Employee Ownership Blog

A new study by the NCEO has found that publicly traded companies with more than 10% employee ownership are neither more nor less likely to involve their workers in Total Quality Management (TQM) programs, work teams, mini-business units, quality circles, or other forms of participative management

Kremlin Capitalism, a new book by Joseph Blasi, Maya Kroumova, and Douglas Kruse (Cornell University I&LR Press, 1996), provides the first in-depth look at the privatization process in Russia, a process largely accomplished through employee ownership.

In a major employee stock ownership plan (ESOP) decision (Howard v. Shay, 9th Cir., No. 93-56605, 11/22/96), the U.S.

In another appellate decision (Faircloth v. Lundy Packing Company, 4th Cir., 8/2/96), the U.S. Court of Appeals for the Fourth Circuit ruled that ESOP trustees are not required to provide a copy of the ESOP appraisal to participants who have requested it.

In Private Letter Ruling 9639071, for release on September 23, 1996, the IRS ruled that the employer stock owned in a 401(k) plan that is merged into an ESOP will count towards the total amount of stock owned by the ESOP for purposes of meeting the 30% threshold to qualify for section 1042 treatm

According to a new report from the Institute of Management and Administration, 42% of the funds employees invest in the 401(k) plans of large public firms are invested in company stock. In just the 246 companies surveyed, employer stock accounted for $133 billion in the employees' accounts.

California has enacted legislation restoring special ESOP tax benefits for firms in the state.

Burlington Industries, NationsBank, and Morgan Stanley have agreed to pay $8.8 million each to settle a class action lawsuit brought by a group of Burlington employees. After legal fees are deducted, the remaining amount will go into Burlington's ESOP for current and former employees.

The "Back to Small Business Job Protection Act" (the small business tax incentives feature of the Minimum Wage Bill) contains a number of provisions important to employee ownership. The bill has now been passed by the Congress and should be signed in the next few weeks by the President.

Under current law, employee benefit trusts cannot own stock in an S corporation. The new law would change this, effective January 1, 1998, to allow ESOPs, profit sharing plans, stock bonus plans, and 401(k) plans to own stock in their companies.

Section 133 of the Internal Revenue Code allows lenders to exclude up to 50% of the interest income they receive on loans to ESOPs owning more than 50% of a company's shares. This provision is repealed by the new bill, effective when the President signs it.

The new bill makes a number of changes in employee benefit plan law intended to simplify plan operations. The two most significant concern the definition of highly compensated employees and the participation requirements for 401(k) plans.