Historically Underutilized Business Program under attack by State Legislature
| 100% Anglo Trustee Board Could Pose as HUB |
| AUSTIN– Skirting the very definition of what it means to be certified as a Texas Historically Underutilized Business (HUB), Texas House Representative Hugh Shine, R-Temple, concocted HB1198 under the guise of keeping businesses employee-owned and operated. A similar bill – SB1650 – is supported in the Senate by Senator Beverly Powell, D-Burleson. It all begins with a plan known as the Employee Stock-Owned Plan or ESOP, which is designed to encourage transfer of business ownership from retiring owners to their employee base. Through the Plan, a trust is set up, complete with a Board of Trustees, to oversee operations, while the employees truly take stock and ownership of the business. For all practical purposes, the plan represents an opportunity to help ensure continued local-control, continued growth and buy-in from all those involved with the company. Both HB1198 and SB1650, however, seek to expand the ESOP program by allowing any company that has qualified for HUB status, i.e., a business that is at least 51% owned by Asian Pacific American, Black American, Hispanic American, Native American, American woman or a Service-Disabled Veteran – to be able to retain that status if/when it is sold. Thus, even if the Board of Trustees who oversee the newly-created ESOP trust for a specific company is made up of 100% White Males, it would still be allowed to bid on State-wide contracts as a HUB, with approval of the bill. At a hearing before the House State Affairs Committee, Representative Drew Springer, R-Gainesville, who serves on the Committee, made that very point. Representatives with the Texas Association of Mexican American Chambers of Commerce (TAMACC), the Texas Association of African American Chambers of Commerce (TAAACC) and U.S. Hispanic Contractors Association of Austin agree the bill represents a very dangerous challenge to HUB. Initially instigated by the United States Supreme Court, the HUB program sought to increase opportunities for minority- and women-owned businesses with the award of state contracts: “In accordance with Chapter 2161 of the Texas Government Code, State agencies, including institutions of higher education, shall make a good faith effort to utilize HUBs in state contracts, including contracts for construction, services, and commodities.” (Source: Texas Comptroller of Public Accounts). “This Legislative session has been replete with bills that have a negative frontal attack on the intent and purpose of the HUB program and serve to dilute and negate the reason this program was created for in the first place,” explains Samuel Guzman, TAMACC Chairman of the Board. “The opportunities for underutilized businesses which the HUB program once sought to offer would be severely compromised by these bills rendering the program ineffective. We urge the members of the Legislature to carefully consider the adverse impact of these bills and not allow them to move forward and become law.” “These most recently created bills represent yet another assault on the HUB Program,” adds Frank Fuentes, Chair of the U.S. Hispanic Contractors Association of Austin. “Our organizations support the creation of ESOPs throughout the State, allowing business owners the opportunity to transition into retirement while their dedicated and trusted employees continue their legacy. However, what we cannot support is the dilution of the HUB program and in effect negating the very purpose for which it was created.” Currently, HB1198 is pending in the Committee. However, representatives with TAMACC are concerned that more attacks on the HUB program may come down the pipeline this session. “TAMACC is committed to continue advocating on behalf of the over 700,00 Hispanic owned businesses in Texas, and to be a voice for women-, minority- and Service-Disabled Veteran owned businesses. Lawmakers should be working to improve the HUB program not diluting it,” says Pauline E. Anton, TAMACC President and CEO. Additional Background: Employee Stock Ownership PlanAn employee stock ownership plan (ESOP) is an employee-owner program that provides a company‘s workforce with an ownership interest in the company. In an ESOP, companies provide their employees with stock ownership. Shares are allocated to employees and may be held in an ESOP trust until the employee retires or leaves the company. The shares are then either bought back by the company for redistribution or voided. In many cases, voting rights are given only to certain shareholders, and more senior employees may be allocated more shares than new hires; typically, they are tied to the compensation an employee receives from the company. Compared with cooperatives, ESOP-centered corporations often allow for company executives to have greater flexibility and control in governing and managing the corporation. Most corporations, however, use stock ownership plans as a form of in-kind benefit, as a way to prevent hostile takeovers, or to maintain a specific corporate culture. The plans generally prevent average employees from holding too much of the company’s stock. Many closely held companies have little or no succession plan in place. As a result, the day a founder or primary shareholder leaves the business often results in significant adverse consequences for the company, the employees and the exiting owner. ESOPs offer transitional flexibility that can facilitate succession planning. Historically Underutilized Business (HUB) Program In 2008, the State’s Comptroller’s office contracted with an independent vendor to determine if there was compelling enough information to continue the HUB program. The resulting Disparity Study released in 2009 confirmed the need for the continuation of the Statewide HUB Program, based primarily on:1. statistical disparities by race, ethnicity and gender classification in current HUB utilization, particularly in prime contracting;2. statistical disparities by race, ethnicity and gender classification in the private marketplace, particularly in the area of utilization of women- and minority- owned firms in commercial construction;3. statistical disparities in firm earnings by race, ethnicity and gender classification, even after controlling for capacity-related factors; and4. anecdotal testimony of disparate treatment as presented by business owners in interviews, surveys, public hearings and focus groups.5. The findings are the basis for any rule revisions required of this agency by Chapter 2161, Government Code. |
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