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The Employee Ownership Update

Loren Rodgers

November 15, 2016

(Loren Rodgers)

What Does the Presidential Election Mean for Employee Ownership?

One of the few clear implications of last week's election is that the character and policy agendas of both parties will inevitably change. Many traditional core principles of the Republican Party establishment do not bind president-elect Trump, who strongly identifies as a change candidate. The decisive loss by Hillary Clinton, one of the most emblematic members of the Democratic Party's establishment, is vivid proof that in order to win elections the party must rethink its approach to policy and politics.

The NCEO does not lobby, and we do not favor either party. We do believe in employee ownership, and we also believe that the disruption caused by this election is an opportunity for employee ownership to claim the prominence it deserves in our national conversation.

Employee ownership has broad bipartisan support, but more importantly, it directly addresses the party-spanning issues that drove this election. People angry at elite privilege will see employee ownership as a way to shift the economy toward the middle class. Communities that have seen jobs slip away can use employee ownership to root economic activity locally. Working-class Republicans, Democrats, and independents who feel themselves to be disempowered cogs in an impersonal economic machine can learn how business works and, together with their co-workers, take responsibility for their own economic futures.

Perhaps the divisiveness of this election can be the spur to seek a shared commitment to create more wealth in the middle class through employee ownership, a time-tested, pie-expanding, pro-business, pro-worker policy.

The NCEO is working to insert employee ownership into our emerging national conversation about where we are headed, and we ask for your help. We are looking for people who will share their stories with us or with the media. Drop me a line at LRodgers@nceo.org if you'd like to learn more.

The Elections and Congress

Last week's elections saw many ESOP champions return to Congress, with some important exceptions. Some highlights follow:

Bill on Stock Options and Restricted Stock Advances

The Empowering Employees Through Stock Ownership Act has a good chance of becoming law. The bill allows employees receiving stock options and restricted stock units that meet certain criteria to defer paying any tax after exercise for up to seven years. But as Bruce Brumberg of MyStockOptions.com points out in a recent blog post, the language of the bill has multiple drafting problems that need fixing for it to do what it hopes to do.

District Court Explores Application of Dudenhoeffer to Private Companies

The District Court of Northern California dismissed a class-action lawsuit against the ESOP company Singler-Ernster, a California pizza-franchise operator, but left open the possibility of an amended complaint. The plaintiffs argued that it was not prudent to invest an additional $250,000 for the ESOP to purchase more company shares. In Fifth Third Bancorp v. Dudenhoeffer, the Supreme Court ruled that plaintiffs must show an alternative action, and in Hill v. Hill Brothers Construction, a district court in Mississippi extended that principle to privately held companies. The judge ruled that the plaintiffs had not alleged sufficient plans to support a claim, but also allowed the plaintiffs to amend their complaint.

Now Accepting Nominations for the NCEO's Board of Directors

Annual elections for the board of directors of the National Center for Employee Ownership (NCEO) will take place in January, and members in good standing are invited to nominate themselves or other members during the nomination window, from now until December 9. Nominees should review the online resources for board candidates. The NCEO's board is actively engaged in many of the organization's activities, from contributing to the content of our research and publications to assisting at the annual conference and finding new members.

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