In the late 1970s the global engineering and construction company Parsons initiated an employee stock ownership plan (ESOP) to which 30% of the stock of the company would be allocated. ESOP is a defined contribution retirement plan which is managed by an ESOP trust which holds the stock that will be allocated to the accounts of employees on periodic basis. This is an example of worker capitalism to the largest degree in which employees actually take beneficial ownership in the stock of their company. In this case Parsons had distributed 30% of its stock to the ESOP trust, the other 70% being held/traded by public stockholders on the New York Stock Exchange. Years later in 1984, for a number of strategic reasons,Parsons management including its CEO determined that a 100% ESOP owned company would be in the best interests of both the company and the employees. Parsons engaged financial and legal experts to structure the internal and external parameters of this deal. Parsons plan was to execute a tender offer for both the outstanding 70% of publicly owned stock and for the 30% owned by the preexisting ESOP trust. In establishing the internal structure Parsons very questionably established executive reporting relationships in such a way that there were conflicts of interest between the executives serving as Trustees both preexisting and new ESOPs and the senior corporate executives to whom these trustees reported and were personally beholden. The new ESOP Trust tendered $32 per share for the publicly held shares. The tender offer for the employee owned shares of the predecessor ESOP amounted to only $28 per share..This turned out to be a serious problem, the cause being that lacked the financial capacity to pay $32 per share for all of the shares. This shortchanged the employee held shares by $4 a share under the preexisting ESOP Trust. My corporate position at the the time was Manager of Contracts re porting only three tiers down from the CEO. I was k broadly known because of this position. When it became clear that the employees and the predecessor ESOP were being shorted my four dollars per share I assessed the conflicts of interest involved and found them to be untenable. P. Not only did I spend a number of hours in the law library examining relevant deal points and IRS regulations on retirement plans under ERISA but I made my concerns known to my direct reporting relationship. As the deal continued to unfold management held to its position forcing a $4 per share difference between the $32 stock on the New York Stock Exchange and the $28 per share for employee/ predecessor ESOP. After attempts to get management attention on the problem I decided to outline the problem in detail in a letter to senior management, the trustees of both ESOP trusts and the IRS cognizant office for the company.To avoid drawing attention to myself personally, I sent the letter unsigned to these different individuals. My main objective was to get these principals to ascertain the nature of the conflicts, the impacts on company employees holding stock in the predecessor ESOP and to take action to correct the problem. As a result, ultimately the IRS who is required to approve the new ESOP plan refused to approve the plan because of this price differential between the two ESOP trusts. The IRS eventually approved a plan in which retiring employees would receive the $32 per share instead of $28 per share until such time as the price evaluated for the stock reached or exceeded $32 per share. This was an equitable outcome for the employees and therefore my objections were satisfied.
After this entire matter had been satisfied, I learned a lesson that when management takes a position and implements policy that is unfair or objectionable to the employees on unjfair legal principles, furnish senior management a fair opportunity to rectify the problem first before you take legal action.
The statements and other comments in this above transaction are merely my opinions and observations in the matter and do not necessarily reflect the opinions of Parsons.
Houstonjac 