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house Bill H.R. 1343

Should it be Easier for Growing Companies to Offer Employees Stock?

Argument in favor

Many companies use stock compensation as a tool to incentivize their workers, but reporting requirements for issuing stock beyond a certain level can act as a deterrent. Raising the threshold from $5 million to $10 million will make it easier to do so.

MJDalio's Opinion
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04/04/2017
Frankly I am fed up with government micromanagement of the private sector companies. The government is incapable of managing anything without screwing it up. The reason our country is stagnant is because over the past 16 years of Bush then Obama the intrusion by government into the private sector expanded. Anything the government touches other than military it damages.
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···
04/04/2017
Yes. There are many benefits. Giving employees stock options gives them a sense of ownership. They'll be more devoted and work harder to improve profitability. It's also a relatively cost effective way for companies to reward their employees. More owned stock is goof for stock prices, and companies gain additional brand appeal.
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Kaleb's Opinion
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04/04/2017
Absolutely. I don't see why not, especially if they're helping to build it. That sounds like capitalism at its genuine finest right there.
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Argument opposed

Lower thresholds and the reporting requirements that go with them help ensure proper oversight and avoid questionable business practices. Besides, a company shouldn’t be issuing stock if its not willing to open its books and be forthright.

Leo's Opinion
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04/03/2017
Lack of disclosure makes it very easy for corporations to fool the public into buying poor investments.
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Mohamed's Opinion
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04/04/2017
This is nonsense, the bill's sponsor wants you to believe that there are all these "hard working" people harmed by the current policy. The change really only benefits company owners by exposing them to less oversight from the SEC. As we have seen in the past even large companies with lots of resources and oversight engage in chicanery when it comes to compensation through stocks. This is likely even higher when you're talking about small companies who have less oversight from institutional investors. Oversight is forgotten when times are good, it's for the bad times that we have it.
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LFR2D2's Opinion
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04/04/2017
I am opposed to this bill. It never ends up benefiting the employees who only get a small fraction of the stock. The companies and large shareholders will be the benefactors of any financial gains.
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What is House Bill H.R. 1343?

This bill would direct the Securities and Exchange Commission to revise regulations to require a business that issues securities to provide investors with additional disclosures about employee equity compensation plans if the total value of securities issued during the last 12 months exceeds $10 million. The value of the securities sales that triggers the disclosure would be raised from $5 million to its new level of $10 million, and would be indexed to inflation every five years then rounded to the nearest $1 million going forward.

Disclosures would include risk factors, copies of the compensation plans and financial statements.This change would take effect within 60 days of the enactment of this legislation.

Impact

Investors, companies issuing securities, and the SEC.

Cost of House Bill H.R. 1343

A CBO cost estimate is unavailable.

More Information

In-Depth: Sponsoring Rep. Randy Hultgren (R-IL) introduced this legislation during the 114th Congress as well to make it easier for "companies to offer ownership to their hardworking employees," saying at the time:

"Employees who own a stake in the company they work hard for every day have a strong incentive to see that company does well. 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. Unfortunately, high compliance costs and red tape limit how much ownership these companies can safely offer to their deserving employees. Forcing a company to make confidential disclosures that could easily fall into the wrong hands and harm the company is not the way to encourage more ownership. We should be applauding employee ownership in businesses from the board room to the shop floor. My bill would open up more opportunities for employees to be further rewarded for pouring sweat into their jobs every day."

Several Democrats on the House Financial Services Committee offered a joint dissent to this bill that focused on the need to keep the requirement for disclosures at companies that offer more than $5 million in securities to give employees the ability to "know the value of their shares" and understand the risks of the securities. They also pushed back against Republicans' arguments about the bill's benefits:

"Some proponents of the bill cite the costs of disclosure and fear of confidential information being leaked to competitors. However, to take advantage of the increased threshold under the bill, a company would need to have over $34 million in total assets. Requiring such large companies to provide the minimal disclosures cannot be seen as too burdensome. In addition, non-disclosure agreements and similar confidentiality agreements are already effective mechanisms to prevent unauthorized disclosure."

This bill was passed by the House Financial Services Committee on a vote of 48-11. During the 113th Congress, a similar version of this legislation passed the House by a vote of 320 to 102, but stalled in the Senate. And during the last Congress, it passed 265-159 in the House but didn't get a vote in the Senate.


