Employee Ownership Blog

Ray Carey's new book, Democratic Capitalism: The Way to a World of Peace and Plenty, is a comprehensive look at the concept of capitalism, both in terms of how it is now practiced and how Carey thinks it must be reformed.

The IRS has issued final regulations on incentive stock option plans. The proposed regulations were published last year.

The University of Wisconsin at Madison has started a three-day program for managers and supervisors on managing an employee ownership company. Courses will focus on communications, team-based management, marketing employee ownership, how ESOPs work, and other topics.

In Armstrong v Amsted Industries, Inc., No. 01 C 2963, MDL 1417 (U.S. Dist. Ct. ND Ill, 7/29/04), ESOP fiduciaries and company officers won an important victory concerning fiduciary obligations, changes in repurchase rules, and business acquisition decisions.

On July 20, 2004, the House passed H.R. 3574, "The Stock Options Accounting Reform Act," by a vote of 312-111. The bill would limit proposed options accounting reforms in several ways:

Both the American Jobs Creation Act of 2004 (H.R. 4520) and the Jumpstart Our Business Strength Act (S.

The two tax bills described above also both contain significant new restrictions on the tax treatment of all kinds of deferred compensation, including stock-based compensation.

An IRS pilot program surveying employer compliance indicates that stock options and executive equity compensation are likely to be high up on future IRS audit target lists.

A new survey of 150 high-technology companies from Mellon Financial Corporation's Human Resources & Investor Solutions group shows that the "burn rate" for options in these companies declined by 30% over 2003, and the overall use of options declined by 15% to 20%.

On June 30, the Bureau of Labor Statistics (BLS) reported that data from its 2003 National Compensation Survey indicated that 11% of private industry workers "had access to stock option plans," a term the BLS defines as meeting the basic service requirements for eligibility for an award.

Indications are mounting that the rules requiring companies to expense options could be delayed. Securities and Exchange Commission Chief Accountant Donald Nicolaisen said he would favor a one-year delay.

A number of sellers to ESOPs, as well as their advisors, are rethinking whether to take advantage of the tax-deferred rollover opportunity Section 1042 of the Internal Revenue Code provides for sales of stock to ESOPs in C corporations that end up with at least 30% of the company's shares.