U.S. Government Focuses on ESOP Valuation, Administration

The federal government is stepping up its scrutiny of how U.S. companies are valued for employee-stock-ownership plans (ESOPs), reported The Wall Street Journal.

The Labor Department is the plaintiff in 15 lawsuits related to employee-stock-ownership plans, with “virtually all” the cases alleging shoddy estimates of what a company’s shares are worth.

Federal officials are expected to propose early next year rules aimed at toughening standards for outside appraisers who provide valuations for ESOPs. Now, companies must hire appraisers whenever a stock plan is started and must tell workers once a year how much their shares are worth, but there are no minimum qualification standards for these appraisers or specific rules on how they perform their work.

The agency also is getting tougher on trustees who work on behalf of ESOPs and have a fiduciary duty to put the interests of workers first or face financial liability if things go wrong.