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The Employee Ownership Update

Corey Rosen

May 29, 2009

(Corey Rosen)

Employee Ownership 100 List for 2009

Our Employee Ownership 100 list tracks the largest 100 employee-owned companies in the U.S. (ranked by the number of employees). The total number of employees in these companies grew to 598,500 in 2009, up from 580,500 in 2008, 579,000 in 2006, and 506,000 in 2005. As usual, Publix Super Markets topped the list, with 142,000 employees. The smallest companies on the list had 1,000 employees. Fifteen of the companies were supermarkets or (in one case) convenience stores, 15 were in construction or construction services, and 9 were in engineering and or architecture.

Total employment at the 94 companies that were on the list in both 2008 and 2009 grew 6.1% over last year, partly from acquisitions and partly from internal growth. Of the six companies that dropped off the list, two publicly traded companies had ceased to be majority employee-owned (SAIC and Journal Communications), three were sold (each was profitable at the time), and one private company no longer met the qualification rules. The Tribune Company is the only company on the list in bankruptcy. It is still owned by the ESOP, pending reorganization.

To make the list, at least 50% of the company's stock must be owned by an ESOP (which accounts for almost all the plans), or the company must have a profit sharing or similar plan, and/or a direct purchase plan in which most employees participate.

Australian Government Withdraws Proposals on Equity Plan Taxation; Pledges to Come Up with New Approach

The Australian government has withdrawn a proposal to tax equity awards at the time of grant for higher income taxpayers (those who make more than $60,000 Australian, which is about U.S. $47,000). The proposal drew strong criticism from consultants, and a number of companies with broad-based plans said they would shut them down if the new rules were implemented. Regulators are now meeting with various interested groups to come up with a new proposal, which should be out by mid-June.

Under current Australian law, awards are taxed at grant with two exceptions: If a plan is open to at least 75% of full-time employees with three years or more of service and is capped at 5% of total shares, there is a $1,000 exemption on the issuance of an award or a tax deferral on any discount for up to 10 years.

There are no rules saying that shares must be available in proportion to salary or other considerations, so higher-paid people can get the bulk of the benefits. Somewhat under half of plans in public companies offer some form of free share or option; somewhat fewer companies have plans in which employees buy shares, usually at no discount. However, plans can be structured so that employees use pretax salary deferrals to buy shares.

German Unions Press for Employee Ownership

Until recently, continental European governments, business, and labor unions have had only minimal interest in employee ownership, but that appears to be changing. Germany recently passed legislation to allow employees to buy stock in companies on more favorable terms, and Austria has made similar changes. The Sarkozy government in France had proposed significant new incentives for broad-based employee ownership, but they have been on hold.

Meanwhile, German unions are starting to press for an equity stake in companies where they are taking concessions. The German Labor party has supported the idea. For details, see this Financial Times article on the subject.

NCEO Sets Up New LinkedIn Group

Thanks to the good efforts of NCEO board member Dan Walter of Performensation Consulting, there is now a lively and fast-growing employee ownership network on LinkedIn, the NCEO Employee Stock Ownership Network. This group brings together people from the ESOP and equity compensation worlds with postings of news and discussions. We encourage everyone to sign up and to invite others to join as well. As the group develops enough critical mass, we will be able to set up specialized subgroups, such as by form of employee ownership or industry.

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