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    ESOP

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    Ankur Arora
    An employee stock ownership plan (ESOP) allows employees to own shares of the company they work for. ESOPs have grown significantly in the United States since 1974, with around 11,000 companies establishing ESOPs that involve nearly 8 million employees. Companies set up ESOPs to reward and motivate employees as well as provide a market for departing business owners to sell their shares. An ESOP functions like a profit-sharing plan, with the company contributing shares or cash to a trust fund to purchase shares for employees.

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    ESOP

    Uploaded by

    Ankur Arora
    15 views1 page
    An employee stock ownership plan (ESOP) allows employees to own shares of the company they work for. ESOPs have grown significantly in the United States since 1974, with around 11,000 companies establishing ESOPs that involve nearly 8 million employees. Companies set up ESOPs to reward and motivate employees as well as provide a market for departing business owners to sell their shares. An ESOP functions like a profit-sharing plan, with the company contributing shares or cash to a trust fund to purchase shares for employees.

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    An employee stock ownership plan (ESOP) allows employees to own shares of the company they work for. ESOPs have grown significantly in the United States since 1974, with around 11,000 companies establishing ESOPs that involve nearly 8 million employees. Companies set up ESOPs to reward and motivate employees as well as provide a market for departing business owners to sell their shares. An ESOP functions like a profit-sharing plan, with the company contributing shares or cash to a trust fund to purchase shares for employees.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    15 views1 page

    ESOP

    Uploaded by

    Ankur Arora
    An employee stock ownership plan (ESOP) allows employees to own shares of the company they work for. ESOPs have grown significantly in the United States since 1974, with around 11,000 companies establishing ESOPs that involve nearly 8 million employees. Companies set up ESOPs to reward and motivate employees as well as provide a market for departing business owners to sell their shares. An ESOP functions like a profit-sharing plan, with the company contributing shares or cash to a trust fund to purchase shares for employees.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    ESOP

    An employee stock ownership plan (ESOP) is a way in which employees of a company can own a share
    of the company they work for. There are different ways in which employees can receive stocks and
    shares of their company. Employees can receive them as a bonus, buy them directly from the company,
    or receive them through an ESOP.

    In the United States, ESOPs are a very common form of employee ownership. They have been growing
    in strength since about 1974. Around 11,000 companies have an ESOP in place, and nearly 8 million
    employees are involved in them.

    Companies may establish an ESOP for a number of purposes. Most press attention regarding the use of
    ESOPs focuses on their use as a takeover defense or as buyouts of failing companies. These account for
    a very small percentage of ESOPs.

    The main purpose of an ESOP is to reward and motivate employees. They are also used to provide a
    market for departing owners of successful companies. In most cases, an ESOP is given to an employee,
    rather than purchased by an employee.

    An ESOP is similar to a profit-sharing plan. A company sets up a trust fund, into which it contributes either
    new shares of its own stocks or cash to buy existing shares. Another version of the ESOP borrows money
    in order to buy existing or new shares. In this case, the company makes cash contributions to the plan in
    order to repay the loan.

    Company contributions to the plan are tax deductible. Shares in the trust are generally allocated to
    individual employee accounts. All employees over the age of 21 can participate in the plan, and senior
    members of the workforce acquire an increasing right to the shares in their account. This is known
    as vesting, and employees should be fully vested within five to seven years. Other employee’s shares are
    based on relative pay or some other equitable formula.

    When employees leave the company, they receives their share options, and the company must be able to
    buy back these options. They must buy them back at their full market value. In private companies,
    employees are able to vote their shares on major issues such as relocation or closure. In public
    companies, employees can vote on all issues.

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