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The Employee Ownership Update

Loren Rodgers

December 3, 2012

(Loren Rodgers)

UK Study on Employee Ownership and Well-Being

A study of 1,000 employees at employee-owned businesses in the United Kingdom examined measures of well-being and health. The authors, Professor Ronald McQuaid, Dr Emma Hollywood, Sue Bond, Dr Jesus Canduela, Alec Richard and Gemma Blackledge, found a "very high level of wellbeing and satisfaction across a range of issues in all of the organisations in the survey." They noted that these "results are consistently more positive for the [companies] surveyed than the UK workforce as a whole." The study was carried out at Edinburgh Napier University's Employment Research Institute and was commissioned by the UK's Employee Ownership Association. It gathered data from eight diverse employee-owned companies using surveys and interviews, and then compared the results to various national samples of the UK workforce.

The employee-owners reported higher levels of job satisfaction, especially in comparison to non-employee-owned companies where they had worked before. Respondents were far more likely than average to feel that managers respond to their suggestions, and they reported a higher degree of control over their work: 53% of the employee-owners reported "a lot" of control over their work, versus 36% in the 2004 Workplace Employee Relations Survey, which surveyed a representative sample of the UK work force. While 46% of employee-owners agree that working for an employee-owned company is better for their health and wellbeing (versus 14% who disagree), actual measures of health were essentially the same for the employee-owners and the non-employee-owners.

Employees in Closely Held ESOP Companies Average $73,500 in Plan Distributions

The NCEO analyzed data from the Department of Labor to find out what a typical ESOP participant receives as a distribution from the plan. Subject to some severe limitations in the original data, we found that the average distribution to a departing employee in 2009 and 2010 (both of which were recession years) was $73,500. Most ESOP participants also have access to other retirement plans through their employer.

There are no direct comparison data for 401(k) plan distributions, but based on analyses by the Employee Benefit Research Institute, the mean account balances for employees over 30 years old and with 5 to 20 years of tenure in 401(k) plans is between $52,000 and $90,000. Given typical tenure patterns in closely held companies for employees in these companies, that suggests mean distributions would fall somewhere in the middle of this range.

While this is comparable to ESOP distributions, roughly two-thirds of 401(k) account balances are contributed by the employee, whereas (with a few exceptions) all of the ESOP account balances come from employers. ESOPs are required to cover all employees meeting minimum tenure requirements, while 401(k) plans generally only include employees who contribute to the plan. As a result, about 25% of eligible employees, generally the lowest paid group, do not benefit from the plan.

A state-by-state analysis of the data is available by contacting Corey Rosen (crosen@nceo.org). The NCEO urges its members to use the data to send out their own press release to local reporters about their own distributions over the last years, and we have ready-to-use materials to help.

House Republican Budget Proposal Could Include Lower Qualified Plan Caps

The House Republicans' recent budget proposal for the fiscal cliff negotiations recommends using some of the ideas Erskine Bowles of the Simpson-Bowles Commission recommended to the Republicans in 2011. While the House Republican proposal is not specific on what aspects of this proposal it would want to use, the proposal did suggest that Congress could consolidate retirement accounts and cap all employer and employee contributions to the lower of $20,000 or 20% of income, a substantial reduction from what ESOPs and other plans are now allowed to deduct.

Certificate Course for Non-Professional ESOP Fiduciaries

The Beyster Institute at the University of California San Diego's Rady School of Business will host the first certificate-granting course for inside ESOP fiduciaries. The course will include classroom activities, group exercises, case study simulations, guest lecturers, and group discussion, and will cover the standards for fiduciary behavior, the practical responsibilities of ESOP fiduciaries, and examination of the appropriate fiduciary response in a range of concrete situations. The course will take place from February 10 to 13 in San Diego, and discounted registration is available until January 1, 2013. More information and registration instructions are on the program brochure (PDF format).

Submit Nominations for the NCEO Board by December 14

If you or someone you know is interested in serving on our board of directors, please submit a nomination before the close of business on December 14. The NCEO board is actively involved in a number of our new projects and can be an exciting way to support our research, publications, meetings, outreach, and our overall mission to provide accurate, reliable information about employee ownership.

You can learn more about how to apply and the expectations for directors on our Web site, where we have a resource page on Running for Election to the NCEO's Board of Directors. The election will be held in January.

Author biography and other columns in this series

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