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This week, the House of Representatives passed the Encouraging Employee Ownership Act of 2017, bipartisan legislation making it easier for companies to offer employees business ownership opportunities.
The bill received support from Democrats and Republicans alike and was approved by a vote of 331-87. In a release, the House Financial Services Committee articulated, “It [the bill] would update a nearly 20-year-old Securities and Exchange Commission rule that inhibits employee ownership opportunities due to burdensome disclosure requirements.”
“Don’t we want more Americans to have an opportunity to obtain an ownership stake in the places they work?” questioned Financial Services Committee Chairman Jeb Hensarling (R-TX). “That way the workers can earn the large financial upside that comes when the company performs well, and the company benefits by being able to attract talented workers. Unfortunately, too many companies right now shy away from offering employees greater ownership opportunities because a bureaucratic, burdensome, top-down regulation hasn’t been updated in nearly 20 years. Well, we can fix that.”
The legislation would reform the Securities and Exchange Commission (SEC) Rule 701, which exempts businesses with a stock compensation threshold under $5 million from regulations and compliance requirements. Companies above the $5 million cap are tasked with stringent disclosure responsibilities, which at times prevent them from compensating their employees through stocks.
The legislation would increase this threshold to $10 million, thereby allowing small businesses to better serve their employees and communities, and suitably benefitting hardworking American workers with valuable business ownership opportunities.