The Employee Ownership Update
October 17, 2011
Proposed New Accounting Body for Private CompaniesThe Financial Accounting Foundation, the parent organization of the Financial Accounting Standards Board (FASB), plans to encourage modification of Generally Accepted Accounting Principles (GAAP) for private companies. The modification would be developed by a group called the Small Company Standards Improvement Council and might eventually result in a new body parallel to FASB. In an October 4 article, the Financial Times describes the motivation for the possible modification as "concerns that the full set of accounting principles is unduly complex and burdensome for smaller companies." Two areas specifically mentioned of concern to the employee ownership community are fair value assessments and stock option valuation. The proposal will require extensive review, so even if it is adopted, it will be probably some years before it goes into effect. The Financial Accounting Foundation's Web site offers more details and a request for comments.
Stock Purchase Plans Under Scrutiny by the European CommissionThe European Commission is looking into stock purchase plans that offer incentives for employees to set aside monthly deferrals to invest in the shares of their employers. One response in the Commission's consultation paper "The EU corporate governance framework" suggests that this type of plan "places asymmetric risk upon the employee," according to Charles Cronin, formerly of CFA Institute, and John Mellor, of the Foundation for Governance Research and Education. An article in the Financial Times also cites John Collison, head of employee share ownership at IFS ProShare. He notes that over 900,000 employees in the UK participate in share incentive plans (SIPs). As of the end of 2010, the average value of a SIP holding approximately $4,700 per employee. Mr. Collison noted in the governments of the UK and other European countries limit the amount that can be invested in employee share plans. "Having a limit," he argues, "acts as a mechanism to prevent [an employee having] too much in a single savings vehicle." The European Economic and Social Committee will hold a conference on the topic in mid-October, in Brussels.
IRS Conference Call to Discuss ESOP Determination LettersThe next IRS phone forum on employee plans, "Determination Letter Issues Regarding Employee Stock Ownership Plans," will take place on October 28 (11:00 AM Pacific, noon Mountain, 1:00 PM Central, 2:00 PM Eastern). Registration information is available on the on the IRS Web site, which also includes titles and handouts of past phone forums.
AGM's No-Layoff PolicyLong-time ESOP company AGM Container Controls has a 13-point policy to prevent layoffs. The plan, available online, includes some pieces of common wisdom (hiring slowly, hiring from within, and cross-training), some open-book principles (communicating openly about any projected downturns), and some refreshingly non-modern ideas. Instead of outsourcing, the company may insource contracted services or nonrecurring tasks like painting. During slow times, the company may build up inventory or do comprehensive counts of its own inventory. The results? Increasing employment over 20 years.
Miller's Health Systems on TelevisionA 100% employee-owned company that provides long-term care, Miller's Health Systems operates 32 rehabilitation centers, 11 assisted living facilities, and other services. With over 3,000 employees, Miller's is on the NCEO's list of the 100 largest majority employee-owned companies. The company recently released a 30-second video explaining how employee ownership matters to the people it serves.
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