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The Employee Ownership Update

Corey Rosen

January 3, 2003

(Corey Rosen)

US Airways Unions Agree to Board Seats and Equity in Return for Concessions

Employees at bankrupt US Airways have agreed to take concessions in return for four seats on the 15-person board of directors and for restricted preferred stock in the company. Pilots would reportedly get 19% of the company's equity, with other union groups getting a few percent each, totaling 10.8% of the equity. Management would get 7.8%. Machinists Union members could get 4.4% or profit sharing, depending on their election. The stock will be issued as preferred stock, with dividends payable in additional shares. Shares would be redeemed in the 11th through 15th years of the agreement. The stock agreement has received virtually no media coverage (a search on Google found only a few limited stories, and details on the deal have been hard to find; the most useful information came from the union's web sites), in sharp contrast to the coverage United's ESOP got when it was formed and when the company went bankrupt.

1,700 Employees Form Alion Science and Technology

Employees of the IIT Research Institute have bought out the defense technology portion of the non-profit organization using an ESOP (employee stock ownership plan). The 1,700 employees now own 100% of the McLean, VA based company. The new company, named Alion Science and Technology, provides research and development work in a number of defense and security areas and was recently one of three contractors hired by the federal government on a major counter-terrorism project. That contract alone could be worth $690 million.

FASB Issues Guidelines on Voluntary Expensing of Options, Issues New Options Disclosure Rules, and Announces Intention to Reconsider Requiring Expensing

As expected, the Financial Accounting Standards Board has issued guidelines on how companies that voluntarily expense options can make the transition from accounting for options under APB 25, which does not require options to show as a cost on the income statement, to FAS 123, which does. FASB will allow companies three alternatives:
  1. Start expensing options only for grants from the date the new method is adopted forward
  2. Restate income statements for the prior three years, taking into account grants for those years
  3. Count only new options and existing unvested options

In addition, as of December 15, 2002, companies must record the expense of options under FAS 123 on a quarterly basis in their footnotes, rather than the annual basis previously required.

Finally, FASB has indicated that next year it will start a reconsideration of whether all companies should be required to expense options.

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