Protecting citizens,
taxpayers and pensioners
facing corporate bailouts
and
corporate accountability
scandals – “Fair Exchange”:
summaries
of 4 timely broad ownership proposals
From: Attorney Deborah Groban Olson
(www.esoplaw.com)
Date: October 2, 2002
Fair Exchange Investment and
Taxpayer Protection Act (FEITPA) of 2001 (Appendix A)
Following the terrorist acts on September 11, 2001,
many private businesses (most notably the airlines) sought investment from the
US government in grant or loan form to handle the damages and increased
risks. Many own or operate assets both
within and outside and the US, while the taxpayers making the loans and loan
guarantees are US citizens who may also be harmed by related loss of
employment. This FEITPA proposal tracks
(but expands upon) the language of the Air Transportation Safety and System
Stabilization Act of 2001, P.L.107-42 Sec.102 (d) (“ATSSSA 2001” or “Airline
Bailout Act”). FEITPA would make the one-time policy on government investment
in private business a general policy for all such investments. FEITPA proposes
the US Congress create a Federal Equity Exchange Board (FEEB) and require that
in exchange for government grants, loans and loan guarantees, the FEEB shall
obtain contracts under which the government, the business’ employees and all
current US taxpayers would participate in the gain of the participating
business through common or preferred stock and instruments such as warrants and
stock options (FEESOP). The FEEB's
purpose would be to utilize the financing capacity of the federal government to
accomplish and balance three goals: 1) to broadly distribute "meaningful
ownership" among U.S. citizens in the same way that the Homestead Acts of
the 1860's made many citizens landowners; 2) to provide necessary financing to
stabilize US businesses and the US economy; and 3) create a second stream of
income as jobs become less permanent. This framework provides citizens
appropriate returns on their investment when the government acts quickly to
respond to an emergency. It also uses the economic strength of the US
government to counterbalance the trend whereby hegemony of global corporations
is increasing as that of nation-states is decreasing. The Chrysler Loan Guarantee Act of 1979 is a precedent.
Fair Exchange Proposal -
Equity Quid Pro Quo Proposed Legislative Language (Appendix B)
This is a
more generic version of the above FEITPA proposal. The “Fair Exchange” Proposal (also called “stock or
equity quid pro quo”) provides an equity return to citizens for specific
government benefits provided to businesses. The equity would be used to promote
local economic development and local control. It is not a proposal for
government ownership of businesses. Rather, it calls for ownership of company
stock by a “commonweal agency” that may be organized in a number of ways
including: a community land trust, a
community economic development fund, or individual accounts for all the local
citizens. It may be a non-profit or for-profit entity. The citizen shareholders
elect some of its leaders and some are hired by the elected representatives
based on business expertise and ability to discern and serve the needs of the
community. The intent is to (1) deter government units from competing with each
other for corporate location by means that undermine their local economies; (2)
build a diverse stock portfolio for every citizen over a generation; (3) create
a source of non-wage income and a vote in corporate decision from a diverse
citizenry; and (4) create means for the new corporate citizenry to
intelligently and collectively exercise their concerns by electing some members
of the boards of directors of the funds that hold their stock. Specific language includes:
"In exchange for government benefits granted to a
business for providing jobs, or government grant of licenses or permits
enabling extraction of natural resources or use of collective resources, such
as air and water for business purposes, the business shall provide a quid pro
quo at fair market value to the commonweal."
"Commonweal" means private or public entities, and other entities provided they met specific tests of bona fide interest in protecting the long-term economic, social, ecological and/or cultural interests of the local citizens. They should provide the community receiving the benefit with individual accounts to provide citizens with: a) wealth creation for their families; b) the ability to withdraw and use the funds; and c) the ability to vote for the leadership of the trust, and to take action to formulate the policies of the trust.
"Government benefits" means any tax
deduction, abatement, grant, government subsidized or guaranteed loan, license
(e.g. banking and broadcasting), lease, concession, or contract, preparing
and/or providing parcels of land, government contracts, and favorable utility
rates, use of non-renewal resources, etc.
"Quid pro quo"
means corporate common stock with the greatest voting and dividend rights or
preferred stock convertible into such common stock or its equivalent in cash.
Proposed Worker Bill of Rights in ESOPs - Sliding
Scale Tax Incentives (Appendix C)
Makes ESOP tax benefits for the corporation and selling shareholder available on a sliding scale based on the amount of voting stock meeting the requirements described below, or contributed to the plan pursuant to a collective bargaining agreement. For example, if taxpayers sell or contribute 10% of their stock to an ESOP, they would receive 20% of the ESOP benefits for which they were otherwise eligible. (The term "taxpayers" is used to refer to any selling shareholders, estates, or corporate plan sponsors.) If taxpayers sell or contribute 20%, they would get 40% of the benefits, etc. The benefits would increase so that once taxpayers sell or contribute 50% or more, they would be eligible for 100% of the ESOP benefits.
Reinstate the ESOP lender deduction (IRC Section 133), contingent upon requirements, (any or all of which may be waived if the ESOP is created through collective bargaining) that either: (a) more than 50% of the company’s voting stock be allocated to ESOP participants; or (b) where the ESOP owns more than 30% but less than 50% of company stock, the plan provides that the ESOP participants, through the ESOP committee, direct the trustee on how to vote unallocated shares. (Changes ERISA to permit employee owners to direct trustees to vote allocated and unallocated shares.) . Makes ESOP appraisals available to participants with appropriate confidentiality safeguards.
If Congress is going to encourage employee ownership, employees should get enough control over investment, disinvestment, employment, and other significant corporate policies to make employee ownership a meaningful method of anchoring business in local communities.
Summary of “Employee Ownership Act of 2001” – a non-pension form of tax advantaged majority employee owned and controlled company (Appendix D)
Introduced 6/28/2001 by Hon. Dana Rohrbacher
Declares the policy of the United States that, by the
year 2010, 30 percent of all U.S. corporations shall be owned and controlled by
their employees. Amends the Internal Revenue Code to provide for tax-exempt
employee-owned and employee-controlled corporation (EOECC) trusts whose primary
assets consist of the employer securities of an EOECC. Declares that: (1) there
shall be no tax on the corporate income of an EOECC; and (2) the gross income
of an employee owner shall not include any proceeds from the qualified sale of
EOECC securities. Exempts from inclusion in gross income of property transferred
in connection with performance of services any transfer (in lieu of
compensation) of EOECC securities during the three years following a
corporation's election to become an EOECC. Mandates non-recognition of gain in
the case of the sale or transfer of EOECC securities to an EOECC trust.
Establishes a credit against the estate tax for the amount of EOECC securities
considered to have been acquired from or to have passed from a decedent to an
EOECC trust. Directs the Comptroller General to study and report to Congress on
Federal regulations and policies affecting EOECCs. Directs the President to
establish a Presidential Commission on Employee Ownership to study and report
on all issues that affect ownership of businesses in the United States, with a
primary focus on the issues that affect employee ownership of such businesses.
For more on these concepts and related proposals check out the following links.
http://capitalownership.org/PapersMay2001/Homestead.htm
http://www.kent.edu/oeoc/
http://thomas.loc.gov/cgi-bin/bdquery/D?d107:1:./temp/~bdLsM9:@@@L&summ2=m&|/bss/d107query.html|
For more information on Deborah
Olson see http://www.esoplaw.com
For more general information about employee ownership see: www.nceo.org