The January 15, 2008 Employee Ownership Update is online and discusses the following:
- New Guidance on ESPP and ISO Reporting
- French Finance Minister Wants to Democratize Stock Options
- Developments in Stock Drop Cases in 2007
- Quotable
- Innovations Award: February 1 Deadline
The Update discusses IRS Notice 2008-8 - Information Reporting Requirements Under Internal Revenue Code § 6039, including the requirement to file an information return with the IRS for incentive stock options (ISOs) and employee stock purchase plans (ESPPs). It also discusses the 2007 developments in stock drop litigation:
"The most significant development of the year was that three appeals courts each ruled that participants who have been paid out of plans and later alleged fiduciary abuses caused them to suffer losses can sue to recover their own alleged individual losses, rather than just being able to sue for equitable relief (meaning benefits would have to be restored in the plan, something of little practical value to them). Until this year, courts generally ruled that paid out employees lacked standing to sue for individual damages, but the appeals courts all concluded this left employees with no practical remedy. Just how the tricky issue of how much the damage cost the employees (assuming the court agrees there were fiduciary abuses) remains unresolved. For instance, if the stock hit a high of $85, then fiduciaries ignored information that would lead it to fall to $35, is the damage $50 per share? Is the highest value the right reference point? Might the shares have dropped some amount even absent the impact of the information? Courts will have to sort that out in the future.
The lawsuits and changes in rules for diversification in 401(k) plans have led the amount of employer stock in 401(k) plans to drop from 19% in 2002 to 11% in 2006."
Here are some related stock drop litigation links:
The Update also has a reminder of the February 1 deadline for the Innovations in Employee Ownership Award.
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