An Educational Breakthrough for ESOP Management

By Anthony Mathews

Employee Retirement Income Security Act The acronym ERISA is a very familiar reference in our community – it is even familiar to lots of people who couldn't tell you what the letters stand for or who might imagine that it is a reference to a "B" movie sea monster that was particularly frightening because it is always said with such a sense of serious concern. For the record, the letters stand for Employee Retirement Income Security Act and it is the fundamental labor law in the U.S. Adopted by Congress in 1974, ERISA not only resolved a whole host of abuses that had come to represent the interaction between employers and their employees through the 50s and 60s, it also brought into law the provisions that authorized the formal creation of ESOPs and embedded us permanently into the U.S. labor scene.

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It is important to note that during the many intense discussions about employee ownership in general and ESOPs in particular that occurred during the creation of ERISA, few were more heated nor more controversial to resolve than the issue of whether the ESOP model was primarily a mechanism of corporate finance or employee benefit retirement plan. It is clear that the resolution of that discussion one way or the other would have determined two very different futures for our fledgling employee ownership movement.

It turned out in the end that Congress's joint conference committee essentially landed on the "lite beer" solution and decreed that ESOPs would be, unlike any other provision of ERISA, both and equally a mechanism of corporate finance and an employee benefit retirement plan. Since no primacy is given to either of its natures, the ESOP and all who work with it must walk a very difficult and bifurcated path and yet do full honor to and successfully represent both of its natures. A very tall order indeed and one that was novel at the time.

Luckily, over the years, the ESOP community has been blessed with a reliable supply of both skilled professional fiduciaries and dedicated, selfless people at ESOP companies who are willing to take on the risk of representing the interests of ESOP participants as non-professional fiduciaries (most often for no compensation). In my experience, both groups have, overall, done a remarkably good job. ESOPs are responsible for creating hundreds of billions of dollars of wealth for millions of people who would not have had it otherwise. And all that wealth is protected and nurtured by the skill and diligence of those fiduciaries. We have been impressed for many years by the actions of these people and the collaborative style of management that engages everyone in the successful management of our companies, but the process is complex, so we decided that one thing we could do at the University to help in their effort was to create a specialized training program to help them assure that their skill and understanding would be up to the task.

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Sunday evening, Feb. 10, 2013, will be the opening session of the first ever Certificate Program for Non-Professional ESOP Fiduciaries at the Rady School of Management, UCSD. The program will run from Sunday through mid-day Wed., Feb. 13 and is designed to train and certify mastery of the legal framework, skills and procedures necessary to successfully play that role. The course is open to anyone who is involved in the operation of an ESOP in a way that could be considered fiduciary. The curriculum covers the subject from the basics of determining when acts are fiduciary and when they are not all the way to decision making skills where complex transactions and multiple interests are involved. The faculty includes academics from major universities as well as contributions from several of the most respected professional advisors in the community and the end product will be a certified experience that will both help non-professional fiduciaries do their job correctly and safely and create a network of non-professional fiduciaries who can support each other in this critical work.


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