RE: EFES: FW: ESOPs and Regulation

["Daryl.DArt" <Daryl.DArt@ul.ie>]

Dear Dan
I enjoyed reading your communication and indeed I may appear to have
overstated my case.
It is of course an excellent idea to have a general framework of legislation
for the protection of employees.  This is particularly neccessary in cases
where the share scheme or ESOP is a substitute benefit.  With regard to
schemes that function as an additional benefit over and above standard wage
rates and fringe benefits pensions etc the need for rigourous legislation
may not be so acute.  Yet even then some legislative regulation may be
neccessary expecially where the promotion of the schemes invovle tax
consessions and a result loss in tax revenue for the state and citizens.
Regards
Daryl D'Art

-----Original Message-----
From: Dan Bell [mailto:dbell@kent.edu]
Sent: 04 April 2005 21:12
To: efes@cog.kent.edu
Subject: Re: EFES: FW: ESOPs and Regulation


Dear Daryl and others on the EFES list,

I think it is best to avoid extremes when it comes to whether or not to 
regulate
ESOPs and other forms of employee ownership.

Yes, there should be regulations that set forth a general framework intended
to
protect employees from fraudulent behavior.

At the same time, within that framework, there should be a great deal of
flexibility for each company to develop its own model.

Employee ownership can range from nothing more than a few shares of stock
in a retirement account, to a fully developed democratically owned and
operated
company.

While the democratic enterprise is my preference, it is not a bad thing if
an
employee has shares of stock that he or she might not otherwise receive.

My experience over the past 18 years in working with traditional owners
setting
up ESOPs, is that many of them start out rather conservative, but over time,
discover that building a participative ownership culture makes good business
sense. I would not want to deter conservative traditional owners from
starting
down the path of employee ownership, because they found it too restrictive.

A series of progressive incentives like tax benefits that become more 
attractive
as a company chooses to implement more democratic practices is fine.

For example, in the US, if the owner sells less than 30% of the stock to the
ESOP, the owner still has to pay capital gains tax on the sale. This
encourages
many owners to start with a significant transfer of capital, while at the
same
time allowing the original owner to retain a controlling share of the 
equity. For
sellers who want to transition out over 5 or 10 years, this allows the
company
to avoid taking on too much debt all at once.

Just a few thoughts.

Cheers,

Dan Bell

At 05:08 PM 4/4/2005 +0100, you wrote:


>-----Original Message-----
>From: Marc Mathieu [mailto:marcmathieu@marcmathieu.be]
>Sent: 31 March 2005 17:48
>To: Daryl.DArt
>Subject: Re: ESOPs and Regulation
>
>
>Dear Daryl,
>Thank you very much for this.
>Would you please send it to efes@cog.kent.edu, I think it is of interest
for
>all.
>With best regards
>Marc
>
>----- Original Message -----
>From: "Daryl.DArt" <Daryl.DArt@ul.ie>
>To: <marcmathieu@marcmathieu.be>
>Sent: Thursday, March 31, 2005 6:56 PM
>Subject: ESOPs and Regulation
>
>
> > Dear Marc
> > I have read with interest the ongoing debate on regulation versus self
> > regulation or laissez faire regarding employee stock ownership plans. I
>have
> > to admit it find it some what depressing that there should be any debate
>at
> > all concerning state regulation of these schemes.  The long history of
> > employee ownership and profit sharing schemes points to the neccessity
for
> > regulation if the participants in these schemes are to enjoy any real
> > participation, empowerment or security.  There have been numerous
>historical
> > examples, particularly in the US where these schemes were used primarily
>to
> > benefit the company rather than employees. (General Accounting Office
>Report
> > see page 115 in my book).  The most recent example was ENRON.  The ESOP
> > association claims it favours participation and empowerment for
employees
> > yet to my knowledge may still oppose any obligation to pass on voting
>rights
> > to employees.  The argument of government regulation versus self
>regulation
> > is an old one but was heard again in the aftermath of ENRON - same old
>self
> > serving stuff.
> > Finally many schemes in the US are not additional benefits for employees
>but
> > subsitutes for standard wages or pensions - and as pensions are a very
> > uncertain benefit.  It is likely that the European Trade Union movement
>will
> > not support these schemes in the absence of fairly strict regulation to
> > protect employee interests.  In the US of course trade unions are of
>little
> > account due to their weakness and can be safely ignored.
> > A brief glance at Chapter 3 Employee Stock Ownership in the US - Worker
> > Capitalism would not go amiss and indeed might clarify the arguments
> > regarding regulation.  See D.D'Art 'Economic Democracy and Financial
> > Participation; A comparative Study  Routledge London 1992.
> > Regards
> > Daryl D'Art
> >
> >
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