The Employee Ownership Update
September 26, 2002
BusinessWeek Online Article Argues for Broad-Based OptionsThe September 20 edition of BusinessWeek Online contains a persuasive article by commentator Chris Farrell (also heard on NPR's "Sound Money" program) titled "Stock Options for All." Farrell argues that CEOs are getting far too much already and could easily give up some of their options to spread them further down to employees. Noting the research linking broad-based options to corporate performance, he writes that "not enough focus has been put on the real problem with stock options: Too many have gone to senior management and not enough to rank-and-file employees...[C]ompanies should use options to spread the wealth, recognizing that much of shareholder value in the new economy is created by a corporate culture that values human and intellectual capital throughout the organization." The article can be found here.
Farrell's message is one that most of the media have missed, as their focus on stock options has generally been on executives. We encourage readers to e-mail his article to people who might gain from seeing it.
Senate Negotiators Make Progress on Pension ReformNegotiators are reportedly close to an agreement on a pension reform bill that will merge versions passed by the Senate Finance Committee and Senate Health, Education, Labor, and Pensions (HELP) committee. The bill will look mostly like the Finance committee version, with a few provisions from the HELP bill. That means it could be fairly close to the House version on most issues, including providing a requirement that employees in 401(k) plans be able to diversify after three years in the plan or, possibly, after employer stock has been in their account for three years. Stand-alone ESOPs would not be affected by either bill; only ESOPs combined with 401(k) plans in public companies or public company ESOPs that allow employees to buy stock in the plan would likely see any change in rules. Congressional passage of the legislation seems increasingly uncertain, however, and very unlikely before a planned October recess. That means the bill would only pass in a "lame-duck" session after the elections.
Major obstacles to passage come in several forms. First, Congress has to pass homeland security legislation and a resolution on Iraq. The first has taken much longer than expected. Second, the Senate and House versions contain very different provisions on providing employers with exemptions from liability when providing investment advice to employees. Finally, the Senate bill may become a magnet for a variety of other controversial tax proposals, such as small business tax incentives, as well as an effort to raise the minimum wage.