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The Employee Ownership Update

Corey Rosen

April 21, 2000

(Corey Rosen)

United ESOP to Phase Out; Southwest Airlines Plan Grows

Both labor and management have agreed that the United's ESOP, which now owns 55% of the shares, will receive no further contributions after this year. The plan was set up with an unusual five-year structure (most ESOPs have no end date) and was funded by the company in return for employee concessions (also very unusual in ESOPs). The employees no longer want to make concessions and the airline is unwilling to continue making contributions without them. The plan will not be terminated, however. While new employees will not get shares, current employees will continue to have shares in their accounts until they leave. Until the ESOP drops to 26% ownership, moreover, employees will retain representation on the company's board and certain control rights.

Meanwhile, Southwest Airlines contributed a record 14.1% of employee pay into a deferred profit sharing plan. Employees can choose to use the money to buy Southwest shares, among other investments, and 72% of the plan's assets are currently invested in company stock. Employees own about 13% of the company under the plan. Pilots also get stock options and employees can purchase shares through stock purchase plan.

Options Overtime Bill on Fast Track

The bill to amend the Fair Labor Standards Act to clarify that option awards do not constitute compensation for overtime calculation purposes is now on a very fast track. The "Worker Economic Opportunity Act" has been endorsed by the Administration and leaders of both parties. Senate leaders have pledged to move the bill directly to floor with committee consideration after House passage. Passage is anticipated in the very near future. The bill contains provisions covering past plans as well as future ones.

Company Notes

Periodically, we report on the kinds of company announcements not likely to make the news, but typifying the employee ownership world. One such case is Environmental Sciences Associates, a leading California-based environmental consulting firm. In March, the company completed a $4.5 million ESOP buyout. The plan now owns 90% of the company ESA specializes in land use and resource planning, compliance, and impact assessments. ESA will provide for full pass-through voting for employees.

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