| Members Area |
|
|
|
|
|
|
|
| Home Page | Reference Desk | ESOPs | Stock Options | Ownership Culture | About Us & How to Join | Order Form |
| |||||||||
| |||||||||
|
Home > About Us & How to Join > Why You Should Join >
For most people joining the NCEO, the first-year membership is just $90 (it's more if you are outside the U.S. or want to be in our referral service, but the fees are still very reasonable). But you might be thinking, "I don't really need this now; I'll just look at their Web site and maybe buy a book or two. This whole process is costly enough; I'll save the membership fee." At the risk of being self-serving, let me tell you why that may be a costly error.
First, three obvious reasons:
But there is a much more compelling reason. If you are a company member, we can help you make sure you get your plan set up right and that you avoid costly and aggravating errors. If you are a plan advisor, you can make sure your advice is up to date with the latest news and best practices. I can best illustrate this through some real-life examples.
Someone who really knows, not who says they know. Some years ago, an accountant in Texas called me. He was setting up an ESOP for his client and wanted the name of an attorney to help. I told him he could join for $90 and get access to our referral service. "No," he said, "I don't want to spend the $90; I'll find someone else." A few years later he called back. "Remember me?" he asked. "I called a few years ago and you wouldn't give me an attorney's name. Well, I found one who said he could do this, and now we are being audited by the government for violating the rules. So I need someone to help us out of this." I told him if he joined, we could refer him to a qualified person. "No," he said "I don't want to spend $90, I just want an attorney's name."
The accountant's case had an especially bad ending, but we have talked to hundreds of people over the years who have used someone who said they were experts. If there were as many actual experts on these plans as there are people who say there are experts, there would be many times more plans than there really are. These so-called experts have come up with all sorts of ingenious and wrong ideas about how plans work, many of which have prevented their clients from using the plans properly or even gotten them into trouble. There are a lot of real experts. Use them. As a company member, you'll get access to a database of people who actually do work in this field. If you are a service provider, we'll help you make sure your expertise is current. We don't certify their competence, but at least you know they are involved enough to list their qualifications and be active in an employee ownership organization.
When Starbucks was about to go public, it wanted to issue stock options to all of its employees, a rare thing in those days. Its investment bankers said that was a goofy idea and they should not do it. Working with us, the company developed a package of research on how employee ownership improved performance and was then able to sell the idea to investors. Today, CEO Howard Schultz says the company's "bean stock" program is one of the keys to Starbucks' amazing success.
Recently, we got a call from an accountant in New Jersey. Their client had an ESOP, and the attorney (not an NCEO member, despite the accountant's urging!) said they were going to have a problem -- to fund their ESOP, they were going to have to make excess contributions to the plan, causing a substantial tax penalty. The lawyer proposed they switch from their current status a an S corporation to a C corporation, because larger contributions would be allowed. The switch would involve substantial one-time costs. We said, "wait a minute -- why not just restructure the ESOP loan to pay it off over a longer period of time, thus driving annual contributions to a more practical level?" The accountant said the lawyer never told them about that very simple, cheap solution.
A recent call came from a stock options company. They wanted to replace their nonqualified stock options with incentive stock options. Could they do that? Their advisors didn't really know what would happen if they made this change. We provided them with a detailed answer on the tax, accounting, and contract concerns that would come up.
One of our members is now saving millions of dollars in taxes every year. They are an ESOP company and a C corporation; they didn't know (and their advisor didn't tell them) that they could become an S corporation and pay no tax at all.
One company we worked with wanted to give 1 million options to all employees, including every new employee who joined the company. The owner said that one million seemed like a good number, and he would just keep issuing new shares to satisfy the need. After some discussion, we agreed that this would mean his original and often more valuable senior people would be seeing the value of their options constantly diluted. He needed to think in terms of the value his company was giving out, not just the number. We have worked with countless other option companies to persuade them to parcel out options over a longer period of time, not give them all up front. That's made a lot of people happy today because otherwise they would have gotten most of their options at high 1999 or 2000 process.
A woman in Kansas City called a few years ago. She was selling her successful company, but wanted employees to get something out it. Her advisors, who were well known in this field, it turns out, wanted her to set up an ESOP, sell to it, then turn around and sell the company. "Wait!" we said, "You could just sell them company and give the employees part of the sale proceeds." The way the advisors were proposing the transaction, the tax consequences would be identical, but there would be an additional tens of thousands of dollars in fees for them. Conversely, another business owner told us he didn't sell to an ESOP a few years before because his accountant told him he would have to give employees voting control (that's not a requirement). He later found us, talked to us, understood how that works, and sold--but he said he really wanted to sell a few years back and was upset he'd stayed on with the company longer than he had wanted.
The stories go on and on. We get calls from members every day with all kinds of questions. As a member, it's just part of your benefit. No clock is running, no bill is mailed (unless we do an in-depth consultation). We don't set up plans, so we are not trying to get you to hire us. We don't want people to set up plans who don't need them, so we aren't just trying to sell you on that either. We can live without your $90 more easily than with a guilty conscience. Frankly, I just can't see why anyone who is at all serious about any of this would not join. If you set up a plan, the cost of your membership will equal about 15 minutes of your lawyer's time. It really isn't my nature to be so promotional. I started this organization because of a belief in the concept. We are committed as a matter of principal to keeping fees down. But I'd be dishonest if I did not tell you that if you are interested in employee ownership and don't join, you're making a mistake.
Copyright © 2002 by The National Center for Employee Ownership (NCEO) (phone 510/208-1300; email nceo@nceo.org; WWW http://www.nceo.org/). All rights reserved.
| Home | Reference | ESOPs | Options | Culture | About Us | Order Form |