Colleges, Charities to Get Donation

Parsons Corp. Chairman William T. Leonhard, who devised and executed a plan to turn Parsons into a privately held company through an employee stock ownership plan, said this past week that he plans to donate the proceeds from his Parsons stock to colleges and charities.

Leonhard owned 175,207 Parsons shares, which are worth $5.6 million under the $32-per-share price that the Parsons deal paid shareholders outside of the existing employee stock plan. Parsons is a large, Pasadena-based engineering and construction firm.

Because the stock was issued to Leonhard with certain restrictions covering when it could be sold, he has received only one-third of the cash and will receive the balance in two installments--in January, 1986, and January, 1987, he said in an interview.

Leonhard, a retired Air Force brigadier general, said he took cash from the first installment, paid $450,000 in taxes to the Internal Revenue Service and sent out checks for the balance the following day.

He said he donated cash to the Massachusetts Institute of Technology, Pennsylvania State University, Caltech, UCLA and Harvey Mudd College.

Leonhard, 70, explaining that “I am too old to change my life style,” said he plans to donate the balance of the future Parsons stock proceeds. Leonhard’s annual salary from Parsons was listed in a 1983 proxy statement as $600,000, the latest figure available.

The Parsons stock ownership plan has come under criticism from some employee groups who believe that the plan unfairly rewards public shareholders at the expense of their future retirement benefits. The plan is paying $32 per share for the 71% of Parsons shares not held by an existing ESOP, but ESOP shares will be worth much less after the deal, according to a proxy statement.

Critics of the plan have sent letters of protest to the IRS and the Labor Department, which oversees retirement plans. Leonhard vigorously defended the ESOP plan, saying neither he, nor any officer or director, received any special benefits in the plan.

Leonhard said he was motivated to take Parsons private through an ESOP because he believes in the philosophy of employee ownership and thinks Parsons can grow faster as a privately owned firm.

“When you look back over the long term, maybe we didn’t always make the best strategic decisions because of tactical reasons,” he said. “We think the company will benefit from a relief of that quarter-to-quarter pressure.”

Indeed, Parsons is already holding discussions with several firms for possible acquisition during 1985, Leonhard said. Those deals would expand the firm’s revenues by about 10% annually, he said.

In addition, Leonhard said the ESOP will be a major attraction to technical talent in an industry in which skill is paramount.

“We will have more to offer--stability, job security and a better retirement package than anybody else could put together,” he said.