Employee Stock Ownership Plans: ESOP Planning,

Financing, Implementation, Law & Taxation

Robert W. Smiley, Jr., Ronald J. Gilbert, David M. Binns, Ronald L. Ludwig and Corey M. Rosen, Editors

Published by

The Beyster Institute, At the Rady School of Management,
University of California, San Diego

(Cost: $395 plus shipping and handling includes searchable electronic version of the text. )

Order Your Copy Now at www.ESOPBook.org

Comprehensive Coverage of the Legal and Practical Ramifications of Employee Ownership

Research has shown that companies with employee stock ownership plans (ESOPs) have more highly motivated employees, greater profits, sales and employment growth, and greater ability to weather recessions than otherwise comparable companies. Employee Stock Ownership Plans provides A-to-Z coverage of ESOPs.

It starts with what an ESOP is, how it works, and how to decide whether or not an ESOP makes sense for a particular company, its officers and directors, employees and shareholders. It then continues through how to implement your ESOP, how to maintain it, and beyond.

Whether you are part of a management team wrestling with the many complex issues that impact the feasibility of an ESOP for your company, a business owner considering your exit options, or legal, accounting, investment, insurance or tax counsel looking to open new client relationships or preserve and enhance existing relationships, you can answer any question with assurance and accuracy when you have this book on hand. Consultants and advisers will also find this book invaluable.

This is a highly readable book. Providing the right answer at the right time could mean the difference between success or failure in an ESOP transaction involving millions of dollars of tax savings.


“Smiley, Gilbert, Binns, Ludwig and Rosen’s book is more complete than anything published before on the subject of ESOPs. It combines the best of both general and technical information. I urge members of the business community and Members of Congress to study the ESOP alternative. Employee Stock Ownership Plans offers businessmen and Congressmen a great place to start studying.”

– Congressman Dana Rohrabache

Guidance from Planning through Implementation to Administration:

Employee Stock Ownership Plans spells out everything for you in detail, taking you from a clear explanation of how ESOPs work and their many financing advantages and built-in tax benefits . . . through accounting requirements, involvement of management and employees, designing an appropriate ESOP, ESOP financing and working with lenders . . . to operating and administering an ESOP. The ESOP is a technique of corporate finance in addition to its being an employee benefit plan. As such, it has unparalleled tax and financial benefits for all parties concerned that are unequalled anywhere else in the law.

Continuing Coverage:

Periodic updates, available to buyers of this book, bring Employee Stock Ownership Plans up to date on recent judicial and regulatory decisions as well as other developments in the field, including:

  • Recent legal initiatives affecting ESOPs.
  • Legislative and regulatory changes.
  • The latest research on employee ownership.
  • International developments such as privatizations and multinational employee ownership plans.
  • A detailed update of ESOP valuation controversies and court cases discussing significant court decisions, in which important valuation and fiduciary issues of interest to ESOP appraisers and trustees are analyzed.
  • Practical guidelines for S corporations.
  • ESOP-benefit distribution rules.
  • Examples of the interaction of IRC Sections 409(o), 409(p), 401(a)(9), and 401(a)(14).
  • Coverage of the taxation of distributions.
  • Updated Case Studies.

Updates published on the web site reflect current changes.

An Unprecedented Endorsement
for this ESOP Book


The Editors and Authors are the world’s leading ESOP experts.

About the Editors:

Robert W. Smiley, Jr. is the founder and chairman of The Benefit Capital Companies Inc., headquartered in Logandale in Southeastern Nevada . He is the managing general partner of Benefit Capital Partners. Mr. Smiley is a founder and past president of The ESOP Association, and a lifetime member of its Board of Governors. He is a director of The National Center for Employee Ownership, and a former trustee of The Employee Ownership Foundation. He serves on several boards of directors.

Ronald J. Gilbert is the cofounder and president of ESOP Services, Inc., headquartered in Scottsville, Virginia. Previously, he was a vice president with Kelso & Company in San Francisco . Mr. Gilbert serves on The ESOP Association’s Board of Governors, its Legislative & Regulatory Committee, as well as the boards of directors of several ESOP companies. He has extensive international privatization experience and is a frequent ESOP lecturer.

David M. Binns is the associate director in the Washington , D.C. office of The Beyster Institute, Rady School of Management, University of California , San Diego . He is also the past executive director of The ESOP Association. A frequent author and lecturer on ESOPs both domestically and internationally, he is a former public relations account executive as well as a former congressional aide.

Ronald L. Ludwig is a retired ESOP lawyer, currently residing in San Francisco . He specialized in ESOPs for almost 30 years, serving as outside ESOP counsel. He is a lifetime member of The ESOP Association, and the founding chairman of its Legislative and Regulatory Committee. He serves on a number of boards of directors of ESOP companies, and is a former tax law specialist with the National Office of the Internal Revenue Service.

