Employee Ownership Blog

On April 22, FASB voted unanimously to require companies to expense options and other equity compensation. Now FASB must figure out just how this expensing will occur.

The "Pension Preservation and Savings Expansion Act of 2003" (H.R.

Shareholder proposals to link options to performance and to require companies to expense them continue to gain momentum. The Investor Responsibility Research Center recently reported that 319 shareholder proposals have been filed on executive pay this year, up from 106 last year.

A new study by Mary Ellen Carter at The Wharton School and Luann Lynch of the Darden School of Business titled "The Effect of Stock Option Repricing on Employee Turnover" finds that repricing executive options has no impact on turnover, while repricing options for non-executives in broad-based pl

In Steinmen v. Hicks, C.D. Ill. No. 00-3260, 3/21/03), a U.S. District Court ruled that the trustees of an ESOP were not liable for losses in a profit sharing plan when it was terminated and merged into an ESOP.

The Joint Tax Committee (JTC) of the Congress has urged that employee retirement plans rely less on investments in employer stock. In its February 3, 2003, "Report of Investigation of Enron Corporation and Related Entities," the JTC urged that retirement laws be changed so that:

It might seem in the post-United era that the last thing that employees in the airline industry would want is ownership, except, of course, in Southwest and JetBlue (both of which do have significant employee ownership plans). Not so, it turns out.

In a briefing to the Profit Sharing Council of America, the IRS said that it is developing guidance to prohibit ESOP S corporation structures in which a management corporation is formed to siphon off most of the ESOP's benefits. Specifically, the IRS said it will address situations in which:

There are several empirical studies of the impact of options expensing. The most comprehensive appears to be "Employee Stock Options, Residual Income Valuation and Stock Price Reaction to SFAS Footnote Disclosures," by Haidan Li at the University of Iowa (ERN Labor Journals, December 19, 2002).

As expected, on March 12, the Financial Accounting Standards Board (FASB) unanimously voted to address whether and how to require companies to charge the grant of options to their income statements. FASB is aiming to complete the project by year's end and implement any rules in 2004.

On February 26, 2003, the European Economic and Social Committee of the European Union strongly endorsed employee share ownership and profit sharing as a means to improve corporate performance, increase financial transparency in corporations, improve corporate governance, and improve the competit

Leaders in the House and Senate have moved to start the process for reforming retirement plan law again with the introduction in each chamber of legislation paralleling what passed in each House last year.