Questions on Best Practice in Your Country and Olson's view on Best Legal Practices in the US Employee Ownership System

[Deborah Groban Olson <dgo@esoplaw.com>]

Dear Marc:

        

I noticed
the comments in the EFES minutes about the NCEO database project. I have
two questions:
1) Is that project the COG EO National matrix, or something else?
2) If it is the COG project, are there any more concrete suggestions
regarding a more desirable way to organize the project. We have been
trying to encourage discussions of best practices.

        

I am the
moderator for the COG EO National discussion. We'd like it to serve the
EFES participants' needs as a best practices forum. We offered the matrix
as a way to get people to come to the site. Based on the response in the
EFES minutes, I propose an alternate path. I encourage every participant
to pose questions to foster a discussion about best practices. So I
begin...

Following are some questions I would like to have people answer about the
employee ownership system in their countries:

1) What features of your country's employee ownership system do you think
work well, and should be replicated by other countries? Why?

2) What features of your country's employee ownership system do you think
should be revised or eliminated? Why?

        

I look
forward to your comments. I will also forward this to the EO National
discussion group and the EFES Executive Committee.

        

As an
example of the type of response I would like to see to these questions,
here are a few of  my thoughts on employee ownership in the
US.  
1) The US system  -

        

a) Useful
Aspects of ESOPs -

        

Tax
advantages create an economic incentive for private companies to choose
ownership, and a method for them to try it out as a minority
interest.  Once they try it and find it is not threatening, they can
get additional benefits by increasing the percentage of employee
ownership. When combined with workplace participation systems they build
a corporate community in which the individual's efforts helps build value
for the company and all its employees.  The legal protections based
in the pension system help protect the least knowledgeable workers.

        

b) Bad
Aspects of ESOPs-

        

Tying
ESOPs to the pension system, creates an overlay of legal restraint that
makes ESOP deals much more complex and hampers the ability of an ESOP to
win in some types of bidding contests. It is often simply easier to sell
to a non-ESOP because the transaction is quicker and less likely to be
dragged into court.

        

        

c) Good
Aspects of Stock Options -

        

They are
easy to use and are proliferating. They are giving a significant sector
of the population the idea that employees should be owners.

        

        

d) Bad
Aspects of Stock Options-

        

They are
generally used in a very individualized way. Most people exercise them
when they are leaving the company. They do not do much to build a sense
of corporate community.

        

e) Overall
Effect on Society - (In the US the rich are getting richer and the poor
are getting poorer. However, most people can find jobs.) Both ESOPs and
stock options as purely voluntary mechanisms do not do much to increase
the overall ownership of stock within the population. This is not the
fault of any of these methods. But I am seeking a way for society to
provide a stronger capital base for the average citizen. Neither of these
methods systematically reaches the working population as a whole. I have
proposed stock quid pro quo for government largesse (SQPQ) in the
Homestead discussion.

SQPQ #2 020800.doc The entire Homestead discussion deals with various proposals to increase ownership within the population.http://cog.kent.edu/archives/homestead/

I have provided more detail on these ideas in a number of articles which can be found at http://www.esoplaw.com/publicat.htm   The following article is an overview of   the history of the democratic employee owenrship in the US system http://www.esoplaw.com/irefa4.htm.   The article "Giving Employees a Real Voice as Stockholders" http://www.esoplaw.com/fall94.htm is my critique of the current US system along with concrete proposals for changes in the US laws.
Deb
Deborah Groban Olson
Project Co-ordinator
Capital Ownership Group Project
Ohio Employee Ownership Center
Kent State University
c/o Shared Equity Strategies, Inc.
3163 Penobscot Building 
Detroit, MI 48226
(313) 331-7821 or (313) 964-2460
(f) (313) 331-2567
email: dgo@esoplaw.com
web site: http://cog.kent.edu