Media:

Summary by Eric Revell
(Photo Credit: Flick
r user andreas_poike)

AKA

Encouraging Employee Ownership Act of 2017

Official Title

To direct the Securities and Exchange Commission to revise its rules so as to increase the threshold amount for requiring issuers to provide certain disclosures relating to compensatory benefit plans.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Banking, Housing, and Urban Affairs
  • The house Passed April 4th, 2017
    Roll Call Vote 331 Yea / 87 Nay
      house Committees
      Committee on Financial Services
    IntroducedMarch 2nd, 2017

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    Frankly I am fed up with government micromanagement of the private sector companies. The government is incapable of managing anything without screwing it up. The reason our country is stagnant is because over the past 16 years of Bush then Obama the intrusion by government into the private sector expanded. Anything the government touches other than military it damages.
    Like (87)
    Follow
    Share
    Lack of disclosure makes it very easy for corporations to fool the public into buying poor investments.
    Like (89)
    Follow
    Share
    This is nonsense, the bill's sponsor wants you to believe that there are all these "hard working" people harmed by the current policy. The change really only benefits company owners by exposing them to less oversight from the SEC. As we have seen in the past even large companies with lots of resources and oversight engage in chicanery when it comes to compensation through stocks. This is likely even higher when you're talking about small companies who have less oversight from institutional investors. Oversight is forgotten when times are good, it's for the bad times that we have it.
    Like (73)
    Follow
    Share
    I am opposed to this bill. It never ends up benefiting the employees who only get a small fraction of the stock. The companies and large shareholders will be the benefactors of any financial gains.
    Like (67)
    Follow
    Share
    Yes. There are many benefits. Giving employees stock options gives them a sense of ownership. They'll be more devoted and work harder to improve profitability. It's also a relatively cost effective way for companies to reward their employees. More owned stock is goof for stock prices, and companies gain additional brand appeal.
    Like (35)
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    It's not worth giving up 2 existing regulations to make this change.
    Like (32)
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    I think it's a great idea for companies to offer stock incentives! They need to do this transparently, though and not by offering effectively "worthless paper" instead of real potential value in the company. If this bill were written differently, I may have been a supporter.
    Like (26)
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    Absolutely. I don't see why not, especially if they're helping to build it. That sounds like capitalism at its genuine finest right there.
    Like (22)
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    This seems like an opportunity for companies to offer forms of compensation to employees that they may not fully understand.
    Like (20)
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    Why are you making it harder for the public to get information. Transparency and accountability are important, and we can't trust YOU to make the right choice.
    Like (18)
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    This law makes it possible for people to sell anything less than $10,000,000 (as opposed to $5,000,000) in terms of stock without filing a notification with the SEC in a 12 month period. This is not necessary and will encourage people to attempt to screw with the stock market with even more money.
    Like (15)
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    Absolutely not. Lack of transparency in business and banking contributed to the 2008 crash economic crash and many others.
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    This is yet another way for the business owners to take advantage of it's employees. If they want to award their employees they can do profit sharing. I've been on the receiving end of receiving stock options which weren't worth the paper they were printed on.
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    The concept of sharing ownership is of immeasurable value to entrepreneurs and the people they choose to associate with when innovating. The moral fiber of humanity will only shrivel if we do not support this vote. For most men in modern times there are but a few moments when life offers a value proposition not founded in financial profit, but rather in a flight of moral quality.
    Like (9)
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    This sounds like opening the flood gates to abuse. The amount of money being considered indicates a plan that would benefit only those already with deep pockets.
    Like (8)
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    The SEC does a pretty good job of regulating trading and monitoring activity. Why do you need more government bureaucracy to add to the mix. Government is not the solution folks. All most politicians are interested in are themselves and retaining power. They could care less about you except at election time. Then the phrase, "Fighting for you" gets beaten to death.
    Like (7)
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    Does Enron debacle come to mind. Over investment in an employer stock is not a good idea. It's fine as a piece of a diversified and independently and well managed strategy but should not be at the company's control.
    Like (5)
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    Transparency and accountability. And stock can be a dubious way to incentivize.
    Like (5)
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    Smells like another way for smaller riskier companies to take undue advantage of employees. Let them disclose all the facts and not cheat employees into investing and then going belly up
    Like (5)
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    Let people make whatever employment arrangements they want. Why does the government deserve a say in this?
    Like (4)
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