SOUTHERN CALIFORNIA JOB MARKET : CHALLENGES OF THE WORKING LIFE : COMMITMENT : ESOPs: A BUYER’S GUIDE

Opportunities for ESOP abuse are plentiful, and most workers aren’t sophisticated or organized enough to do anything about it. Experts say more employees should consider asking managements to organize an employee stock ownership plan if a change of control is possible or imminent.

“Both union and non-union workers should carefully evaluate the possibility of an ownership change, realizing that their job security depends as much on that as any other aspect of their work life,” said Joseph R. Blasi, management professor at Cal Poly San Luis Obispo.

If your company is a subsidiary of a larger corporation and is profitable, and you are a union member, consider asking that your union bargain for inclusion in its contract a right of first refusal to purchase the company, Blasi suggested. If you are not in a union, form a workers’ committee to ask to be considered as an equal bidder if the unit is put up for sale.

If your company is having financial or labor problems, consider a feasibility study to determine whether the reasons for failure are reversible through an ESOP and changes in work rules and compensation. These studies can be done in a day or so by an experienced ESOP expert, who can be found by referral from the National Center for Employee Ownership (415-272-9461).

If your company is a takeover target, suggest a combined management and ESOP buyout to take the firm private, Blasi suggested. If management resists, get an investment adviser to help you launch your own bid through a separate company.

What if your company is forming an ESOP? Non-union employees have virtually no ability to stop a company’s unilateral right to form an ESOP or any other benefit plan, said Corey Rosen, executive director of the national employee ownership center. For unionized employees, benefits like ESOPs generally must be bargained as part of the contract.

But if the plan is started at the expense of other benefits, seek to make sure the valuation of employee shares is fair and equitable. For such an evaluation, consider hiring an ESOP lawyer, Blasi suggested, by referral from the national ownership center.