This article was originally published on ETFTrends.com.
By Jerry Ripperger, VP of Consulting, the Principal Financial Group, Principal Securities Registered Representative
As I write this blog, I’m getting my oil changed. I realize that this is not an earth-shattering event and that it happens all the time. But I realized I had not had to change it since late last year. I literally cannot think of another time since I started driving at age 16 that I had not driven my car 3,000 miles in six months.
The pandemic and need to be safe has certainly changed a lot of things, including how frequently I need to change my oil. Other things have not changed – notably the importance of communicating with employees.
For companies that sponsor an Employee Stock Ownership Plan (ESOP) this is particularly important. Employees do more than work for the company, they own it as well. Their ESOP balance is directly tied to the performance of the company which has likely been impacted.
Some of the most important topics for employee owners include:
- Most ESOP owned companies are valued once a year, typically as of December 31st. Needless to say, the value today may be substantially higher or lower as a result of COVID impacts. Some companies are doing interim valuations as a result. It is important that employees understand this impact.
- Share allocations are often communicated with great fanfare at employee celebrations. With many of these types of gatherings being canceled, companies are looking for ways to continue the excitement – albeit virtually for many. Even with the current economic uncertainty, the ESOP is still the largest part of many employee’s retirement planning.
- To preserve cash, companies may change their distribution policies. It is important that employee owners understand this and plan accordingly.
- Communicating with employees regarding how they can impact company performance is critical. Employee actions can impact the company value. Helping them understand the alignment between their actions, company performance, and their ESOP balance can benefit everyone.
Employee communication is an investment in the company and its employee owners. This is a great time to review your plans and if necessary, make changes. You can learn more at www.principal.com/esopbenefits.
In addition to blogging here, I also tweet regularly about topics of interest to ESOPs.
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