Employee Stock Ownership Plan Trust Trustee Fiduciary Duties

As a mature employee ownership system, employee stock ownership plans (ESOPs)have been booming in the U.S. Though designed to ease the conflict between theemployers and employees, ESOP has gradually become the most important form ofemployee ownership system. In practice, the shares of the plan are held in trust,which gives rise to the fiduciary duty of the plan trustee. In case of a tender offer,the plan trustees are obliged to make a fiduciary decision as to how the unallocatedshares should be voted and tendered. Unfortunately, the courts and the Departmentof Labor, who are eligible to interpret the law, are of different opinion on this issue,which results in the ambiguity and uncertainty in this area.The article consists of four chapters as well as a foreword and a conclusion.The first chapter is the brief introduction of the U.S Employee Stock Ownership Plan(ESOP), including the theoretical background, practical operations and relevantpolicies of ESOPs. The success of ESOPs in the U.S. partly dues to supportingpolicies and sound economic environment, which provides guidance for ESOP'sdevelopment in China.The second chapter represents the basic fiduciary duties of the plan trustees. A plantrustee is both trustee and plan fiduciary under ERISA, subject to the common trustlaw and ERISA. The author clarifies the fiduciary duty standard through analyses ofthe aforesaid laws, including special stipulations on ESOPs.The third chapter focuses the fiduciary duties of plan trustee in face of tender offer.In such case, the shares held by the plan are divided to three categories, which arevoted shares, allocated non-voted shares and non-allocated shares. The author, afterlegal analysis of the NationsBank as well as policy considerations based on that,advances proposals on the standards of the fiduciary duties of an ESOP trustee.The last chapter concerns suggestions on the improvement of ESOPs in China. Afterpointing out defects in rules and regulations in respect of ESOPs, the author tries toprovide constructive suggestions.