Tag Archives | ESOP

Broad-Based Ownership at Twitter: Academic Perspective

twitter-co-op-620x412Through a proxy proposal, we asked the Twitter board to study broad-based ownership, such as cooperatives, for lessons to be learned on how to make Twitter both more productive and more democratic.

The proposal won enough votes to be brought back next year. In the meantime, we continue building a campaign and studying broad-based ownership models ourselves. With that backdrop, I was delighted to see commentary in Fortune by Joseph Blasi and Douglas Kruse entitled, Why Don’t Twitter’s Employees and Customers Buy the Company?   “Consider why it might actually work,” they argued. Continue Reading →

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Employee Participation and Ownership Award

Employee Participation and Ownership: Award Program

Employee Participation and OwnershipThe Foundation for Enterprise Development announced their annual award program for promising research by emerging scholars in the domain of broad-based employee participation and ownership. The purpose of the award program is to identify innovative research in management or management-related disciplines that considers high-impact ideas in the context of business and society’s needs for employee empowerment, participative workforces, and wealth creation through broad-based equity and profit-sharing mechanisms. Research that has broad implications for practice and/or policy, and that addresses pressing economic and/or social problems are especially appropriate for this award. Continue Reading →

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Video Friday: Double Feature on Corporate Governance at ESOP Firms

ESOPCorporate Governance of ESOP Companies from SES Advisors

Without the founding entrepreneur steering the ship, ESOP companies’ corporate governance is of paramount importance. In this webinar, you will learn: the roles of trustees, directors and officers, how corporate governance affects value, and best practices for corporate governance in ESOP companies. Continue Reading →

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CorpGov Tidbits

PLANSPONSOR.com reports, a provision in President Obama’s Fiscal Year 2014 budget that pertains to employee stock ownership plans (ESOPs) could result in a disincentive for offering the plans.

The provision would eliminate Internal Revenue Code section 404(k), an incentive for ESOP creation and operation that permits a C corporation to deduct the value of dividends paid on ESOP stock passed through to employees in cash, deductions used to pay the ESOP acquisition loan, or when the employee reinvests in more company stock in his/her ESOP account balance. Continue Reading →

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ESOPS Gain at Indian IT Firms

Indian IT firms are witnessing a significant jump in attrition levels.  Retention has become a key challenge. Several IT firms are set to implement Employee stock option plans (ESOPs), reports Bibhu Ranjan Mishra from the Business Standard. Infosys discontinued its ESOP policy in May 2003, saying “the employees are not keen on it.” However, in June this year, when Infosys Employee Welfare Trust announced the distribution of equity shares to those eligible, at least 140 employees serving notice periods withdrew their resignations overnight. (ESOPs back in IT firms to reduce attrition, SiliconIndia, 8/11/10)

Over the years, the US-based National Center for Employee Ownership (NCEO) has conducted and reported on research on employee ownership and corporate performance. The research comes to a very definite conclusion: the combination of ownership and participative management is a powerful competitive tool. Neither ownership nor participation alone, however, accomplishes very much. (Research on Employee Ownership and Corporate Performance) Indian IT firms might do well to combine their ESOPs with participative management programs, which will give employees even more reason to feel they have a meaningful long-term role in their company.

A survey by the ESOP Association and the Employee Ownership Foundation found 23% of respondents said their Employee Stock Ownership Plan (ESOP) was created to provide an additional employee benefit, and another 21% stated the attraction of the employee ownership concept as the reason. Eighty-four percent of respondents agreed that the ESOP improved motivation and productivity, and 78% of companies advertise the fact that they are employee owned through Web sites, in company literature, and in marketing campaigns, according to a press release. (Majority of ESOP Sponsors Offer another Retirement Plan, PlanSponsor.com, 8/11/10)

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CorpGov Bites

TheCorporateCouncil.net posted a transcript of a recent Webcast on the SEC’s new Proxy Disclosure requirement. Like always, they do an excellent job of sorting out issues for those getting into the weeds.

RMG reports “The wave of new federal securities lawsuits related to the global credit crisis has finally subsided, down 7-24% depending on whose data you use. The largest category of 2009 cases were those that arose from the credit crisis. (Investors File Fewer Lawsuits in 2009, 1/6/10)

theRacetotheBottom.org has covered a raft of issues lately that are worth a read. These include: Executive Compensation at Goldman Sachs, Executive Compensation, Delaware’s Top Five Worst Shareholder Decisions of 2009 and the need for reinstating Glass-Steagall.

Bowing to pressure from shareholders of On2 Technologies, 11.5% of whom voted they share through MoxyVote.com, Google raised its offer  to  $132 million, up from $106.5 million. (Shazam! Google raises its offer price for On2, 2/7/10)

Study finds Private Investments in Public Equity (PIPEs) announcement returns decrease almost linearly across the first six PIPE transactions, going from positive to negative. Firms that issue multiple PIPEs have high cash levels, and a majority make acquisitions. Successive PIPE transactions delay accessing of public markets while keeping institutional ownership low. Hence, they are greeted skeptically by the market as maintaining managerial entrenchment. (Are Private Placement Announcement Returns Really Positive? On the Information Content of Repeated PIPE Offerings, Ioannis V. Floros and Travis Sapp, SSRN, 1/7/2010)

Small ESOPs, those controlling less than 5% of outstanding shares, benefit both workers and shareholders, implying positive productivity gains. However, the effects of large ESOPs on worker compensation and shareholder value are more or less neutral, suggesting little productivity gains. These differential effects appear to be due to two non-value-creating motives specific to large ESOPS: (1) Management-worker alliances to thwart hostile takeover threats and (2) To substitute wages with ESOP shares by cash constrained firms. Worker compensation increases when firms under takeover threats adopt large ESOPs, but only if the firm operates in a non-competitive industry. (“Employee Capitalism or Corporate Socialism? Broad-Based Employee Stock Ownership”, Kim and Ouimet, SSRN, 12/1/09)


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