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The Employee Ownership Update

Loren Rodgers

September 15, 2015

(Loren Rodgers)

Downturn in China's Stock Market Affects Employees

One effect of the dramatic decline in the stock of China's publicly traded companies has been to cause substantial losses for employees who participated in stock purchase programs. In June 2014, the China Securities Regulatory Commission released guidelines for employee stock ownership plans (ESOPs); public companies then began creating such plans, with 101 plans in place as of September 8 this year. Note that although Chinese plans have the same name and acronym as US ESOPs, they are very different. They require an employee contribution and usually are for a targeted set of employees.

The Shanghai stock market index is down 42% since June, and two-thirds of China's companies with ESOPs have seen their stock value decline. At some companies, employees borrowed money to purchase more shares through the plans, magnifiying their losses. Xiangxue Pharmaceutical employees, for example, borrowed two yuan for every yuan of their own money they invested, only to see the stock lose 58% of its value.

Indian Government Considers Replacing Incentive Pay with Stock Options

The Indian Finance Ministry proposed that state-owned enterprises be required to provide all performance-related pay to executives in the form of stock options, known in India as employee stock option plans (ESOPs); as with China, the acronym refers to something quite different from a US ESOP. An unnamed source at the Finance Ministry, quoted in an article in the Economic Times, said, "By giving ESOPs as variable pay package both the employee and the company benefit." Currently, a portion of performance pay may be given in the form of stock options, but only if the employee agrees.

Participate in a Survey on What Makes ESOP Acquisitions Successful

Researcher Suzanne Cromlish has been investigating ESOP companies that make acquisitions to determine what separates the long-term successes from the failures. The NCEO asks all ESOP companies that have made acquisitions to take 15 minutes to complete her online survey. The survey examines topics such as strategy, vision, time horizon, empowerment, and measures of the success of the acquisition.

Responses will be completely confidential, and respondents can request to receive a copy of the survey results.

The ESOP Transaction Survey Closes Tomorrow

Thank you to the many companies who have already filled out the first-ever ESOP transaction survey. Company responses help us answer questions no one has been able to answer before, such as:

The results are already intriguing, but to maximize the credibility of this research we want as many companies to participate as possible.

Complete the survey here. It should take no more than 15 minutes.

Your responses will be completely confidential, and the NCEO will release only aggregate results to avoid any exposure for individual companies or even small groups of companies.

The NCEO Is Looking for Photos!

From the web to slide shows to publications, mailers, and even our own walls, the NCEO has lots of ways to use compelling photographs and videos from employee-owned companies. If you have professional pictures and would like to have your company's name and image appear in NCEO materials, please contact Ramona Rodriguez-Brooks (; 510-208-1302).

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