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The Employee Ownership Update

Loren Rodgers

September 17, 2012

(Loren Rodgers)

How Many ESOPs Could There Be?

No one knows the number of companies that are reasonable candidates for ESOPs, but census data provides a place to start. According to the U.S. Census Bureau, there are 534,000 firms in the United States with 20 or more employees, the size most experts agree is a rough minimum for an ESOP to be likely to make sense. ESOPs are not possible at 85,000 of those organizations (including nonprofits and governmental agencies) and are nearly impossible for the 20,000 farms on the list. Another 84,000 are partnerships. These would almost all be medical, law, and accounting partnerships, but a few could be eligible for an ESOP. Based on Manta data, about 100,000 firms with over 20 employees are restaurants. Since their high turnover makes ESOPs difficult, most but not all should be excluded from the count of potential ESOPs.

In other words, a very approximate count of the number of ESOP candidates in the United States is 260,000. The NCEO's current estimate for the number of ESOPs and ESOP-equivalent plans is 10,900, which is 4.2% of the potential pool.

UK Has New Minister for Employee Ownership

Jo Swinson, a Liberal Democrat member of parliament, has replaced Norman Lamb as the minister of the Department of Business, Innovation and Skills (BIS), the agency that oversees employee ownership. Lamb was a vigorous promoter of employee ownership, and Swinson expressed her commitment on her first day in office.

AICPA Revises Its Publication on Valuing Stock in Private Companies

The American Institute of CPAs is revising its publication Valuation of Privately Held Company Equity Securities Issued as Compensation. It is seeking input on the chapter on valuing closely held securities; comments should be provided by October 1, 2012. The working draft and request for comments are online.

Roy Messing Becomes Director of Ohio Employee Ownership Center

Roy Messing, who has worked at the Ohio Employee Ownership Center since 2008, became its director, effective as of July 1. Bill McIntyre, who served as director since the death of OEOC founder John Logue, will remain on staff. Messing says "We will be offering updated and expanded programs on ESOPs and worker-owned cooperatives" and notes that the center's mission—to increase employee ownership—remains unchanged.

Who Does ESOP Valuations?

In response to an informal poll conducted by the NCEO, 44 ESOP appraisers indicated that they do over 3,000 valuations annually, representing approximately one-third of active ESOPs and ESOP-equivalent plans. The top five of these do about 13% of all ESOP valuations, and the next five about 5%.

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