Employee Ownership Blog

The Securities and Exchange Commission has finalized disclosure rules for equity compensation plans. The required disclosure is in addition to SFAS 123 accounting rules that already require companies to disclose substantial information about their plans.

According to testimony by Doug Kruse of Rutgers University before the House Subcommittee on Employer-Employee Relations of the Committee on Education and the Workforce (2/12/02), "about 70-75% of participants in plans that are heavily invested in employer stock [ESOPs, 401(k) plans, and profit sh

Senators Carl Levin (D-MI) and John McCain (R-AZ) are introducing legislation that would prevent companies that do not record the present value cost of stock options as a charge to earnings from taking a tax deduction for the spread on the exercise of non-qualified options or disqualifying exerci

In PLR 200205050, the IRS ruled that participation by employees of a foreign subsidiary in a U.S. company's ESOP did not disqualify the ESOP. It is common in ESOPs to exclude employees with no W-2 income, or non-resident aliens with no U.S. source income.

Plaintiffs can have access to data on executive, officer, and board compensation; board minutes relating to the creation of an ESOP and other business plans; plan fiduciary meeting minutes; and data on other retirement plans, if these data are relevant to claims that the ESOP overpaid for stock.

The fallout from Enron continues to be the most important development in the employee ownership world. It appears a consensus is emerging on a least a few points:

Many state laws do not conform in whole or in part to the retirement and ESOP provisions of the new tax bill. This could cause significant problems for companies and employees that exceed the contribution limits under old law.

Senator Charles Grassley (R-IA), ranking Republican on the Senate Finance Committee, has introduced legislation (S. 1831) that would provide for tax relief for incentive stock options exercised in 2000.

In Notice 2002-2, the IRS has clarified rules under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) for ESOP dividends and S corporation ESOPs.

The International Employee Stock Option Coalition, a coalition of 26 business groups and 51 companies, has been formed to oppose a proposal from the International Accounting Standards Board (IASB) to require companies to account for the value of options at grant.

On December 18, Senators Barbara Boxer (D-CA) and John Corzine (D-NJ) introduced the Pension Protection and Diversification Act of 2001 to require diversification in 401(k) plans and ESOPs. Under the bill:

The Securities and Exchange Commission has issued new rules for publicly traded companies concerning disclosure of their stock options.