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The Employee Ownership Update

Corey Rosen

June 29, 2007

(Corey Rosen)

Stock Drop Lawsuits

According to a Fiduciary Counselors compilation of lawsuits involving employer stock, the 53 cases filed between since the late 1990s have resulted in approximately $1.47 billion in judgments and settlements. This amount includes attorney fees and court costs, which vary from case to case, but average somewhat over 25% of the total. The site indicates that approximately 1.3 million participants are affected by the judgments and settlements, although not all those people may be part of the classes receiving awards. Almost one-third of the total dollar amount is attributable to four cases (Enron, which is about one-sixth of total; AOL; the Williams Company; and Royal Dutch Shell). That means that outside of these cases, the average employee is receiving only several hundred dollars per settlement. Only a handful of these cases involve ESOPs (it is not possible from the table to determine a precise number).

Austrian Government Wants to Increase Employee Shareholding

Austrian Finance Minister Wilhelm Molterer wants the percentage of total shares of Austrian companies held by employees to increase from 3% to 6%. He argued that in a globalized economy, wages alone would not suffice; workers need an ownership stake as well. A working group has been set up to examine how the government might encourage this.

Large Companies Moving Toward Grant Date Closing Price as Exercise Price for Options

According to a 2007 Towers Perrin analysis of 89 Fortune 250 companies, 51 now set the exercise price for stock options at not less than the grant date closing price. That is up from 29 before 2007. Using grant date closing prices involves less explanation to shareholders in proxy disclosure information than other methods, such as the average price on the date the award was granted.

New Booklet on Employee Owners in S ESOP Corporations

Employee-Owned S Corporations of America (ESCA) has put out a short booklet with several first-person stories from employee owners in S ESOP corporations. Copies are available from ESCA by calling 202-466-8700.

Federal Reserve Article Takes Positive View of ESOPs

The June 2007 issue of the Federal Reserve Bank of Minneapolis's The Region contains an article by Ronald Wirtz titled Employee Ownership: Economic Miracle or ESOPs Fable? Wirtz writes that "research to date suggests that...firms that offer some form of ownership or other worker-reward system have demonstrated impressive performance, possibly better than those that don't." The paper relies heavily on recent research from the National Bureau of Economic Research the NCEO reviewed in an earlier update.

Are You a "Best Place to Work" Small or Medium-Sized Company?

Many NCEO member companies would be strong candidates for the Great Place to Work Institute's annual "50 Best Small and Medium Companies to Work For in America" list. I am on the board of the Institute, but do not have any role in the selections. Companies with between 50 and 999 employees can participate. There is an administrative fee of $1,100 for small companies (under 500) and $1,400 for medium companies that pass an initial screening. Companies must do an employee survey provided by the Institute. Companies doing the survey receive a feedback report on employee responses with benchmarks against top company scores. To apply, go to this link.

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