Hultgren legislation clears way for employee ownership of companies

Randy Hultgren
U.S. Rep. Randy Hultgren (R-IL) introduced a bill this week to expand the opportunities for employees to own a stake in the companies for which they work.

The bill, Encouraging Employee Ownership Act, was cosponsored by Reps. John Delaney (D-MD), Steve Stivers (R-OH), Kyrsten Sinema (D-AZ), Brian Higgins (D-NY) and Tom MacArthur (R-NJ).

“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.”

Currently, SEC Rule 701 mandates various disclosures for privately held companies that sell more than $5 million worth of securities for employee compensation over a 12-month period.
Hultgren’s bill amends the SEC rule to raise this disclosure threshold from $5 million to $10 million and adjust the threshold 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, who is also vice-chairman of the Financial Services Subcommittee on Capital Markets, Securities and Investment, 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 board room 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, president and CEO of the Illinois Biotechnology Industry Organization, supports the legislation, saying employee ownership helps businesses grow.

“As someone who has worked in economic development for most of my career, I know that offering an ownership stake to employees is a critical tool in recruiting top talent to job-generating companies,” Ribley said. “And there is no doubt that an equity stake encourages employees to drive hard for success of the enterprise.”

The bill previously advanced the House in the 114th Congress as part of H.R. 1675, the Capital Markets Improvement Act of 2016.