The legendary meeting in November 1973 between economist Louis Kelso and Senator Russell Long was the key moment when ESOPs stopped being merely an esoteric financial instrument, and began their path towards the tax code. While Long was initially resistant to the idea of expanded ownership, and the ERISA tax law contained provisions that would eliminate ESOPs as they’re known today, Kelso’s passion proved to be infectious, and after their dinner together, Long became a major advocate for ESOPs.
In the process of seeking out first-hand sources and ESOP professionals to interview about the early days of ESOPs, we found Norman Kurland’s excellent account of the meeting of minds between Kelso and Long.
The push to get ESOPs into law went through a torturous and uncertain process. The National Maritime Union approached Kurland and Kelso to help them save the passenger ship industry, and the plan they developed became the subject of hearings in Congress. At the time, Long rejected it, unhappy with the redistributive aspects of the plan.
However, George & Charles Pillsbury, of Pillsbury Corporation, were interested in ESOPs, and, coming from the opposite parts of the political spectrum, were able to get Kurland and Kelso in touch with prominent Senate Democrats and Republicans alike.
Through their new connections, and exposure from 1973 hearings on saving the troubled US freight rail system, where they presented a plan similar to the Maritime Union, Kelso and Kurland’s name began to spread around Washington.
The ideas eventually filtered to Russell Long’s executive assistant, Wayne Thevenot, and after meeting Kelso, he began working towards arranging a face-to-face between Kelso and Long.
On November 26, 1973, Long was ready to hear about ESOPs. A dinner took place, with Long, Thevenot, Kurland and Kelso in attendance.
It’s difficult to get even four minutes of face time with Chairman of the Senate Finance Committee. The meeting between Kelso and Long lasted for four hours… and at the end, Long picked up the tab.
From then on, ESOPs had the most powerful backer on Capitol Hill that anyone could have hoped for. Long pushed to include ESOP provisions in the Internal Revenue Code, as part of the 1974 ERISA act; those provisions are there to this day.
Read more at the original article, or check out a different angle on the tale from ESOP lawyer and Kelso associate Roland Attenborough.