Friday, August 21, 2009

Zell's ESOP Fable

Tribune Employees Are Shortchanged

Tribune's short-lived experiment with employee ownership is coming to an end.

While Tribune is still navigating the bankruptcy process, the creditors are unlikely to keep the employee stock ownership plan, leaving workers with worthless shares, a source involved in the negotiations said.

In 2007, real-estate tycoon Sam Zell used the stock plan, called an ESOP, to gain tax benefits on the $8.2 billion buyout of the struggling company.

The plan made employees official owners with 100 percent of the equity, but they have no say over management or the board. In the bankruptcy, they are viewed as common shareholders with less claim than other creditors. [Click for MORE]

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