Encouraging Employee Ownership Act of 2015

Floor Speech

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Mr. LYNCH. Mr. Chairman, I thank the gentlewoman for yielding.

It is very rare that I get to speak in opposition to such bad legislation, but not only do we have a single bill that is bad legislation, my friends across the aisle have packaged five bad bills and put them all together. My only regret is that I only have 3 minutes to speak about these bills.

Let me single one out, the Encouraging Employee Ownership Act of 2015. Currently, employee benefit plans must disclose information to employees who invest in those plans if the plan's assets are above $5 million.

H.R. 1675, the Encouraging Employee Ownership Act of 2015, now 2016, modifies SEC rule 701 by allowing private companies to compensate their employees up to $10 million, indexed for inflation.

So they can pay their employees in stock, basically. But the key here is that they don't have to provide the same information that they would to outside investors in that same stock. Therein lies the danger here.

This means that employees in smaller companies, start-ups, especially--small drug companies, small software companies--those employees with smaller plans, oftentimes those companies are more subject to, more vulnerable to, the ups and downs of the economy. These are the most vulnerable.

So the employees in those small plans that are paid with company stock would be less protected as to how their stocks are performing.

Last Congress I voted against a similar bill, H.R. 4571, when it was marked up in our committee. I also spoke in opposition to this bill when it was included as title XI of H.R. 37.

This bill uses the veneer of job creation to provide special treatment for well-connected corporations, mergers and acquisition advisers, and financial institutions, while doing very little for and probably doing much damage to employees and working families.

I strongly support employees receiving equity. I think that is a good deal. If employees can receive stock options and, importantly, if they can know about the value of those stocks and know about the condition of these companies, that can be a huge advantage.

Employees will buy into the company, but they have to have the information about what the stock is worth. This bill allows them to be denied that information. They are buying a pig in a poke. They don't know what the stocks are worth. So it puts them at a tremendous disadvantage.

And, again, these companies are the ones that are most vulnerable to ups and downs in the economy going forward.

I agree the remarks of Professor Theresa Gabaldon from George Washington University during our April 29 Capital Markets and Government Sponsored Enterprises Subcommittee hearing. During her testimony, the professor expressed opposition to this bill for the very reasons I have stated.

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Mr. LYNCH. She opposed this bill because employees deserve the same protections, she said, as investors.

This makes sense. This is easy. We should be able to do what we want to do here and stimulate the economy, yet, at the same time, allow these employees to have the information that they need to know what the value of the stocks they are being paid with are worth. It is as simple as that.

I thank the ranking member for her indulgence.

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