Corey M. Rosen is executive director of The National Center for Employee Ownership, which he co-founded in 1981. The NCEO is a nonprofit membership, information, and research organization based in Oakland , California . He served five years as a professional staff member in the U.S. Senate, where he helped draft legislation on employee stock ownership plans. He is the author or co-author of several books and over 100 articles on employee ownership. He has a Ph.D. in Political Science from Cornell University .

Partial Table of Contents

Introducing the ESOP

  • Financing Advantages and Tax Incentives
  • What Makes a Good ESOP Candidate?

Research Results and Case Studies

  • Research Results
  • Case Studies

Equity: Why Employee Ownership is Good for Business

  • Equity Model Brings New Levels of Profitability
  • How to Lead and Manage the Process

ESOP Financing

  • Expectations
  • Secured and Unsecured Financing
  • How to Structure and Complete a Cash Flow ESOP Leveraged Buyout
  • Pricing the ESOP Loan

ESOP Accounting Aspects

  • Accounting for Non-Leveraged ESOPs
  • Accounting for Leveraged ESOPs
  • Accounting for Dividends
  • Accounting Standards

ESOP Legal, Tax, ERISA, & Securities Issues

  • ESOPs as an Employee Benefit Plan
  •  ESOPs as a Technique of Corporate Finance
  • Special Fiduciary Liability Rules for ESOPs
  • Legal, Tax, ERISA and Securities Issues

ESOP Communications to Participants

  • Legal Requirements
  • Practical Considerations

ESOP Operations

  • How it’s Done
  • Practical Considerations

ESOP Administration

  • A to Z and Back Again
  • Practical Considerations

Repurchase Obligation

  •  Calculating the Repurchase Obligation
  • Funding the Repurchase Obligation

ESOP Distributions & Diversification

  • Statutory and Regulatory Requirements
  • Practical Considerations

Ownership Transition Using a Leveraged ESOP

  •  Overview of the Legal and Regulatory Framework
  •  Attributes of a Successful ESOP Buyout
  •  The Critical Match: Transition and Objectives and Capital Structure Components

Making the Decision to Implement an ESOP: The Full Feasibility Study

  • Stock Valuation
  • Stockholders’ Equity Analysis
  • Liquidity Study
  • Design Study

Implementing the ESOP

  • Implementation Budgets
  • Phases of the Implementation Process

ESOP Dividends

  • Statutory Requirements for Dividend Pass Through
  • Mitigating Participants’ Adverse Tax Consequences

ESOPs for S Corporations

  • Unique Features
  • How They Work
  • Structures
  • Pitfalls and Traps
  • Abuses and Problems
  • Solutions

ESOP Corporate Governance

  • How and Why
  • Options
  • Effects of Sarbanes-Oxley

Special Issues for Public Company ESOPs

Practical Guidelines

Terminating an ESOP

  • How and Why
  • Practical Guidelines

Global Equity Plans & ESOPs

  • Transforming Stakeholders into Shareholders
  • Challenges in Globalizing the ESOP

Building Long Term Value & A High Performance Culture

  • Transforming the Culture
  • A Road Map to Success
  • What to Do
  • What Not to Do

ESOPs & Charitable Uses

  • ESOPs and Charitable Planning and Giving–A Win-Win Combination

ESOPs, Family Partnerships & LLCs

  • Pass Through Entity Planning–Another Win-Win Combination

Valuation of Companies for ESOP Purposes

  • Requirements
  • Fair Market Value vs. Book Value
  • Valuation Theory and Examples

ESOP Trustee & Fiduciary Considerations

  • What are the Rules for Fiduciaries?
  • Perils and Pitfalls

ESOP Valuation Controversies & Court Cases

  • Critical Court Decisions
  • Recent Court Decisions

Overview of ESOP Legislative History

  • How the ESOP Tax and Financial Benefits Evolved

Legislative, Regulatory, and Case Law Developments–Seven Years in Review

  • A Year-by-Year Summary and Analysis
  • Detailed Histories

Multi-Stage ESOP Transactions

  • Background and Current Status

Anti-Abuse Testing for S Corporations

  • The Nuclear Excise Tax Potential
  • Practical Issues and Solutions

ESOPs and Privatization

  • A Practical Means to Privatization
  • Federal Government Encouragement

Employee Ownership Beyond ESOPs

  • Employee Ownership Strategies Beyond ESOPs

Congressional Support for ESOPs

  • Examples of Congressional Support
  • Support from Leading ESOP Champions

ESOP Bibliography

ESOP Glossary

Table of IRC Sections

Table of ERISA Sections

Table of Cases

Master Index

Over 20 Appendices with Useful Information, Forms and Procedures

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