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The Employee Ownership Update

Corey Rosen

June 30, 2010

(Corey Rosen)

Royal Mail Employees to Get a Share of Company

The new British government plans to privatize part or all of the country's Royal Mail Service in the fall. The plan calls for employees to own part of the company under a share ownership trust. The idea has been floating around for some years, and now is likely to come to fruition, despite labor union opposition to any privatization.

Academic Interest in Employee Ownership Blossoms

Thanks to the efforts of the Foundation for Enterprise Development, the Beyster Institute at the Rady School of Management, Professor Joseph Blasi at Rutgers, and the Rutgers School of Management and Labor Relations, academic interest in employee ownership is finally coming of age after a long period of being largely ignored. At a June 28-29 gathering of researchers at the Second Annual Beyster Fellowship Symposium, over 50 scholars reported on a variety of exciting new research projects underway. The researchers came from business schools as well as from economics, history, organizational development, and philosophy departments. In general, the researchers agree that employee ownership has been shown to have significant positive effects for companies and employees, although there are important exceptions. Much of the new research is looking to dig deeper to find what conditions are most conducive to employee ownership and why it is adopted in some firms but not others.

Article Explores Top Five Trends in Equity Compensation

Matt Simon of has published a useful article on the five top trends in equity compensation over the last decade. The Web site, which helps people figure out how to understand and manage their equity grants, is now 10 years old. The article can be found at this link.

Tech Employees Rate Shared Capitalism as Key Benefit

ComputerWorld asked 38,000 employees in the information technology field what they believe is the best benefit of working for their company. The employees all worked for the 100 companies ranked the best places to work for information technology workers. The table below shows that some form of shared capitalism ranks highly:
Paid vacation75%
Health insurance74%
Profit sharing/employee stock-ownership program/401(k)/403b plan51%
Flexible hours45%

New Rules on Employer Stock Diversification in 401(k) and KSOP Plans

On May 19, the IRS published new regulations (26 CFR Part 1, TD 9484) on required diversification of employer stock in 401(k) plans and combined ESOP/401(k) plans (KSOPs). Read them online at this link (opens in new window). Under the Pension Protection Act of 2006, publicly traded companies that do not have stand-alone ESOPs are required to allow employees to diversify out of employer stock, whether it came from employer contributions or employee investments of their own deferrals. Stand-alone ESOPs are exempt from the rules.

Under the law, a participant's right to invest in or divest employer securities cannot be any more restricted than it is for any other plan investment options. However, the final regulations modify some of the permitted restrictions. According to the IRS:

The IRS notes that the final regulations also:

In the preamble, the IRS states that an ESOP that presently has a diversification option under Section 401(a)(28) will not violate anti-cutback rules by eliminating this option in favor of the more favorable (to employees) diversification provisions of the Pension Protection Act.

Author biography and other columns in this series

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