Employee Ownership Blog

Corey Rosen

Report on NCEO's Task Force on ESOP Valuation and the Repurchase Obligation

The NCEO recently convened a task force of trustees to issue a report on the current situation regarding valuation and the ESOP repurchase obligation. We have now released the Report of the NCEO Task Force on ESOP Valuation and the Repurchase Obligation (PDF; also see the embedded version below), which discusses the basic problem, governing authority, common approaches, ESOP valuation basics, specific issues, and recommendations for companies.

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Corey Rosen

Why Increasing Your ESOP Contribution Level Might Actually Save You Money in the Long Run

It is common in mature ESOP companies, especially those whose stock has been performing well, to try to create a steady and sustainable contribution level to the ESOP trust. Intuitively, the argument for doing this seems obvious. If the contribution level is too high, it seems that it would make funding the plan over time much less affordable. While that can be true in some situations, a recent presentation at the NCEO’s Forum, “Busting the Benefit Level Myth: What Too High Really Means for Your ESOP,” made a convincing case that sometimes a higher contribution level may result in a lower long-term cost for maintaining the ESOP.

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Corey Rosen

ESOP Pioneer Norm Kurland Dies

Norm Kurland, one of the earliest advocates for ESOPs, has passed away. Born in 1930, Mr. Kurland received his law degree from the University of Chicago. His early career included being director of planning of the Citizens Crusade Against Poverty, a national coalition headed by United Auto Workers president Walter Reuther. Before that, Mr. Kurland, as a federal government lawyer, became deeply involved as a civil rights investigator.

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Corey Rosen

Will AI Make ESOPs Easier to Set Up and Administer?

A new NCEO paper, The Impact of AI on ESOP Transactions and Administration (PDF; also see the embedded version below), looks at whether artificial intelligence (AI) will lower the costs of setting up and administering an ESOP. Generative AI is seen as a potentially transformative technology in part because it promises to reduce the time and expense needed for service-intensive projects. Selling a business to an ESOP is certainly service-intensive, and finding ways to make the process quicker, easier, and less costly would be a real boon for selling business owners.

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Madelyn Hammack

How the National Employee-Owner Summit Builds on Midwest ESOP Culture

As a lifelong denizen of the Midwest, I can personally attest to the rich culture of employee ownership in the area. From the J&R Schugel trucks I see along my drive into downtown Chicago to the Woodman’s Food Market in my very own backyard, it’s clear that employee ownership is thriving across the Heartland. Alongside the employee-owned companies themselves, the region is also home to several nonprofit organizations that are doing the necessary work to further the spread of employee ownership, such as the Illinois Center for Employee Ownership (ILCEO) and the Ohio Employee Ownership Center (OEOC). Through their events and resources, these organizations are ensuring that everyone from EO-curious business owners to employee-owners themselves can connect with peers and receive valuable education about employee ownership models.

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Corey Rosen

Once Again, the SBA's ESOP Loan Program Becomes Dysfunctional

The first piece of legislation I wrote on ESOPs as a Congressional staffer was the Small Business Employee Ownership Act. It became law in 1980. The bill was designed to address the SBA's refusal to make loans to ESOP trusts. At the time, loans often went directly to the ESOP trust rather than first to the company, which would then reloan it to the ESOP. The new law clarified that the SBA could make a loan directly to the ESOP trust. Shortly after that, I started the NCEO. After a couple of years, the SBA still had not issued guidance on how the law would be implemented. I set up a meeting with SBA officials to discuss the issue. They told me the law did not mean what I thought. I explained that I actually wrote the law, but they were not persuaded. The law also directed them to run an outreach program, but they didn't want to do that either. 

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John Case

The Surprising History of Democratic Management a Century Ago

Many employee-owned companies these days are experimenting with different forms of participative management, such as systematic suggestion procedures, quality circles, and self-managing teams. Most of these initiatives work well, but they’re limited in scope. Participants rarely address issues of business strategy or financial priorities. They don’t negotiate pay or benefits; indeed, allowing such discussions would expose the company to legal challenges under the National Labor Relations (Wagner) Act. 

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NCEO Events & Webinars

Navigating ESOP to ESOP Mergers: What Every Employee-Owned Company Should Know

Mergers and acquisitions have become an increasingly common growth strategy for ESOP companies, and a recent NCEO webinar with Hillary Hughes and Will Hobby of Prairie Capital Advisors offered a timely look at one particular path: the ESOP to ESOP merger. Their session made clear that this strategy is gaining traction, with polling during the webinar showing that roughly two thirds of attendees have already seriously evaluated acquiring another company.

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