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The Employee Ownership Update

Loren Rodgers

February 1, 2016

(Loren Rodgers)

Welcome! New Leadership at Employee Ownership Centers

The Pennsylvania Center for Employee Ownership (PCEO) and the Rocky Mountain Employee Ownership Center (RMEOC) each has a newly appointed executive director, signaling a possible revitalization of state/regional employee ownership centers. Kevin McPhillips is the new executive director of the PCEO and Halisi Vinson is the new executive director of the RMEOC.

The PCEO is a subsidiary of the NCEO, and is funded by the NCEO, in-state donors, a member of the NCEO board, and the Employee Ownership Foundation. The mission of the PCEO is to provide business leaders and others information to help them make good choices about employee ownership. McPhillips says, "The message that I have heard so clearly from all of those involved in the founding of the PCEO is one of selfless and enthusiastic desire to change lives in a real, positive, and substantial way in Pennsylvania. To be part of that is a gift, and I'm very much looking forward to making that happen."

The RMEOC's mission is to "stimulate employee ownership opportunities" through awareness, education, and being a contact point for government officials. The chair of its board, Greg Weiss, says "We are thrilled to have Halisi as our first executive director. We are confident that she will take RMEOC to the next level."

These two organizations join the other state programs. The oldest state center, founded in 1987, is the Ohio Center for Employee Ownership. Part of Kent State University, the OEOC is the oldest state/regional center and provides a wide variety of education, an annual conference, peer networking, a succession planning program, support for cooperative development, and extensive research and publications. The Vermont Employee Ownership Center is an independent nonprofit that promotes and fosters employee ownership. The Beyster Institute at the University of California San Diego's Rady School of Business runs the California Center for Employee Ownership. Several other state centers are in various stages of development.

Anyone interested in learning more about a state center, helping launch a new center, or supporting the NCEO's work to provide support and resources for the expansion of the state centers should contact the centers directly, contact the NCEO's Tim Garbinsky, or join a meeting about the state centers during the NCEO's 2016 conference.

Supreme Court Again Remands Amgen Case

In Amgen Inc. v. Harris, 577 U.S. ___, No. 15-278 (Jan. 25, 2016), the Supreme Court for the second time reversed the Ninth Circuit's decision on the prudence of continuing to hold employer stock in Amgen's 401(k) plan. The first time, the Supreme Court remanded the case after its ruling in Fifth Third v Dudenohoeffer eliminated the presumption of prudence rule (the "Moench presumption"). The Ninth Circuit on remand said that the fiduciaries should have removed Amgen stock, which would have the same effect on the market as disclosure of the potentially adverse information. The Supreme Court ruled that a plausible argument could be made along these lines, but "the facts and allegations supporting that proposition should appear in the stockholders' complaint. Having examined the complaint, the Court has not found sufficient facts and allegations to state a claim for breach of the duty of prudence." The Supreme Court said that the complaint needs to claim an alternative action that "a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it." The district court can now decide it if wants to allow the stockholders to amend their complaint.

Today! Call for Input: Please Complete a Brief Survey on Determination Letters

The Employee Plans subgroup of the IRS Advisory Committee on Tax Exempt and Government Entities (ACT) is conducting its 2015/2016 project on the IRS's decision to eliminate most determination letters for individually designed plans. As part of the project, the ACT has prepared a short, confidential online survey to solicit retirement practitioner/service provider feedback on the elimination and to determine the choices plan sponsors are likely to make and how the IRS can minimize the impact of the change.

Respondents should complete the survey by today, February 1. The survey does not require that respondents identify themselves, and all responses go directly to the ACT members, and not to the IRS. Click here to take the survey.

Progressive Policy Analyst Releases Report on ESOPs

Jared Bernstein, the former chief economic advisor to Joe Biden and an influential thinker among left-leaning policy makers, released a report on January 26 titled Employee Ownership, ESOPs, Wealth, and Wages, in which he concludes that, were ESOPs to proliferate,
their impact on inequality reduction could well be significant. In part, I argue that this is a result of transferring wealth in the form of stock in their companies to workers who, because they own little such wealth, reside in the lower reaches of the wealth distribution. But the result also flows from research, which I both cite and contribute to herein, showing workers do not appear to trade off one form of income, like wages, for ownership shares (p. 1).
The report was commissioned by Employee-Owned S Corporations of America (ESCA).

Bernstein is quoted in an article in Politico saying, "I strongly suspect there's an untapped [interest] out there, as in more employers who would introduce ESOPs or other forms of [employee ownership] if they could figure out how to do it."

Employee Ownership Companies on the Forbes Top 25 Small Employers List

Forbes Magazine has released its first list of the Top 25 Small Employers. Compiled by Bo Burlingham, author of Small Giants and the keynote speaker at the 2016 NCEO Annual Conference, the list includes seven ESOP companies: Fresno First Bank, Innotec, Integrated Project Management, New Belgium, Quality Bicycle Products, Torch Technology, and West Paw Express. Two companies provide equity grants to all employees: Headsets.com and Blink UX.

Companies are included on the list based on several criteria, as outlined by Burlingham:

Progress Through Business Offers a New Web Resource

Progress Through Business, a nonprofit organization, has launched a new website, Progress Daily, with daily updates on a number of topics connecting business with social welfare, including employee ownership.

Beyster Institute Online Program: Certified Employee-Owner Program

On March 16, the Beyster Institute at UC San Diego will host an online seminar to help companies successfully start educational programs for employee-owners. Several companies have used Certified Employee-Owner (CEO) programs have to build understanding, enthusiasm, and engagement.

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