Guest IM2B_Anonymous Posted November 20, 1999 Posted November 20, 1999 I would like to know if there is anything we can do to help our company. I'm a chairman on our ESOP Advisory committee - and we've got a major problem at the office. Our President is driving the company into the ground, the retired owner wants nothing to do with the company, and all of the good employees are leaving - which means new employees coming in, higher expenses for training, and lower productivity. Our costs have been raised to our clients 2 times in 7 months becuase of the salaries being paid to administration now - yet when it comes time for a raise for production level people - they say there is no money. Our President is sucking us dry and I can't seem to find anything we can do about it. SOMEONE HELP!!!
RLL Posted November 20, 1999 Posted November 20, 1999 What % of the company does the ESOP own? Who is on the Board of Directors? Who is the ESOP fiduciary with responsibility for investments in company stock? Who says the President isn't doing the right thing? Do you know how the company could be better managed? If the ESOP participants' interests as beneficial shareholders are not being adequately protected, you have recourse under ERISA. You should seek legal advice regarding your rights. An alternative might be to contact the nearest office of the Pension & Welfare Benefits Administration of the U.S. Department of Labor if you like the idea of relying on federal bureaucrats to investigate the situation.
Guest IM2B_Anonymous Posted November 23, 1999 Posted November 23, 1999 Our ESOP has 80% of the stock with 40% distributed, the other 40% held in trust, and the remaining 20% by the chairman of the board. I'm not sure who the fiduciary is. Would that be a trustee? I would say about 90% of our employees including the VP,office manager, supervisors, and employees all believe the president is ruining the company. Even our chairman of the board has told me he doesn't agree with things the President is doing, but he's retired and he shouldn't and wouldn't get involved. I have gotten our trustee involved, because I and others believe there is something funny going on with the money. Especially raises. It seems all the money goes to Administration - and the employees get nothing. When it's time for the employees to get raises - we're told there's no money for raises this year - consistently. I know for a fact that the Pres. got a $40k raise this year. We're a 4 million dollar company with 2 people making 14% of our revenue. Friends of the president are being used as vendors with inflated prices and poor service, as well as hiring of friends/aquaintences with little or no knowledge of the business - and then put into a moderate salary (high salary compared to what they know).. It's just bad...
RLL Posted November 23, 1999 Posted November 23, 1999 It sounds bad! This is the type of situation that gives ESOPs a bad reputation and encourages the U.S. Department of Labor and the IRS to continue to have a hostile attitude toward ESOPs. It seems that the ESOP trustee may have an obligation here to take action to protect the ESOP participants' stock ownership interests. With the trustee having knowledge of possible mismanagement, failure to investigate and take appropriate action may be a violation of ERISA's fiduciary rules. If the ESOP owns 80% of the company, whoever controls (has voting power over) the ESOP's shares of company stock can elect a majority of the directors. The board of directors has the power (and responsibility) to appoint and remove management of the company. If the trustee has voting power, perhaps the trustee should call for a special election of directors and throw out the rascals, if appropriate. I hate to hear stories like this. I hope that you and your fellow employees are able to find a solution that will save the company. Good luck! [This message has been edited by RLL (edited 11-23-1999).]
IRC401 Posted November 25, 1999 Posted November 25, 1999 You stated that 40% of the stock was distributed and 40% was in trust. Does that mean that 40% of the stock is in a suspense account to be allocated as an ESOP loan is paid off? I once asked a speaker at an ALI-ABA program if an ESOP trustee ever had a fiduciary duty to default on an ESOP loan because the company was going downhill, and he responded "Very interesting question". If your company is no longer a good investment, consider defaulting on the loan. That will get someone's attention. By the way, it is one thing to assert that there are problems, but is the stock price going down? Look at the methodology that the appraiser has used to value the stock and try to determine whether you would anticipate a significant decline in share price. If the stock price isn't going down, is there really a problem? Finally, for a situation such as the one you described, it is very dangerous to rely on advice from a computer screen. Good Luck.
IRC401 Posted November 25, 1999 Posted November 25, 1999 You stated that 40% of the stock was distributed and 40% was in trust. Does that mean that 40% of the stock is in a suspense account to be allocated as an ESOP loan is paid off? I once asked a speaker at an ALI-ABA program if an ESOP trustee ever had a fiduciary duty to default on an ESOP loan because the company was going downhill, and he responded "Very interesting question". If your company is no longer a good investment, consider defaulting on the loan. That will get someone's attention. By the way, it is one thing to assert that there are problems, but is the stock price going down? Look at the methodology that the appraiser has used to value the stock and try to determine whether you would anticipate a significant decline in share price. If the stock price isn't going down, is there really a problem? Finally, for a situation such as the one you described, it is very dangerous to rely on advice from a computer screen. Good Luck.
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