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The Employee Ownership Update

Loren Rodgers

June 16, 2014

(Loren Rodgers)

NCEO Releases Revised Key ESOP Data

The NCEO now estimates that there were 8,926 companies with ESOPs and similar plans in the United States at the end of 2011, including 6,941 companies with ESOPs and 1,985 with plans that, while not ESOPs, share a number of similar features. The numbers are based on a more rigorous method than the NCEO's prior estimates and rely on the Department of Labor's research files.

The new analysis shows the number of literal ESOPs declining from 8,874 in 2002 to 6,941 in 2011. The number of participants in literal ESOPs over that time, however, increased from 10.0 million in 2002 to 13.5 million in 2011.

Over the same time period, the number of ESOP-like plans increased from 1,614 to 1,985. While those figures in isolation imply an annual rate of increase in plan numbers, the actual trend was a decrease between 2002 and 2009, followed by a sharp increase in 2010. We define "ESOP-like" plans as profit sharing, stock bonus, and other defined contribution plans that are substantially (at least 20%) invested in employer stock and have at least five participants; most are profit sharing plans.
Number of plansTotal number of participantsTotal assets
Literal ESOPs6,94113.5 million$942 billion
ESOP-like plans1,9851.2 million 53 billion
Total 8,92614.7 million 995 billion
Plans that have at least 100 participants and have plan assets under $3.1 billion represent 32% of all ESOP and ESOP-like plans, 46% of all participants, and 38% of all plan assets. Small ESOPs and ESOP-like plans together account for approximately two-thirds of all plans, but only about 6% of plan assets and 9% of plan participants. On the other side of the spectrum, public companies with over $3.1 billion in total plan assets are just 0.8% of plans, but account for 55% of plan assets and 45% of plan participants.

Our forthcoming issue brief The Changing World of Employee Ownership includes a detailed report on the new estimates, including trends, company characteristics, and methodology. We also will be summarizing the report online in the near future. The NCEO will continue to release new data and results as they appear.

DOL and GreatBanc Settle Valuation Lawsuit

The Department of Labor brought a 2012 suit against GreatBanc Trust Co., alleging that in 2006 it allowed the Sierra Aluminum ESOP to overpay for company shares. In the settlement, GreatBanc and its insurers will pay $5.3 million, including $4.8 million to the ESOP and $0.5 million in penalties.

The settlement also included standards that GreatBanc and the DOL negotiated, including how to select and monitor the appraisal firm, the scope of analysis required for the valuation, and documentation of the valuation. In reference to the agreement, James Staruck, the president of GreatBanc, said his company is "proud to be in the forefront of implementing what we consider to be an exceptional process." In a press release, the Assistant Secretary of Labor for the Employee Benefits Security Administration Phyllis Borzi said, "Others in the industry would do well to take notice of the protections put in place by this agreement."

New York City Council Considers Support for Coop Development

A proposal before the New York City Council would allocate $1.2 million to support a Worker Cooperative Business Development Initiative. The initiative would provide financial and technical assistance to worker cooperatives and would coordinate training resources. Supporters say the initiative would create 294 jobs in the city, at a cost of just over $4,000 per job.

New Zealand to Reduce Compliance Costs for Employee Ownership

Craig Foss, the Commerce Minister of New Zealand, announced in March that the government would simplify employee disclosure requirements for companies offering employee ownership plans. Foss noted, "New exemption rules will open up possibilities for employers to offer share purchase schemes, enabling employees to take an ownership stake in the business they work for. This creates a practical way for businesses, especially start-ups, to attract and retain talent."

PBS Stations to Air Documentary on Worker Ownership

Public television stations around the country will run the documentary ShiftChange, a film that describes worker cooperatives in the United States and investigates the connections to the Mondragon cooperatives in the Basque region of Spain. The list of stations and screenings, which will be updated weekly as more stations add the documentary to their schedules, is available at the ShiftChange Web site.

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