general not so happy feelings, just as they can positive and upbeat attitudes.

(To add a personal, longtime experience, it takes all my fingers and toes, and there are still not enough, to count the number of members of Congress who have said to me, “ESOP companies are special.”)

Can the happy story end here? No, because becoming “fat and happy” is the worst thing that could happen to our ESOP community. Setting aside the fretting, that is real, over the Department of Labor’s tough attitude towards ESOPs, and the fact that the Supreme Court may soon drop a real bomb on ESOPs, the bottom line is, as former Senator John Breaux said once on the Senate floor, “There are no final victories in the legislative process.” For example, backers of the seemingly sacrosanct tax laws permitting a tax deduction for interest on home mortgages, donations to charities and churches, for paying state and local taxes, among other sacred cows in the Federal tax code, were more than shocked to read Chair Camp’s tax reform proposal.

Bottom line, ESOP tax benefits are not carved in stone; they are not sacred. Today’s feeling good can turn out to be the enemy of the work that needs to continue — the exposure of what being employee owners means to the men and women who work in ESOP companies.

As noted in the March ESOP Report President’s Page column, don’t stop now.

Filed under: Publication, ,

Missouri State Legislator, Torpey, Introduces ESOP Bill

On April 2, 2014 Missouri State Representative, Noel Torpey (R), introduced Missouri House Bill No. 2268, which authorizes a tax credit for companies with an ESOP. From the proposed bill: “This bill authorizes employers a tax credit of 10% of the amount contributed to an employee stock ownership program. The credit is not refundable and cannot be sold or transferred. The credit can be carried forward up to three years. The credit is capped at $10 million annually and $500,000 per employer.”

In recent years, a similar bill became law in Iowa and such a bill is pending the New Jersey legislature.

“As I’ve said before, it’s very encouraging to see states considering bills to facilitate ESOP creation,” said ESOP Association President, J. Michael Keeling. “Indiana, Iowa, New Jersey, and now Missouri, are leading the way on the state level and clearly more state officers are seeing the benefits that employee-owned companies bring to the local economy.”

Filed under: Government Affairs, ,

May 2014 Wrap-Up

It’s June and that means it’s time for a May link round up.

Moody’s Collision Centers, Inc. hosted an event with Senator Susan Collins in Gorham, ME

We shared a photo of the 2014 Employee Ownership Month Poster Contest Winner

The May 2014 ESOP Report was released

We highlighted the ABCs of ESOPs

The Employee Owner Retreat is open for registration

Big G Express hosted at event with Congresswoman Diane Black in Shelbyville, TN

We shared some photos from the 2014 Annual Conference in Washington, DC

The Leading in an Ownership Setting Program is open for registration

We featured items from the Employee Ownership Foundation Auction that took place at the Annual Conference

We announced the 2014 ESOP Award Winners

We shared video highlights from the Awards Ceremony

We shared a link to the Annual Conference Lobbying Kit

We extended an invitation to Conference attendees to visit the AACE Awards display

The Annual Conference App was announced

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

2014 New England ESOP Company of the Year — Moody’s Collision Centers, Inc. — Sets a High Bar

The following article originally ran as the May 2014 Washington Report column in the ESOP Report. The ESOP Report is the newsletter of The ESOP Association. The full issue can be found on the Association’s website under Meet & Learn.

Sen Collins Moodys Event 5

Senator Susan Collins (R-ME).

One thing that inside the beltway lobbyist types brag about is how they keep the grass roots, the voters, in a member of Congress’ district informed, and armed with tactics to make the case for the law[s] important to their jobs. Common is intelligence provided to an association’s reader about a piece of legislation of interest, talking points boiled down to one page or less, and when appropriate, some background on the member’s prior record on issues of interest. For example, at the recent 37th Annual Conference, the Association’s Washington staff provided attendees with a booklet, with perforated tear out pages to leave off when visiting a member of Congress, plus listings of members who were sponsoring pro-ESOP legislation, and a reminder to be gracious when acknowledging that Chair of Ways and Means Committee Dave Camp’s [R-MI], massive tax reform proposal did not reduce current law benefiting ESOPs and ESOP participants.

But, on April 11, 2014, Shawn Moody, President of Moody’s Collision Centers, Inc. in Gorham, ME, and his fellow employee owners, put on an event for Maine’s senior Senator Susan Collins that embodied a very, very powerful message of what employee ownership means to the men and women working in Maine ESOP companies.

What did Moody’s Collision do? Beginning in late February, Moody’s notified all the ESOP companies in Maine that are members of The ESOP Association about a “fund raiser” for Senator Collins. In this day and age, it seems that everyone running for Congress will not darken the doors of a fund raiser on their behalf unless tickets are $500 per person, and some of the New York City and Hollywood events run $5,000 per ticket; but not Moody’s — for $25 a person, their conference room event was open to the employee owners of Maine ESOP Association members. Repeat — $25 a person. A true grass roots fund raiser.

Sen Collins Moodys Event 3

Shawn Moody, President of Moody’s Collision Centers, Inc., located in Gorham, MA.

When she arrived, Senator Collins saw a room packed with women and men from nine different Maine ESOP companies. Some were dressed for office jobs, even some men in suits and ties. Some were dressed for their jobs on a manufacturing floor — work books, work shirts, khakis. Some had grey hair, or no hair — others were in their twenties.

The positive vibe of ESOPs was in the air.

While Senator Collins has been a consistent, and longtime advocate for ESOPs in the U.S. Senate, when she walked out the door, she knew that ESOPs in Maine represented the people of those ESOP companies — different income levels yes; but all part of the capitalistic system — owners.

A big tip of the hat to the leaders of Moody’s Collision — the New England Chapter’s 2014 ESOP Company of the Year — an example to follow.

Senator Collins, front row center, with individuals at the April 11th event in Gorham, ME.

Senator Collins, front row center, with individuals at the April 11th event in Gorham, ME.

Sen Collins Moodys Event 2

Senator Collins and Shawn Moody — introductions with other ESOP companies and employee owners at the event.

Filed under: Chapter News, Employee Ownership Message, Government Affairs, TEA Members, ,

2014 Employee Ownership Month Poster Contest Winner

The Winner of the 2014 Employee Ownership Month Poster Contest…Entertainment Partners!

Entertainment Partners, located in Burbank, California, has been selected as the 2014 Employee Ownership Month Poster Contest Winner. The winning poster design was unveiled at the Association’s 37th Annual Conference in Washington, DC.

Entertainment Partners’s poster was chosen because of the idea it expressed: We Own Our Future. This is the second time Entertainment Partners has won this award; the first win was in 2010.

Congratulations to the employee owners of Entertainment Partners. More information on Employee Ownership Month.

EOM Poster Contest Winner

Copyright 2014 Marty LaVor

Filed under: Employee Ownership Month (EOM), TEA Members,

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