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The Employee Ownership Update

Loren Rodgers

October 1, 2012

(Loren Rodgers)

2013 Tax Rates and Equity Compensation

Uncertainty about the state of the tax code in 2013 is creating some difficult decisions for companies and individuals with stock plans. Unless Congress extends current tax rates, due to expire at the end of 2012, the amount of tax due will change on the exercise of options, vesting of restricted stock or RSUs, or the purchase of shares under a stock purchase plans. Changes would likely affect the capital gains rate, the rate on dividends, and Social Security and Medicare tax, as well as withholding rates. As MyStockOptions.com notes, however, "Unless you were already definitely planning to sell company stock or exercise options soon, many experts would say that the likelihood of higher tax rates ahead should not be the sole reason for taking these actions before the end of 2012."

Human Impact of Employee Ownership in the UK

A four-year study of 1,500 employees primarily at companies in the UK with all-employee share plans found that plan participants reported a number of positive results. In The Human and Organisational Impact of Employee Share Ownership, David McConville, Alison Smith, and John Arnold of Loughborough University report that 50% of employees who participate in plans say that the plans make them more likely to remain employed at the company, compared with 32% who said participation would not affect them. The main characteristic the study identified separating those who expect to remain employed versus those who do not is the extent to which employees feel their expectations for the plan have been met. Interestingly, a minority (from 14% to 22%) of respondents reported that being an employee-owner affected the quality of their job performance.

Senator Collins Visits Johnny's Selected Seeds

Johnny's Selected Seeds, which has had an ESOP since 2006 and became 100% ESOP-owned this year, hosted Maine Senator Susan Collins (R). Senator Collins has supported legislation to facilitate ESOP companies getting loans from the Small Business Administration and to broaden the use of the 1042 rollover. "Some of the most innovative firms in the country are employee-owned," said Senator Collins.

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