ESOPs

ESOPs — Employee Stock Ownership Plans

An employee stock ownership plan (ESOP) is an employee-owner scheme that provides a company’s workforce with an ownership interest in the company. (Wikipedia) Ownership of the business allows the workers to reap the profit of their own labor and their own productivity increases. In the US there are “almost 11,000 employee stock ownership plans (ESOPs) and stock bonus plans covering over 10 million employees.” (ESOP.org)

Employees in ESOPs routinely fare better than employees in purely exploitive share-holder owned organizations. “A 1997 Washington State study found that ESOP participants made 5% to 12% more in wages and had almost three times the retirement assets as did workers in comparable non-ESOP companies.” (ESOP.org)

Additionally, above-and-beyond just the employees faring better, the actual corporations fare better by sharing profits and being inclusive. “A 2000 Rutgers study found that ESOP companies grow 2.3% to 2.4% faster after setting up their ESOP than would have been expected without it. Companies that combine employee ownership with employee workplace participation programs show even more substantial gains in performance.” (ESOP.org)

The 100 largest ESOPs in the US are listed at the National Center for Employee Ownership (NCEO) 100. NECO is a leading organization that is supportive of ESOPs . Another is the ESOP Association.

Different than co-ops, an ESOP trust holds the shares owned by the employee and buys back the accrued shares upon an employee’s departure. Unfortunately, ESOPs are primarily only used as an exit strategy to cash out departing capitalists and there does not appear to be a clear path to forming ESOPs from scratch. “About two-thirds of ESOPs are used to provide a market for the shares of a departing owner of a profitable, closely held company. Most of the remainder are used either as a supplemental employee benefit plan or as a means to borrow money in a tax-favored manner. Less than 3% of plans are in public companies.” (ESOP.org)


 

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