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The Employee Ownership Update

Loren Rodgers

October 15, 2015

(Loren Rodgers)

Prominent Companies Announce Employee Ownership Plans

Yesterday, Apple CEO Tim Cook wrote to Apple employees about a new plan, which he called a "stock ownership program," to more broadly provide restricted stock units (RSUs). The plan is "designed to reach employees who were not previously eligible, including many in our amazing retail and AppleCare teams," Cook wrote. He described the program as a way to say thanks, and noted that it built on Apple's successful stock purchase plan, about which he said, "I am told we have one of the highest participation rates of any company offering employee stock purchase plans."

Based on a 2013 project by the National Center for Employee Ownership, about 20 of the largest 900 S&P companies say on their websites that they provide restricted stock to most or all employees.

The German company Siemens has been working hard to expand the amount of ownership among its employees. Currently 5% of its shares are held by 144,000 of its 360,000 global employees, and in October the company announced a formula-driven employee ownership policy that would distribute shares to nearly all employees. In an article, the magazine Handelsblatt said that under the program "the net profit above the company's internal forecast is divided roughly into thirds: one-third for investments, one-third for shareholders, and one-third for employees. The workers' share goes into a pot. Once it reaches 400 million [$455 US], the amount is disbursed in the form of shares based on worker salaries at the time."

IRS Issues Private Letter Ruling on ESOPs in LLCs

On September 18, the IRS issued private letter ruling 201538021, which allows limited liability companies to adopt an ESOP under certain circumstances. The PLR clarifies that unit shares of an limited liability company that is classified as an association and that has elected to be taxed as a corporation, are employer securities as defined in in tax code, provided that the unit shares otherwise meet the requirements that they have the highest dividend and voting rights.

The NCEO Will Seek Nominations for Its Board of Directors

On November 4, the NCEO will begin accepting nominations to serve on its board of directors for the term that begins April 1, 2016. (We will post nomination instructions at that time.) All members in good standard are eligible, and the election will be held in January.

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