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OEOC 21 st Annual Conference Marilyn Marchetti Senior Vice President GreatBanc Trust Company 630-572-5121 Growing Responsibilities of ESOP Trustees: Are.

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Presentation on theme: "OEOC 21 st Annual Conference Marilyn Marchetti Senior Vice President GreatBanc Trust Company 630-572-5121 Growing Responsibilities of ESOP Trustees: Are."— Presentation transcript:

1 OEOC 21 st Annual Conference Marilyn Marchetti Senior Vice President GreatBanc Trust Company 630-572-5121 Growing Responsibilities of ESOP Trustees: Are Internal Trustees Too Risky?

2 The Draft Valuation Report – What do the Trustees do now? -Trustees determine value -Read and analyze report -Ask questions -Compare to prior year’s report -Keep written minutes -Get training on valuation standards -Have valuation team meet with trustees

3 How can the Trustees monitor management? - Meet with management on a regular basis -Engage lawyer to represent the Trustees -Compare financial results with projections -Ask for projections, strategic plan, etc. -Understand business -Hire compensation consultant -Attend Management meetings with valuation firm

4 Executive Compensation – What Now ? -Independent Board of Directors form Compensation Committee Hire ESOP Attorney to buffer internal trustees -Have valuation firm review options, SARS, phantom stock for dilution impact and fairness Understand performance goals Hire compensation consultant for study

5 Some one wants to purchase the Company. What do we do now? -Removal of conflicted trustees -Appointment of independent trustee -Role of the Board of Directors -Role of the Trustee -Marketing the Company -DOL/IRS Joint Statement

6 How is a 100% ESOP Sub-S Corporation valued when considering a sale? -Remove C Corp tax model -Look at value build up over short, medium and long term periods -Factor in legislative risk -Facts and circumstances of Company

7 Discretionary Trustee versus Directed Trustee – What is the difference? -Directed: Trustee is given a written direction from an internal committee -Discretionary: Trustee decides how to vote independently -ERISA Override

8 Pass through voting – How to do it right. Pass through voting – How to do it right. - No company drop off sites -Collected by an independent party -Confidential procedures -Contains all material information

9 LESSONS FROM AMSTED Court will not substitute its judgment when Trustee is independent and experienced Judicial review of Independent Trustee is highly deferential Decision upheld unless independent trustee is found to have acted arbitrary or capricious

10 DOL or IRS Audits: Hire ESOP Counsel immediately Carefully review documents to be produced Produce documents off-site Take it seriously

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