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The Employee Ownership Update

Loren Rodgers

December 1, 2017

(Loren Rodgers)

Tax Bill Leaves ESOPs Untouched; Encourages Equity Sharing in Closely Held Companies

The tax bill now before the Senate, and the bill that passed the House, contain no provisions directly affecting ESOPs, nor do they contain previous provisions that would have taxed stock awards at vesting. Both bills also contain a provision allowing employees in closely held companies that provide equity to 80% of their employees to defer taxation on unexercised awards until up to five years after they leave the company. However, the tax is computed based on when the award vests, even if that number ends up being higher than when exercised.

New York Creates Commission to Study How to Encourage Employee Ownership

New York State has enacted a bill (5349A [PDF]) creating a special commission to report on how the state can encourage employee ownership through worker cooperatives and majority ESOPs where employees elect the plan trustees. In practice, employees rarely elect trustees, but the recommendations on how to encourage qualifying enterprises would presumably apply to other ESOPs as well. The commission will report back in 2019.

Schweitzer Engineering Named Top Employer in Washington

The Association of Washington Business has named Schweitzer Engineering Laboratories as its employer of the year. The award recognizes innovative work and compensation practices.

Based in Pullman, Schweitzer is 100% owned by its ESOP and employs over 5,100 people. It builds digital products that protect power systems around the world. One of its most innovative policies are no-copay onsite health clinics for employees and their families.

Robert Fulton, Founder of Web Industries, Dies

Robert Fulton, the founder of ESOP owned Web Industries, died on November 18 at the age of 86. We at the NCEO wanted to include this in our update because Bob and the company he created have been such seminal figures in employee ownership. Web set up its ESOP in 1991, when it was just one facility in suburban Boston. It converted plastic sheeting into specialized uses for things like gum wrappers and diaper tapes. Today, Web has 550 employees in seven cities and Germany and $160 million in revenue. It achieved that because Bob and those who followed him were deeply committed to a high-involvement, open-book management system that truly treated employees as owners. Ideas from employees have fueled Web's growth to become a sophisticated converter of all sorts of materials, including very high-technology applications. Over the years, dozens of companies have modeled what they are doing based on what Web is doing.

Bob was a deeply religious man who took his belief in serving others very seriously. Aside from Web, he created a ministry called Integra Ventures to develop business that will impact society and change communities. Bob always said that the essence of life and work was relationships. Our relationship with him is one we cherish.

Correction

In the November-December issue of the Employee Ownership Report, we erroneously reported that in Pioneer Ctrs.Holding Co. EmpStock Ownership Plan & Tr. v. Alerus Fin., an appellate court refused to overturn a lower court ruling that Alerus Financial violated its fiduciary duty by not agreeing to an ESOP at a Land Rover car dealership. In fact, the lower court ruled that Alerus did not violate its duty as a fiduciary in the case, as we have correctly reported elsewhere. In fact, Alerus has not had a judgment against it in any court. We deeply apologize for the error.

Author biography and other columns in this series

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