The Employee Ownership Update
January 15, 2015
Liberal Think Tank and Congressional Democrats Call for Employee OwnershipThe progressive think tank Center for American Progress (CAP) released the Report on the Commission of Inclusive Capitalism, the output of a commission co-chaired by former U.S. Treasury Secretary Lawrence Summers and Ed Balls, the UK Labour Party's Shadow Chancellor of the Exchequer. Earlier, the ranking Democratic member of the House Budget Committee, Chris Van Hollen (MD), issued a plan on January 12 that many commentators see as the Democrats' first post-election attempt to lay out an economic vision.
Van Hollen's action plan includes a proposal that closely tracks a policy recommendation in The Citizen's Share by Joseph Blasi, Doug Kruse, and Richard Freeman. Under the heading Incentives for Employee Ownership and Profit Sharing, Rep. Van Hollen writes:
Research shows that firms in which employees are given an ownership or profit stake not only compensate workers better, but also perform better. At many firms, however, employees have no stake or voice in the company, and stock options and other forms of incentive compensation are limited to top executives. Congress should condition tax breaks for executive stock options and incentive packages on such pay packages being made available to all employees and otherwise strengthen tax incentives for employee ownership. The CEO-Employee Paycheck Fairness Act could be revised to allow corporations to deduct CEO and executive compensation in excess of $1 million if the corporations provide their employees with ownership and profitsharing plans meeting certain standards.The 170-page CAP report includes analysis of the U.S. and U.K. economies and suggests a range of policy options for both the U.S. and the U.K. They summarize one policy recommendation (page 14):
[W]orkers must benefit from increased productivity rather than seeing returns accrue primarily to shareholders. Profit-sharing and share-ownership schemes provide a direct way to ensure that employees have an incentive to help their company to succeed.Among its many specific recommendations, the CAP report calls for expanding the tax incentives for ESOPs and for establishing an Office of Inclusive Capitalism (page 105).
Fidelity Study Shows Holders of Equity Grants and ESPP Participants Place High Value on PlansA recent survey (PDF format) of 2116 worldwide recipients (1,475 of whom were in the U.S.) of individual equity plan awards and/or participants in employee stock purchase plans (ESPPs) shows that stock plans are highly valued by employees and that their perception of them has strengthened since 2011.
The report, Participant Research Global Results 2014, looked at employees in Fidelity Stock Plan Service clients. Of the 1,475 U.S. respondents, 553 received restricted stock and, in some cases, options, while 405 got stock options only. Both categories could be eligible for ESPPs as well. There were 517 participants in ESPPs only.
Almost two-thirds of those in some kind of plan said they were satisfied or extremely satisfied with their plans, up from 56% in 2011. Fifty-nine percent said they were more loyal to their company because of the plan, about the same as in 2011. Eighty-two percent said getting stock would be an important consideration in changing jobs, and 39% said it was a "must have." The percentage who say they have "a good idea of how much my stock options/grants are worth in today's dollars" increased from 79% in 2011 to 87% in 2014, corresponding with an increase in the number of participants making active use of plan-relevant information (from 38% in 2011 to 46% in 2014).
Purchasing Preferences and Employee Ownership: Project UpdateIn November, the NCEO began gathering information on various preference standards, such as certifications as for small businesses or as women-, minority-, or veteran-owned businesses, with a focus on how and whether those standards consider employee ownership. Thank you to the 30 companies that have participated!
We still welcome your input, and we are interested in hearing of your successful and unsuccessful experiences with any of the organizations, from quasi-governmental organizations to nonprofits to large corporations, that provide different types of certification. Help us determine how these various rules affect employee ownership companies by taking this two-minute, five-question survey.
Later this year, look for the output from this project, which will include a catalog of the various standards and documentation of their relevance to employee-owned companies.
Discussion on European Commission's Employee Ownership PlanIn October, the European Commission released a pilot project to support the development of employee ownership throughout Europe, Promotion of Employee Ownership and Participation. In additional to legislation, the pilot project suggests forming a virtual employee ownership center, launching an awareness campaign, and a code of conduct.
On January 5, the European Federation of Employee Share Ownership (EFES) released its own report reacting to the provisions in the pilot project and expressing its strong disagreement with the proposed legislation. Although the pilot project's legislation does not include financial incentives, EFES argues that such incentives are essential for the successful growth of broad-based employee ownership in Europe.