I guess the Mott family really needs the money.
CLEWISTON, Fla. — Thousands of workers at U.S. Sugar thought they were getting a good deal when the company shelved their pension plan and gave them stock for their retirement instead. They had a heady sense of controlling their own destiny as they became the company’s biggest shareholders, Vic McCorvey, a former farm manager there, said.
Now that many U.S. Sugar workers are reaching retirement age, though, the company has been cashing them out of the retirement plan at a much lower price than they could have received. Unknown to them, an outside investor was offering to buy the company — and their shares — for far more. Longtime employees say they have lost out on tens of thousands of dollars each and millions of dollars as a group, while insiders of the company came out ahead.
Corporations loved these plans (ESOPs- Employee Stock Ownership plans) if for no other reason than that they allowed them an alternative to defined benefit plans. There were corporate tax breaks as well and owners could sell their otherwise illiquid stock to the plans. US Sugar took its stock off the public market when the ESOP was created in 1983.
Nearly 95 percent of the country’s 10,000 ESOPs (Employee Stock Ownership Plans) are now at privately held companies, like U.S. Sugar. Because their shares are not publicly traded, there is no market price. So workers cash out shares without knowing what the price would be on an open market.
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2 comments:
The comments on this article lead one to believe that a closely held company a) can make up whatever price it wants for the shares in an ESOP, b) never has to tell people what their shares are worth and c) often substitutes an ESOP for a pension or other retirement plan. None of this is true. Federal tax law (ERISA) requires an independent, outside appraisal at least every year, and owners outside the ESOP cannot get any more for their stock than employees do. Second, employees must be told their account value every year. Third, ESOP companies are substantially more likely to have pension plans than comparable non-ESOP companies, and similarly more likely to have 401(k) and other plans.
Details can be found at www.nceo.org, site for the non-profit National Center for Employee Ownership.
Corey...
Thanks for your comments. It's a curious sort of ownership when stockholders cannot vote their stock because it is held in a retirement plan.
The law suit in this case apparently revolves around the issue of fair and open dealing by US Sugar.
The court will decide.
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