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The Employee Ownership Update

Loren Rodgers

February 18, 2014

(Loren Rodgers)

New Research: ESOPs and Other Benefit Plans

A new report from PLANSPONSOR magazine shows that ESOP companies are more likely than non-ESOP companies to offer secondary defined contribution and defined benefit plans. They are also are substantially more likely to offer health savings accounts (HSAs). PLANSPONSOR's annual defined contribution survey tracked the prevalence of retirement plans among 5,342 responding companies, 231 of which had ESOPs and 22 of which had KSOPs (ESOPs combined with a 401(k) plan). The firms are generally larger than most plan sponsors, although about one-half have assets less than $10 million in their retirement plans.

Within the sample, the survey finds that 95% of all ESOP and KSOP companies have 401(k) plans, compared to 86% of all respondents. Close to 40% of ESOP/KSOP companies have defined benefit plans, compared to 25% of all respondents, although that comparison is reversed in smaller companies (those with $50 million or less in defined contribution plan assets), where 6% have defined benefit plans, compared to 12% of companies without ESOPs. Interestingly, ESOP companies of all sizes are 6% to 15% more likely to offer HSAs.

We thank PLANSPONSOR magazine for generously providing the data tables used for this article. PLANSPONSOR is a leading information resource on retirement plans and the publisher of PLANSPONSOR magazine. To subscribe, visit

Employee Ownership and the Best Companies to Work For

Google topped the annual Fortune list of the 100 Best Companies to Work For. Just behind Google are 40 more companies with employee ownership plans, including Edward Jones (#4), Genentech (#6), (#7), Intuit (#8), and majority employee-owned Robert W. Baird (#9).

Of the 41 employee ownership companies on the list, six are majority employee-owned, six have ESOPs, nine have broad-based individual equity grant plans (options or restricted stock), 24 have employee stock purchase plans (ESPPs), and two are majority-owned by broadly offered stock purchase plans other than 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.

Those who have seen the film We the Owners will recognize #10 on the list: DPR Construction was featured in that documentary for its use of phantom stock to create an ownership culture.

NCEO Members can see the full list in our March-April newsletter, which will arrive in the last week of February.

SEC Proposal Would Make It Easier to Create Internal Stock Markets

Few companies, most notably CH2MHill, operate internal stock markets to allow employees to buy and sell shares. There are a number of reasons for this, but one has always been regulatory cost and complexity. Companies needed to register the shares, provide extensive financial reporting, and comply with blue sky securities laws in each state in which they operate. On December 18, 2013, the Securities and Exchange Commission issued a proposal to make this process substantially easier.

The SEC's proposal would change Regulation A, an existing exemption from registration for small offerings of securities up to $5 million within a 12-month period and not more than $1.5 million for existing securities holders. This $1.5 million limit means many employee ownership companies have too many shares on offer to qualify for the exemption. The revised proposal would provide an option to increase that to $50 million overall and $15 million for existing security holders. It would still require significant reporting, generally comparable to those for public companies, but would exempt companies from blue sky compliance in each state in which they operate. Companies that want to offer less than $5 million overall per 12-month period and not more than $1.5 million for employee security holders would be able to have somewhat less onerous reporting requirements.

The comment period on the proposal ends February 18.

UPenn Program for ESOP Company Executives

The Center for Organizational Dynamics at the University of Pennsylvania will host "the first and only program anywhere formally addressing the relationship between the distinctive nature of ESOP companies and the effectiveness of leaders." The program consists of two week-long sessions (June 15-20 and October 19-22, 2014). Topics include the challenges and opportunities unique to leading an ESOP company, practical ideas to promote employee engagement, implications of recent research, and strategies for building a high-performance ownership culture. Attendees will also leave the program with a network of peers at other ESOP companies. More about the program is available online or by contacting the program's academic director Ginny Vanderslice (215-292-4865,

Veteran-Owned Company Joins Ranks of Largest Employee Ownership Companies

Triple Canopy, a Reston, VA-based provider of mission support, security, and training services, has become 100% ESOP-owned. The company has been active in a number of war zones. It was started by veterans in 2003 and has grown quickly to several thousand employees worldwide, making it one of the largest ESOP-owned companies. Eighty percent of its employees are veterans.

Author biography and other columns in this series

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