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The Employee Ownership Update

Corey Rosen

March 31, 2011

(Corey Rosen)

Directed Trustees Can Take Many Roles

Over the years, we have talked to many companies that have directed trustees, usually an outside institution. Directed trustees have very limited fiduciary responsibility. The real fiduciary is the person or body that causes a decision to be made (this could be the board, an ESOP committee that directs the trustee, an officer, etc.). The directed trustee, however, must make sure the directions are consistent with ERISA and the plan document, something that has been narrowly interpreted by courts in the past.

But a directed trustee may actually do a lot of work. For instance, the trustee may carefully review the appraisal and make recommendations directly to both the fiduciary and appraisal firm. The trustee might also provide advice on ongoing administrative issues, sit in on board meetings to discuss plan issues, and advise the fiduciary and/or the board on the propriety of plan policies and changes among other things. None of these actions, in themselves, make the trustee more of a fiduciary, however, at least under current court decisions.

Reminder About Great Game of Business Meeting May 2-4

If you have not already considered attending the Great Game of Business conference May 4-6 in St. Louis, I would strongly encourage you to do so. The NCEO and the Great Game have a long history of working together, and I have been to all their conferences. It's a great place to learn how to use open-book management effectively. This year, they have honored me by making me a keynote speaker. I will be discussing what makes for a great workplace—and why so many companies don't even try if it is such a good idea. Details on the meeting can be found at

Tax Time Is Time for Errors on ESPP Tax Calculations

The taxation of employee stock purchase plans (ESPPs) is sufficiently complex that even people who know the field sometimes get confused. So imagine how hard it is for employees to figure it out. Barbara Baksa, executive director of the National Association of Stock Plan Professionals (NASPP), for instance, points out that TurboTax currently is wrong about how to calculate the ordinary income component of ESPP shares when the shares are bought at a discount and the plan has a look-back feature. In a qualifying disposition, the employee pays ordinary income taxes on the lesser of what the discount would have been if the purchase price had been set on the first day of the offering period (even if that's not when the actual purchase price was calculated) or the employee's actual gain upon sale of the shares. See her blog for details. And in this article at (paid subscription required), Bruce Brumberg and Lynette Khalfani explain that employees should not report income in the year shares are purchased unless they also sell the shares that year.

Annual Conference Attendance to Set Record, But There Is Still Time to Join Us

If you are not already registered for our 30th annual conference in Denver, you should register now. We currently have a record number of registrants, and if we reach our maximum we will not be able to take additional registrations on site. Register now if you haven't done so already, or read about the conference.

Survey on New Resources for Equity Compensation in Private Companies

Stock & Option Solutions, an equity compensation service provider, has created a brief survey to gather input about new activities it is considering to support equity compensation in private companies. We encourage issuing companies (not vendors or consultants) to fill out the survey. The NCEO will have access to the survey results and will be part of any activities that arise from the survey. Stock & Option Solutions will raffle a $100 gift card for people who participate. Click here to complete the survey, which should take 5 to 12 minutes.

Author biography and other columns in this series

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