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Filing data for 2020 and 2021 indicates a moderate uptick in new ESOPs, over 60,000 new active participants, and a strong two years for the construction industry.

Building the right board and setting appropriate compensation are key considerations for any company, arguably even more so for ESOP companies. The NCEO ESOP company survey provides some of the only data to help ESOPs with meaningful comparisons.

An important question in the ESOP community is the circumstances surrounding plan terminations. To help provide some clear answers, we analyzed all plans that terminated since our last report on this topic in March 2021. This primarily covers filing years 2020 and 2021.

The NCEO ESOP Corporate Governance Survey is designed to help companies learn how other companies are handling the unique governance issues faced by ESOPs. This year’s survey collected responses through May and June from 302 privately held ESOP companies.

In the face of an economic downturn, many companies are looking at ways to restructure executive compensation. In some cases, it may be to reduce executive pay; in others it may be as a way to change incentive pay so that it is more aligned with current realities.

At the NCEO Annual Conference in Kansas City, a husband and wife who were owners of a company considering an ESOP asked if I had some time to chat. They had come to the conference excited about the idea of selling their company to an ESOP, but now, they were not so sure. They liked the idea of employees being owners, and the tax benefits were appealing, but they said that in session after session, they kept hearing about all the litigation and investigation risks, that the DOL really does not like ESOPs, and that the plans were complex. They had been told to expect to pay hundreds of thousands of dollars to set up an ESOP in a company that had about 50 employees.

Lots of ESOPs today have a pleasant problem—what to do with excess cash. The default position for some companies is to be conservative and keep it in immediately accessible funds or shorter term interest-bearing investments.

Another election—and another cycle of the left trashing the right, the right trashing the left, and the middle seemingly disappearing. It can make us despair about finding common ground. But that is exactly what has been achieved with employee ownership for decades.

The buyer may use cash in reserve to finance the deal. That is almost always the case in smaller deals. In other cases, the buyer may borrow money from a lender, usually a bank or non-bank debt in very large deals..

Last month, the NCEO released its 2022 Executive Compensation report, an analysis of compensation-related survey responses from 380 privately held ESOP companies.