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The Employee Ownership Update

Loren Rodgers

July 1, 2011

(Loren Rodgers)

Employee Ownership Companies Among the Winning Workplace Award Winners

Eleven of the 50 winners of the Inc. 2011 Winning Workplaces awards either have ESOPs, provide broad-based stock options, or are worker cooperatives. Eight of the winners are NCEO members. The awards are a project of Winning Workplaces, a not-for-profit providing consulting, training, and information focused on helping small and midsize organizations create great workplaces. Nominees must have 500 or fewer employees. Over 350 companies applied this year. Companies are chosen based on innovative practices that engender employee involvement, loyalty, and innovation.

This year's employee ownership winners are:

Supreme Court Decision in CIGNA v. Amara Sends Mixed Message on Reliance on Summary Plan Descriptions

To read the headlines on the Supreme Court decision CIGNA v. Amara, No. 09-804 (U.S. May 16, 2011), it might seem that employers won a big victory. The court had ruled that a conflict between language in a summary plan description (SPD) and the plan document itself should be resolved in favor of the plan, at least under one part of ERISA. But the court's ruling was far more complex, finding that employees can still seek equitable and monetary relief if they can show damage resulting from the miscommunication under other sections of ERISA. A more detailed explanation worth reading appeared in the BNA Pension Reporter (available at this link).

IRS Proposes Regulations to Clarify Taxation of Performance-Based Equity Compensation

On June 24, the IRS issued what it termed a clarification of the rules regarding performance-based equity compensation. Generally, stock options and stock appreciation rights (SARs) granted by public companies to certain highly compensated employees and meeting specific conditions are not subject to the tax deduction limit of $1 million per year. One of those conditions is that the number of shares is specified, and the proposed regulations clarify that the number of shares must be specific for a given time period for each employee, rather than over the life of the plan or an aggregate amount for all participating employees. The proposed regulation also states that these maximums can be specified in the plan rather than in the individual award documents. In its review of the proposed changes, the law firm Morgan Lewis suggests that the proposed regulation has the potential to retroactively disallow prior tax deductions.

Employee Ownership and Values

When people work in an employee ownership company with a strong culture, is there a tendency for their values to converge? Anecdotally, the answer would appear to be "yes," given the intense nature of the work environment and the shared goals toward which people work. Recent research by Marilyn Cain, Jason Stansbury, and David Cook, however, concludes that "the six employee ownership best practices, whether individually or together, had no influence on the sharedness of values among employees, among managers, or between managers and employees." The research is based on the Rokeach values survey and includes data from over 800 people at 20 organizations. NCEO members will be able to read more in the September-October issue of the Employee Ownership Report.

Robert Oakeshott

The founder and long-time executive director of the UK's Employee Ownership Association (EOA), Robert Oakeshott, died on June 18. Mr. Oakeshott began his career as a journalist, including six years at the Financial Times, and in 1979 he founded Job Ownership Limited, which later became the EOA. A tireless advocate, brilliant writer, and dogged researcher, Mr. Oakeshott's legacy will live on through the organization he founded, the books he wrote, and the lives he touched. David Ellerman of the University of California in Riverside writes, "From his discovery of Mondragon for the English-speaking world in The Case for Workers' Co-ops to his magisterial Jobs and Fairness, Robert Oakeshott has been the foremost analyst and interpreter of worker ownership in the world today."

Author biography and other columns in this series

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