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The Employee Ownership Update

Corey Rosen

October 16, 2009

(Corey Rosen)

S Corporation ESOP Promotion and Expansion Act of 2009 Introduced

Representatives Ron Kind (D-Wis.) and Earl Blumenauer (D-Ore.) have introduced the S Corporation ESOP Promotion and Expansion Act of 2009. The bill would:

New Data on Employee Ownership in S&P 900

The NCEO has developed a list that provides a breakdown of employee ownership in the S&P 900 index of large- and mid-cap publicly traded companies for the Heron Foundation. Based on Form 5500 filings, we found that 196 of the companies in the index had ESOPs or KSOPs (combinations of 401(k) plans and ESOPs). Of these, 36 owned 5% or more of the company's outstanding shares. Nineteen companies had 401(k) plans that owned 5% or more of company shares out of 199 companies that had some company stock in their retirement plans.

To identify other forms of broad employee ownership, we examined the careers section of each company's Web site and looked to see whether they indicated they offered some kind of broad-based equity grants or stock purchase plan. Forty companies provided broad-based options to employees, three provided both options and restricted stock, and six provided restricted stock only. We also identified 202 companies with employee stock purchase plans (ESPPs), although we believe additional companies that we have not yet identified have these plans. Many companies do not provide much detail on employee benefits. A future project will probe other data sources to try to compile a more complete list.

The list contains the company name, state, type of plan, value of company stock in a defined contribution plans, and whether there is some other form of broad equity plan available. Where the percentage of stock held by the defined contribution plan is 5% or more, we also calculated the percentage owned, but all of these companies also contain a listing for the total outstanding shares at the time of the most recent Form 5500 filing.

ESOP Governance Tip

Some ESOP companies want to get employees and/or outsiders involved at the board level, but do not want them to have fiduciary obligations. They may also want them only for certain parts of a meeting or for certain meetings. Nothing in corporate law prevents a company from having people serve in a non-fiduciary advisory capacity to the board. By institutionalizing that, you can get a lot of the benefit of getting people who can add value without exposing them to excessive risk.

Author biography and other columns in this series

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