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The Employee Ownership Update

Corey Rosen

June 14, 2007

(Corey Rosen)

Employee Ownership 100 List Announced

The largest 100 majority employee-owned companies in the U.S. employ approximately 594,144 people, up from 579,000 last year and 506,000 in 2005. Publix Supermarkets again topped the list with 143,000 employees. The smallest company on the list has 900 employees, up from 875 in 2006 and 700 in 2005. Sixteen of the Top 100 are construction firms, 13 manufacturing, 12 engineering, and 10 supermarkets. Rankings are based on the number of employees. To be on the list, the company must be majority-owned by an ESOP or similar plan or, if it is a different kind of plan (such as a stock purchase plan) at least half the stock must be owned by at least half the full-time employees meeting tenure-based eligibility requirements.

Total employment grew 4.3% in the companies that were on the list in both 2006 and 2007, more than double the national private sector job growth rate (albeit this is a very imperfect comparison given that in economy overall some companies close; here we just look at companies that stayed open and maintained enough employees to stay on the list)). Almost all the growth was accounted for by internal expansion, not acquisitions. Only one of the companies on the list in 2006 terminated its plan (the John Henry Company was sold). Ten new companies were added, while nine others dropped off the list because they were now not large enough to qualify.

Marriott Settles ESOP Tax Dispute

Marriott International, Inc. reached a settlement in an investigation of its ESOP by the IRS and Department of Labor. The government alleged that Marriott's leveraged ESOP resulted in unwarranted tax deductions. Neither the IRS nor Marriott revealed the nature of the charges, but, based on what we have learned from people familiar with the situation, Marriott was using a questionable approach in how it claimed tax deductions for its plan. Marriott's original release indicated the issue was using loan forgiveness into repay an ESOP loan, a very standard practice. There is no indication that this practice itself was questioned, but rather other issues with the structure. The government sought $1 billion in payments, but settled for $220 million to be repaid to the federal government as well as state and local governments. The settlement is easily the largest in any ESOP investigation.

Creating an Ownership Culture: The Poem

An ongoing mantra of the NCEO is that employee involvement does not happen because a company allows it (think of all the "open doors" of management yet to be darkened by an employee with an idea) but because it structures it. We have tried over the years to find ways to express this idea forcefully and have, at long last, been driven to extremes: a poem.

An Employee Owner's Lament
Corey Rosen

Employees are owners of our corporation,
But sadly, our culture is just "torpor nation."
The ESOP means nothing to all of us here.
Thank goodness our vesting is soon coming near.

"But wait," says our boss. "I really do care.
I want your opinions; my ear's always there.
My door's always open to listen and learn.
The more effort you make, the more that you'll earn.

"I've hired a lawyer to explain this great plan.
He says he'll use English; he thinks that he can.
We've sent you all booklets in plain legalese.
We sent it by e-mail; we need to save trees.

"And once every year, we'll send you a statement.
The numbers you see will bring you elatement.
As your ownership grows, you'll get very rich.
So stop your complaining; you've no reason to ..."

"Now wait just a minute," I rudely retort.
"We really do need more than just a report.
Your door may be open; you may be sincere.
You may try to listen, but here's what we fear.

"So we just leave our jobs to walk in that door?
Just put down our tools and stroll off the floor?
And once we are there, can we really explain?
Expressing ideas can be quite a strain.

"And what if you say, 'I'll give it some thought.'
So we wait for your feedback, but get it? Not.
Or maybe you give it the thought that it's due.
Then claim the idea came directly from you.

"An open door is fine, as far as it goes.
But just how to use it, it seems no one knows.
It's just not enough to make ownership real.
You want our ideas? Well here is the deal.

"We need some good numbers so goals can be set.
We need some rewards if targets are met.
We need a clear structure, a way we can meet.
Teams, groups, committees-they all would be neat.

"You want us to act like we really are owners?
Then give us some power to be more than moaners.
Ownership's more than a piece of a trust.
For ownership culture, trust us you must."

Author biography and other columns in this series

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