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The Employee Ownership Update

Loren Rodgers

February 3, 2014

(Loren Rodgers)

Bureau of Labor Statistics National Compensation Survey Says 8% of Private Sector Employees Have Stock Options or Are in ESPPs

The 2013 National Compensation Survey from the Bureau of Labor Statistics shows that 8% of private sector employees, or 9.2 million employees, are in what the BLS defines as "stock option" plans. Unfortunately, the BLS definition simply defines these as "plans [that] allow establishment employees the right to buy company stock at a fixed price by a fixed time." That definition would include stock options granted by employers as well as employee stock purchase plans. The definition also does not include (nor does the BLS collect data on) other forms of individual equity grants, such as restricted stock, phantom stock, or stock appreciation rights.

More useful are the data the BLS compiles on the distributions of participation by sector and employee type. Not surprisingly, the plans are most common in the information industry, where 31% of employees participate, and least common in leisure, health care, and education (many businesses in these sectors are non-profit).

In 2011 and 2012, 8% of employees were in these plans, compared to 9% in 2009 and 7% in 2010.

DOL Settles with People Care Holdings over Valuation Issues

The former owners of People Care Holdings Inc. have agreed to pay $10 million to settle a lawsuit brought by the Department of Labor over allegations that the ESOP overpaid for the shares when it bought it from the former owners. People Care is a 4,600-employee home health care company in New York. The settlement included a $900,000 civil penalty.

The DOL alleged that the valuation was based on "unrealistically optimistic projections of People Care's future earnings and profitability, even after People Care lost a key municipal contract." The company had used a well-known independent ESOP trustee as well as a respected team of ESOP advisors. It denied any wrongdoing.

The DOL also alleged at the end of its investigation that the stock purchase agreement's indemnification provision was invalid because it required the ESOP, as the owner of the company, to pay any costs incurred by the former owners for an investigation or litigation. The defendants argued the indemnification was valid.

New EBRI Data on Company Stock in 401(k) Plans

The Employee Benefits Research Institute (EBRI) reports that 36% of participants in the EBRI 401(k) plan database were in plans that offered company stock as an investment. Where company stock was an option, 18.3% of participants selected that as one of their holdings. Seventy-six percent of these have less than 20% of their holdings in company shares, while 7% had more than 80% in company stock. Overall, 7.2% of 401(k) participants held company stock. The percentage of participants holding company stock has stabilized in recent years, but had reached a peak of 19% in the late 1990s.

Help Us Make the Case on Employee Ownership and Income Inequality

Income inequality has become a hot topic of late. But notably absent from the debate is any discussion of employee ownership as a bipartisan, capitalist approach to the problem. No pundits and very few news articles talk about it and no major political leader mentions it, although former Congressman Earl Pomeroy did post an article on the Huffington Post. We'd like to help change that and need your help. One approach we think can work is to write op-ed pieces on this for the local newspapers. The few major national papers are hard to get published in, but local newspapers are often happy to get these proposals from local people.

We can help provide draft text that you can modify to talk about your own experience. It will be good for employee ownership, get your company noticed, and make your employees proud.

If you are willing to help, contact Corey Rosen at crosen@nceo.org.

GEO Equity Survey

As announced in late 2013, the Global Equity Organization (GEO) is going live with the 2014 Global Equity Insights survey, together with its sponsors Computershare, hkp///, SAP, Siemens, and the University of Göttingen, and survey support partners WorldatWork, the Certified Equity Professional Institute (CEPI), and the NCEO. The data-gathering phase will be announced soon and will close February 28. The marketing will be worldwide with support from GEO, Computershare, hkp///, and Computershare. Last year's report is available at this link (PDF).

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