The Employee Ownership Update
September 15, 2014
New NCEO Data on Executive Compensation Practices in ESOP CompaniesThe NCEO gathered executive compensation data for the 2013 fiscal year between April and June 2014, receiving a total of 374 valid surveys from a diverse group of ESOP companies. The survey collected data on base pay, cash incentive pay, stock-based incentive pay, and deferred compensation. The survey also addressed vesting and equity granting practices.
Looking across pay categories, the median total pay for CEOs among responding companies was $307,875, with a breakdown of $240,000 among companies with 100 or fewer employees and $378,863 at larger companies (more than 100 employees). The overall median total pay for the other six positions included in the survey were: CFO ($192,649), COO ($237,317), top divisional vice president ($213,003), top HR professional ($112,683), top sales executive ($178,000), and top manufacturing vice president ($166,300).
Stock-based compensation is much more prevalent among larger responding companies: 34% report paying their CEO this type of compensation, compared to 19% at smaller companies (100 or fewer employees). Among the companies that grant equity compensation, stock appreciation rights (SARs) are the most common type: 50% of these companies provide SARs to their CEO, compared to less than 10% using stock options.
Survey participants have already received a summary of the results. Members can view a summary in the members area of the NCEO Web site; go to the Research Reports page (username and password required). You can order the complete results either as a custom report based on criteria you specify or as a database of all responses; for details, see our ESOP Executive Compensation Survey page.
Pennsylvania Center for Employee Ownership: October 16 Event in PittsburghPennsylvania companies interested in learning more about ESOPs can join a meeting hosted by the Pennsylvania Center for Employee Ownership (PCEO) on October 16 in Pittsburgh. The meeting, which will last from 7:00 AM to noon, will cover the various alternatives for ownership transitions, provide key information about how ESOPs work and about ESOP valuation, and draw on the real-life example of the ESOP company KTA-Tator. Learn more about the meeting on the PCEO's Web site or register on the NCEO's registration page for this event.
The PCEO is an affiliate of the NCEO, and this meeting is sponsored by Catalyst Connection and the University of Pittsburgh Small Business Development Center.
MSNBC Interviews Citizen's Share Author Joseph BlasiOn September 1, MSNBC's Richard Lui interviewed Dr. Joseph Blasi, one of the authors of the book The Citizen's Share. The 4-minute interview (see below) covered a range of topics, and Lui emphasized several of the book's recommendations for publicly traded companies, including the idea that companies may, in some circumstances, be required to issue broad-based stock options. Dr. Blasi estimated that if employees had an ownership stake worth 20% to 25% of the market value of publicly traded companies, the impact on wealth inequality would be dramatic.
The 50 Largest Employee-Owned Businesses in the United KingdomThe United Kingdom's Employee Ownership Association published a list of the 50 largest private companies with at least 25% of shares owned by a broad group of employees. The list was compiled by Capital Strategies, which also creates the UK Employee Ownership Index of public companies with substantial employee ownership. These companies collectively employ 151,000 people and have annual revenues of £20.5 billion ($33.3 billion USD).
The Employee Ownership Top 50 includes wholly owned UK subsidiaries of large non-UK employee-owned companies, provided the parent companies are at least 75% employee-owned. Two U.S. companies, CH2M Hill (#5) and W.L. Gore (#32), are on the list. If your company should be on this list, please contact Loren Rodgers (LRodgers@nceo.org; 510-208-1307).
European Union Discusses Incentives for Employee OwnershipAs the European Union discusses its future approach to employee ownership, the European Federation of Employee Share Ownership (EFES) released a report to defend its position that incentives are good public policy. EFES's report is in response to another analysis published by the European Parliament, Employee Financial Participation in Companies' Proceeds, which argues that fiscal incentives may not be a prerequisite for these plans. In June EFES won a court judgment demanding the withdrawal of the competing report.
It is inarguable that incentives are not a prerequisite to employee ownership; companies may set up plans even without any incentives out of a philosophical commitment to the idea. This is perhaps best exemplified by the Mondragon Group in Spain. However, evidence from work by the NCEO and others over the past 33 years studying employee ownership in the U.S. and in other countries strongly suggests that employee ownership plays a substantial role in economies only where tax incentives are present. Fiscal incentive policies need to be crafted with a view toward what role a country hopes employee ownership will play. If the goal is to provide employees, mostly in public firms, with a tax-favored way to accumulate assets, then tax incentives for employees to offset their risk aversion and time preference may be enough. But if the goal is to make employee ownership another model for corporate organization, then fiscal policy is unlikely to succeed unless it provides substantial incentives to employers and deferred taxation for employees.