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The Employee Ownership Update

Loren Rodgers

May 15, 2014

(Loren Rodgers)

Delta Airlines Wins Stock-Drop Lawsuit

In a May 8 decision, the 11th Circuit Court of Appeals dismissed the claim by lead plaintiff Dennis Smith that the trustee of Delta's ESOP should have sold company stock because the trustee should have known that the company's efforts to turn around its value would fail. The court agreed the circumstances were dire, noting, for example, Delta's 2006 request to void 93 million stock options held by 70,000 employees. Observing, however, that the plan required the trust to offer company stock, the court relied on its own ruling in Lanfear v. Home Depot to conclude "Because a reasonable fiduciary could have concluded that investments in Delta stock during the class period remained appropriate, Smith's prudence claim fails."

Australian Government Delays Employee Ownership Reforms

Although it had been considering recommending changes to the rules governing employee ownership in its budget proposal, the government of Australian Prime Minister Tony Abbott has said it will instead introduce its proposals later in the year. Several cabinet members support the proposal, which would largely reverse the changes to employee ownership rules passed by the Labor government in 2009. The Australian business newspaper BRW notes in a May 9 article that the 2009 changes "were intended to stop executives minimising their tax but instead triggered an almost overnight collapse of employee share schemes in Australia."

DOL Has "Slowed Pace" in Drafting Fiduciary Rules

Phyllis Borzi, the Assistant Secretary of Labor for the Employee Benefits Security Administration, told BNA Bloomberg on May 5 that EBSA does not have a set date by which it will release an updated version of its proposed regulations defining who is a retirement plan fiduciary. Although the pace is slower, Borzi said that Secretary of Labor Thomas Perez would decide when to release the regulations, noting that "we're not going to wait forever."

List of 10 Largest Public Company ESOPs

Pensions & Investments released a list of the 10 largest ESOP companies in its top 1000 retirement funds. The companies, all publicly traded, all have ESOPs that own a minority of their shares:

The Corporate Directors' Exchange

The Beyster Institute at the Rady School of Business at UC San Diego will host members of the boards of directors of ESOP companies for a meeting intended to cover the key points of content directors should know and to foster peer-to-peer dialogue among directors. The program will be on July 13 to 15 and is intended for inside and independent board members and for those considering joining an ESOP company's board.

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