The Employee Ownership Update
July 15, 2011
Equity Plans Are a Large (and Misunderstood) Part of Employee SavingsA new study of over 1,900 plan participants in 130 companies by Fidelity Stock Plan Services found that company stock plans are the number two savings vehicle for employees being offered these plans, ranking behind only 401(k) plans. Stock plans, including options, stock purchase plans, restricted stock, and similar plans, account for 17% of their savings allocations, but only half of the respondents could "generally" explain them, and 11% said that they could not explain their employee stock plan "at all."
Corporate Disclosure by Publicly Traded ESOP CompaniesFrancesco Bova, an assistant professor of accounting at the University of Toronto and a Kelso Fellow for research in employee ownership, drew on lists provided by the NCEO to track the disclosure practices of 279 public companies with varying degrees of employee ownership. He found that ESOPs have a positive impact on the quality and quantity of disclosure among unionized companies, but no measurable impact among non-union companies. He concludes that "employee ownership appears to benefit the firm not only by aligning goals between the firm and its employees but also by increasing disclosure from the firm to all of its stakeholders.... [E]mployee ownership, through its ability to improve disclosure quality, appears to generate market outcomes that benefit shareholders." The study is available in Employee Ownership and Shared Capitalism, edited by Edward J. Carberry (Cornell University Press, 2011).
ESOP-Owned Reflexite Corporation Plans MergerLong-time ESOP company Reflexite, of Avon, Connecticut, announced yesterday that it had signed an agreement to merge with the German company ORAFOL Europe GmbH. Reflexite, which formed its ESOP in 1985, has been a prominent employee ownership company, pioneering creative management ideas and thoughtful ways of combining different forms of employee ownership, such as options and internal stock exchanges. Reflexite, which manufactures reflective materials and optical components, has employees in the U.S. and abroad. The transaction requires shareholder approval, and most shares are held by employee and directors. In an announcement on the company's Web site, CEO Michael Foley says, "ORAFOL is a great fit for Reflexite, both from a cultural and a technological standpoint."
Call Center Built Around Employee OwnershipSmart Business featured an article on USA800, a company that primarily serves incoming calls to 800 numbers. For USA800, employee ownership through an ESOP is a primary feature of its brand, and the company credits employee ownership for giving it the lowest turnover rate in its industry: "Employee ownership represents over 35% of total compensation and allows front line customer advocates to make a career at USA800." USA800's article Employee Ownership Culture and Philosophy (PDF format) documents the size of a typical employee's account by years of tenure to demonstrate the vested interest each employee has in customer satisfaction.
Obituary for Robert Oakeshott in the EconomistRobert Oakeshott, the founder of the UK's Employee Ownership Association, died on June 21. His obituary appeared in the July 7 issue of the Economist (available online at this link).
Author biography and other columns in this series