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The Employee Ownership Update

Loren Rodgers

October 15, 2014

(Loren Rodgers)

After Dudenhoeffer, Stock-Drop Case Dismissed

In one of the first stock-drop cases to be decided after the Supreme Court's ruling in Dudenhoeffer v. Fifth Third, a district court dismissed a stock-drop case against UBS. In In re UBS ERISA Litig., No. 1:08-cv-06696-RJS (S.D.N.Y. Sept. 29), the court held that the plaintiff had claimed only indirect harm from the plan fiduciary's decision to continue holding UBS shares during which the price declined 69%. To prove standing, the plaintiff would have needed to show that the alleged fiduciary breaches caused her to suffer an individual loss.

The judge noted that the Dudenhoeffer ruling, which ended the so-called Moench presumption, had "little impact" on this case because the court had found that the Moench presumption did not apply, since the plan in question was not required or encouraged to hold company stock.

In a footnote of his opinion, judge Richard J. Sullivan noted, however, that "It could be argued that the Supreme Court's decision in Dudenhoeffer has, if anything, raised the bar for plaintiffs seeking to bring a claim based on a breach of the duty of prudence," referring to the deference the Supreme Court allowed fiduciaries to give to the impact of public information on stock price.

Pennsylvania Senate Passes Employee Ownership Resolution

On October 6, the Pennsylvania Senate approved a resolution supporting employee ownership, noting that ESOPs provide an "effective tool for companies going through ownership transition by preserving their companies and jobs through employee ownership rather than closing or selling them to out-of-state or foreign buyers." Senator Stewart Greenleaf, speaking on the floor of the Senate, argued that "ESOPs prevent American jobs from being moved overseas, and ESOP businesses are far less likely to lay off employees during a recession." The employee-owners of NewAge Industries hosted Sen. Greenleaf earlier in the year.

Accepting Nominations for the NCEO Board of Directors

The NCEO will begin accepting nominations and self-nominations for its board of directors on November 3. The board is actively engaged in supporting various NCEO projects, such as providing input on research projects, generating publications, creating outreach opportunities to help the NCEO reach new audiences, supporting state employee ownership centers, and much more. Those interested in learning more can refer to our resource page for board candidates or contact Loren Rodgers (, 510-208-1307).

Interested in Minority-, Women-, or Veteran-Owned Business Status?

The NCEO is beginning a project about the interaction of employee ownership and certification as a minority-owned business, women-owned business, or veteran-owned business. If you are interested or if one of these statuses might apply to you and your company, please contact the NCEO's outreach coordinator Tim Garbinsky (, 510-208-1310).

Australia Plans to Change Taxation of Stock Plans

On October 14, the Australian government announced that it will develop new legislation to encourage employee stock plans that would come into effect in July 2015. The changes are in response to 2009 legislation, which has had the effect of strongly discouraging companies from using stock plans. The press release notes that "The Government will reverse for all companies the changes made in 2009 to the taxing point for options, while retaining the integrity provisions that were introduced at that time." Under the new legislation, options would no longer be taxed at vesting and would instead generally be taxed at exercise. Small, privately held startups would be eligible for tax benefits. Options that meet certain criteria would be eligible for a deferral of capital gains tax, and shares issued at a discount would be eligible for a tax exemption.

Author biography and other columns in this series

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