If employees of the Tribune Company ESOP choose the channel Charlie Brown, they may well be saying, “I went out to Wall Street with a piece of a legendary multimedia company and all I got was a rock (wrapped in a worthless piece of paper.)”
Under an ESOP, employees have the equity in the company but no say in management and no presence on the board of directors. Their stake is considered to be common stock, and in a bankruptcy situation, they are far back in line when creditors arrive with their hands out for some form of payback.
On the plus side for employees in this case is that none of them had to put up any cash of their own to effectuate the original deal. According to the New York Post, Tribune was supposed to put money on their behalf into 401(k) or pension accounts. But the company’s meltdown was so swift that never happened.
So what the employees are likely to wind up with is nothing more than worthless paper.
RBR/TVBR observation: Ironically, the Employee Ownership Foundation’s latest study on the effectiveness of such organizations just came out, and it found that 88.5% of them outperformed the stock market in 2008. But that means 11.5% didn’t.