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The Employee Ownership Update

Loren Rodgers

May 1, 2017

(Loren Rodgers)

Alexander Acosta Confirmed as Secretary of Labor

On April 27, the Senate confirmed Alexander Acosta as the new Secretary of Labor, following a 100-day vacancy. Little is known about Secretary Acosta's views on employee ownership or ESOPs, but quick action is unlikely. The DOL is hampered by a large number of vacancies in senior positions, and the full Senate calendar makes quick action unlikely. In addition, a former DOL official, John Irving, told Bloomberg BNA that Sec. Acosta is "an exceptional lawyer, he's a thoughtful guy, he's careful, he's balanced, he's reasonable."

Colorado House Passes Pro-Employee Ownership Legislation

On April 25, the Colorado state legislature passed a pro-employee ownership bill (HB17-1214). The bill creates a revolving-loan program to be operated by the Colorado Office of Economic Development and International Trade (OEDIT), to be funded by gifts and donations. The bill, which now goes to Governor Hickenlooper for signature, also requires that the OEDIT train its employees to be sufficiently knowledgeable about employee ownership to be able to recommend it when appropriate and to promote it in their materials.

The bill was sponsored by state Rep. James Coleman, D-Aurora, and Rep. Jack Tate, R-Centennial, who said, "Anything we can do to encourage ownership helping facilitate getting folks on the path of wealth creation, I think it's a good thing." The Rocky Mountain Center for Employee Ownership helped promote the bill.

New Research on Job Stability and Employee Ownership

In the book How Did Employee Ownership Firms Weather the Last Two Recessions?, co-authors Fidan Kurtulus and Douglas Kruse explore new data about job stability at employee ownership companies during the Great Recession. Dr. Kruse observes: "If good-paying, stable jobs are the economy's goal, then encouraging employee stock ownership in companies makes a lot of sense. As part of corporate tax reform, there's a good case for providing some of these tax incentives to companies that adopt employee stock ownership." The paper analyzes data from 8,000 publicly traded companies and was funded by the W.E. Upjohn Institute for Employment Research.

ESOP Tip

When potential acquirers express a serious interest that is hard to say no to, the next step is often to perform a due diligence assessment. That is a demanding and costly process for the CFO and other managers at an ESOP company. Torch Technologies, a 100% ESOP-owned company, requires these suitors to pay for the due diligence based on the time Torch staff would need to spend. That helps discourage acquirers the company does not want to pursue, but who may be offering an attractive price. Because this is a legitimate company expense, it should not raise a legal issue. Of course, a company that wants to find a buyer can waive it.

Pro-ESOP Bill Advances in Pennsylvania

Pennsylvania Representative Daryl Metcalfe (R-Butler County) and Senator Stewart Greenleaf (R-Montgomery County) have created joint legislation to mirror federal law as it applies to the deferral of capital gains taxation for sales of C corporation stock to an ESOP (the "1042 election"). The Pennsylvania Center for Employee Ownership, which has supported the bill, requests that Pennsylvania employee-owners contact their elected representatives to support the bill. May 3 addendum: In the Pennsylvania General Assembly, the bill is H.B. 1289.

Marketplace Interview on Employee Ownership

On April 20, Harvard economist Richard Freeman spoke with the NPR show Marketplace, where he discusses why increasing automation means that more people should become employee-owners. The audio is available at this link and starts at 3:47.

The NCEO's 2016 Annual Report

2016 was an excellent year for the NCEO, with record conference attendance, new publications, and bold new research. You can read the highlights of our organization, and meet all of our staff, in our 2016 annual report.

Beyster Institute: A Job Opening and a New Staff Member

The Beyster Institute (part of the University of California, San Diego) has a job posting for an ESOP consultant to join its employee ownership consulting group. Some knowledge of ESOPs is required, though training is available. The position is based in San Diego.

The Beyster Institute also announced that Jennifer Briggs, formerly a senior executive with New Belgium Brewing Company, is joining the Institute. She will focus principally on advising companies on the development of high-performance organizational practices.

Author biography and other columns in this series

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