Hultgren bill aims to encourage employee ownership stakes in companies

U.S. Rep. Randy Hultgren (R-IL), vice-chairman of the Financial Services Subcommittee on Capital Markets, Securities and Investment, reintroduced legislation last week that would make it easier for employees to assume an ownership stake in companies where they work.

In a measure that drew bipartisan support, the Encouraging Employee Ownership Act (EEOA), H.R. 1343, would address current Securities and Exchange Commission rules that disincentivize employee ownership due to onerous disclosure requirements.

“Employees who own a stake in the company they work hard for every day want to see it do well and will work hard to make that happen,” Hultgren said. “When the company succeeds, the employee succeeds. Employee-owned companies in my district have shown me first-hand how important ownership is to boosting a company’s performance and attracting top talent.”

Hultgren was joined by U.S. Reps. Steve Stivers (R-OH), John Delaney (D-MD), Kyrsten Sinema (D-AZ), Brian Higgins (D-NY) and Tom MacArthur (R-NJ) in introducing EEOA to amend SEC Rule 701.

The rule currently requires disclosures for privately held companies that sell more than $5 million in securities for employee compensation over a 12-month period. Those disclosures include risk factors, copies of stock offering plans and additional financial statements. The bill would amend the rule by increasing the threshold from $5 million to $10 million, and adjusting it for inflation every five years.

“Unfortunately, high compliance costs and red tape limit how much ownership these companies can safely offer to their deserving employees,” Hultgren said. “Forcing a company to make confidential disclosures that could easily fall into the wrong hands and harm the company discourages ownership. We should be applauding employee ownership in businesses from the boardroom to the shop floor. This bill would open up more opportunities for employees to be rewarded for pouring sweat into their jobs every day.”

Warren Ribley, the president and CEO of the Illinois Biotechnology Industry Organization, said offering ownership stakes in companies to employees is a “critical tool in recruiting top talent” to companies.

“(EEOA) promises to aid in job creation in Illinois’ growing technology sector, especially for the many early stage companies with whom we assist along their commercialization path,” Ribley said.