The Employee Ownership Update
February 15, 2013
NCEO Signs Letter to FASB on ESOP Disclosure RequirementsThe NCEO signed a letter to the Financial Accounting Standards Board (FASB) (PDF) in collaboration with the ESOP Association and Employee-Owned S Corporations of America. The letter argues for carving private companies out of new rules that may require the disclosure of information in their ESOP audit reports filed with Form 5500 about the significant assumptions and methodologies used in the valuation of the company's stock.
The letter explains our concerns and requests that private ESOP companies and other companies where qualified retirement savings plans may own a meaningful portion of the company be exempted from this rule.
FASB adopted Accounting Standards Update (ASU) 2011-04, intended, as we understand it, to require companies to disclose the significant assumptions and methodologies used in the valuation of company securities that are not publicly traded. The wording of the rule may have the effect of requiring that privately held companies to provide a footnote in their ESOP audit reports filed with Form 5500 that would provide information such as the weighted average cost of capital, operating margins, revenue growth rates, and other information. Since the information in Form 5500 is publicly available to competitors or possible hostile acquirers, the letter states that ASU 2011-04 "could cause companies to terminate ESOPs and discourage other companies from adopting them. Decades of research suggests that this would reduce job creation, damage retirement security, and weaken companies."
UK: 2012 Saw a 10% Increase in Employee-Owned BusinessesThe Employee Ownership Association of the UK released its report on events in employee ownership in 2012, noting that the number of employee-owned businesses increased by 10% during the year and citing the major government efforts in support of employee ownership. The report cites extensive press coverage, a series of government-backed reports, and an increase in EOA membership from 100 to 150 companies. It concludes that 2012 witnessed "a seismic shift in the profile of employee ownership in the UK."
Employee Ownership in the Fortune 100 Best Companies to Work ForOnce again, the annual Fortune 100 Best Companies to Work ForŪ is filled with companies with broad-based employee ownership plans. Of the 73 organizations on the list that are U.S. for-profit stock corporations, 44 have some sort of employee ownership plan (see table below). Of these, 5 are majority employee-owned, 6 have ESOPs, 13 have broad-based individual equity grant plans (option or restricted stock), and 23 have ESPPs. Some companies have multiple plans. To be on the list, created by the Great Place to Work Institute, companies must have 1,000 or more employees. The percentage of companies that have broad-based plans has been consistently in the mid-50s since we have been compiling these figures.
|Company||Position on List||Stock Plan(s)|
|1||Restricted stock units, ESPP|
|Hilcorp Energy||7||Phantom interest in energy properties|
|Camden Property Trust||10||ESPP|
|DPR Construction||13||Phantom stock|
|Robert W. Baird||14||Stock purchase (majority employee-owned)|
|Burns & McDonnell||18||ESOP (majority employee owned)|
|W.L. Gore & Associates||21||ESOP (majority employee-owned)|
|Chesapeake Energy||26||Stock bonus plan|
|SVB Financial Groupo||40||ESPP|
|Adobe||41||ESPP, options, restricted|
|Men's Wearhouse||50||ESOP, ESPP|
|Whole Foods Market||71||ESPP|
|EOG Resources||72||ESPP, options|
|PCL||73||Stock purchase (majority employee-owned)|
|Microsoft||75||ESPP, restricted stock|
|Publix Super Markets||77||ESOP, stock purchase (majority employee-owned)|
|TDIndustries||86||ESOP (majority employee-owned)|
|Goldman Sachs||93||Individual equity awards|
|CH2MHill||100||Stock purchase (majority employee owned)|