Use of experts: implications of Howard v. Shay for fiduciary duties in ESOP transactions

Article Abstract:

Recent case law suggests that employee stock ownership plan (ESOP) fiduciaries should not be held liable on inadequacy of consideration grounds based on the correctness of the corporate valuation. Compliance with fiduciary obligations should focus on the process of hiring competent experts, having them investigate thoroughly and reviewing their findings. In Howard v. Shay, the US Court of Appeals for the Ninth Circuit found the ESOP fiduciary liable because the stock transfer price was agreed to before the valuation report was completed.

Pension, health, and welfare funds, Pension Funds, Stock Ownership Plans, Cases, Laws, regulations and rules, Fiduciary duties

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Current issues in the valuation of ESOP-owned securities

Article Abstract:

Employee stock ownership plans can give both corporations and stockholders economic benefits if they follow certain rules. One of these rules and the source of much ESOP non-compliance is the rule regarding valuation of ESOP shares. The publication of the ESOP Assn's Valuation Advisory Committee, 'Valuing ESOP Shares,' details how such valuation is to take place. Recent ESOP trends and economic advantages of ESOPs are summarized.

Valuation

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