100th Anniversary of Kelso
On the fourth of December we celebrate the 100th anniversary of Louis O. Kelso with an international event at the European University Viadrina.
About Kelso: Louis O. Kelso (1913-1991) was a political economist in the classical tradition of Smith, Marx and Keynes. He was also a corporate and financial lawyer, author, lecturer and merchant banker who is chiefly remembered today as the inventor and pioneer of the Employee Stock Ownership Plan (ESOP), the prototype of the leveraged buy-out which Kelso invented to enable working people without savings to buy stock in their employer company and pay for it out of its future dividend yield. Source: Kelso Institute
Kelso regarded the ESOP and CSOP as pragmatic proof that his revolutionary revision of classical economic theory, and the financial techniques he derived from this new perspective, were sound and workable in the economic and business world. As a corporate and financial lawyer, and later as senior partner in the law firm he founded, Kelso well understood this world. He was further motivated by his conviction that lawyers had a special responsibility to maintain and improve society’s institutions in the light of its democratic values. He further believed that the business corporation was society’s greatest social invention and that its executives had a fiduciary responsibility to exercise its vast power.
The event will be under the auspices of the Polish Vice-Minister of Economics, Mrs Ilona Antoniszyn-Klik.
Special guests are: Patricia Kelso (Kelso Institute), John D. Menke (Menke Group), Paul Maillard (FONDACT), David Morris (Global Wealth Allocation), Daniel Dahm (United Sustainability), Herwig Roggemann (Institute for East European Studies).
The Event is jointly organized by: The Centre for Interdisciplinary Polish Studies (Prof. Dr. Dagmara Jajeśniak-Quast) and the Kelso Professorship of Comparative Law, East-European Business Law and European Legal Policy (Prof. Dr. Jens Lowitzsch)
Time & Location: Wednesday December 4th 2013 4PM: Logensaal – Logenstr. 12,15230 Frankfurt (Oder) Germany.
197 Words intro on Leveraged ESOPs
Leveraged ESOPs are generally seen as complex systems but in reality it is more about confusion and not knowing how things work. This short article will give an introduction to the leveraged ESOP as developed by Louis O. Kelso back in 1958.
The leveraged ESOP allows employees to become owners of the company by obtaining shares through the ESOP plan. The shares are bought from a loan that the company takes and not by private funds of the employees. A key point, allowing all employees to become owners of the company they work for – this was an aim of Kelso.
The advantages of the company taking the bank loan for an ESOP are clear:
- The company will get a bank loan more easily in comparison to employees because of the guarantees that the company can give.
- The loan can be paid back by future earnings (for example: dividends).
- All employees are able to participate no matter what their financial background is.
- Employee participation in general provides more employee motivation and allows for a sustainable business succession.
Though, to prevent differences between employees that join at different points in time, holding periods and other rules need to be made.
An interesting article for further reading on employee motivation by the use of ESOPs can be found under: lifehealthpro.com
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Infographic: ESO in Europe
Infographic: ESO in Europe
source: European Company Survey 2009
Do you have an interesting article you want to share with us?
Contact us: contact.proefp [at] googlemail.com or connect on Twitter:@ProEFP
Selected Articles: Why more employee ownership is needed! (from: US News)
We found this interesting US News article on why more employee owned businesses are needed. The article is perfectly describing the similarities and differences between employee and non-employee owned companies.
David Brodwin, the author, points out that: “A truly sustainable economy needs more employee-owned businesses and partnerships.”
He also makes an important point by claiming that: “These businesses stabilize consumer incomes and spending power, stabilize employment, stabilize corporate cash flows, and blunt the extremes of the business cycle. For this to happen we’ll need to find ways to attract more capital into the field, to finance the conversion of existing investor-owned businesses to a new ownership model.”