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The Employee Ownership Update

Loren Rodgers

February 15, 2013

(Loren Rodgers)

NCEO Signs Letter to FASB on ESOP Disclosure Requirements

The NCEO signed a letter to the Financial Accounting Standards Board (FASB) (PDF) in collaboration with the ESOP Association and Employee-Owned S Corporations of America. The letter argues for carving private companies out of new rules that may require the disclosure of information in their ESOP audit reports filed with Form 5500 about the significant assumptions and methodologies used in the valuation of the company's stock.

The letter explains our concerns and requests that private ESOP companies and other companies where qualified retirement savings plans may own a meaningful portion of the company be exempted from this rule.

FASB adopted Accounting Standards Update (ASU) 2011-04, intended, as we understand it, to require companies to disclose the significant assumptions and methodologies used in the valuation of company securities that are not publicly traded. The wording of the rule may have the effect of requiring that privately held companies to provide a footnote in their ESOP audit reports filed with Form 5500 that would provide information such as the weighted average cost of capital, operating margins, revenue growth rates, and other information. Since the information in Form 5500 is publicly available to competitors or possible hostile acquirers, the letter states that ASU 2011-04 "could cause companies to terminate ESOPs and discourage other companies from adopting them. Decades of research suggests that this would reduce job creation, damage retirement security, and weaken companies."

UK: 2012 Saw a 10% Increase in Employee-Owned Businesses

The Employee Ownership Association of the UK released its report on events in employee ownership in 2012, noting that the number of employee-owned businesses increased by 10% during the year and citing the major government efforts in support of employee ownership. The report cites extensive press coverage, a series of government-backed reports, and an increase in EOA membership from 100 to 150 companies. It concludes that 2012 witnessed "a seismic shift in the profile of employee ownership in the UK."

Employee Ownership in the Fortune 100 Best Companies to Work For

Once again, the annual Fortune 100 Best Companies to Work ForŪ is filled with companies with broad-based employee ownership plans. Of the 73 organizations on the list that are U.S. for-profit stock corporations, 44 have some sort of employee ownership plan (see table below). Of these, 5 are majority employee-owned, 6 have ESOPs, 13 have broad-based individual equity grant plans (option or restricted stock), and 23 have ESPPs. Some companies have multiple plans. To be on the list, created by the Great Place to Work Institute, companies must have 1,000 or more employees. The percentage of companies that have broad-based plans has been consistently in the mid-50s since we have been compiling these figures.
CompanyPosition on ListStock Plan(s)
Google1Restricted stock units, ESPP
NetApp 6ESPP
Hilcorp Energy 7Phantom interest in energy properties
Edward Jones8ESPP
Camden Property Trust 10ESPP
Qualcomm 11ESPP
DPR Construction 13Phantom stock
DreamWorks Animation 12ESPP
Robert W. Baird14Stock purchase (majority employee-owned)
Burns & McDonnell18ESOP (majority employee owned)
W.L. Gore & Associates 21ESOP (majority employee-owned)
Chesapeake Energy 26Stock bonus plan
Rackspace 34ESPP
National Instruments35ESPP
NuStar 38ESPP
SVB Financial Groupo40ESPP
Adobe 41ESPP, options, restricted
Cisco 42ESPP, options
FactSet Research44ESPP
Men's Wearhouse 50ESOP, ESPP
Allianz Life 51ESPP
Autodesk54ESPP, options
Stryker 61ESPP
Marriott International64ESPP
Darden Restaurants65ESPP
QuikTrip 66ESOP
Intel 68ESPP, options
Whole Foods Market 71ESPP
EOG Resources 72ESPP, options
PCL 73Stock purchase (majority employee-owned)
CarMax 74ESPP
Microsoft 75ESPP, restricted stock
Publix Super Markets 77ESOP, stock purchase (majority employee-owned)
TDIndustries 86ESOP (majority employee-owned)
Capitol One87ESPP
Nordstrom 88ESPP
Accenture 91ESPP
Goldman Sachs 93Individual equity awards
Starbucks 94Stock options
Mattel 95ESPP
CH2MHill100Stock purchase (majority employee owned)

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