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The Employee Ownership Update

Loren Rodgers

February 15, 2012

(Loren Rodgers)

DOL Works on Re-Proposal

Louis Campagna of the Department of Labor's Employee Benefits Security Administration said on February 2 that when it re-proposes its regulation on plan fiduciaries it will focus on appraisals that are used in transactions. The DOL's original proposal would have made the appraisers of ESOP shares plan fiduciaries, but the department withdrew that proposal in September 2011. Campagna noted that the new proposed regulations will be limited to "arm's-length commercial transactions."

White House Budget and ESOPs

The Obama administration's revenue proposals include one item specific to ESOPs. The administration notes that current law is unclear about whether transfer of qualified replacement property to a spouse should trigger tax on the amount of capital gains originally deferred in an ESOP transaction. It proposes clarifying that such a transfer would not trigger tax, and the accompanying analysis suggests that the revenue impact will be "negligible."

Stanford Webinar on Exporting Ownership Culture to China

The Center for Professional Development at Stanford is offering a Webinar on the Silicon Valley model of shared equity, employee empowerment, and the possibilities of building similar organizations in China. Register online for the free event, which will be February 28 at 10:00 am Pacific time. The three speakers are Tamara Carleton, founder and CEO of the Innovation Leadership Board; William Cockayne, head of Stanford's program for Foresight and Innovation; and Loren Rodgers of the NCEO.

Reaction to Iowa Governor's ESOP Initiative

In response to Iowa Governor Terry Branstad's January announcement that promoting employee ownership would be one of his administration's top three economic goals, ESOPs seem to be gathering increased press coverage, with legislators endorsing his call and well-known local ESOP companies appearing in the press. Employees at Cedar Rapids-based Van Meter noted that their ESOP accounts increased in value faster than the S&P 500. Debi Durham, the director of Iowa's Economic Development Authority, noted that unlike out-of-state buyers, ESOP ownership was less likely to result in layoffs. At the same time, the nonpartisan Legislative Services Agency estimated the cost of the state's ESOP initiative at $1.7 million, consisting of $1 million in additional spending and $700,000 in lost capital gains taxes.

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