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    Reflection On Employee Ownership

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    saurav dahal
    This document discusses employee stock ownership plans (ESOPs) and their benefits for both employees and employers. ESOPs are designed to motivate employees through equity ownership, which can implicitly enhance productivity and profitability. For employees, ESOPs provide tax benefits and a sense of ownership. Employers benefit from increased productivity, employee retention, and financial flexibility. However, ESOPs also have drawbacks such as high administrative costs and complexity that require specialized resources to implement properly.

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    Reflection On Employee Ownership

    Uploaded by

    saurav dahal
    24 views7 pages
    This document discusses employee stock ownership plans (ESOPs) and their benefits for both employees and employers. ESOPs are designed to motivate employees through equity ownership, which can implicitly enhance productivity and profitability. For employees, ESOPs provide tax benefits and a sense of ownership. Employers benefit from increased productivity, employee retention, and financial flexibility. However, ESOPs also have drawbacks such as high administrative costs and complexity that require specialized resources to implement properly.

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    This document discusses employee stock ownership plans (ESOPs) and their benefits for both employees and employers. ESOPs are designed to motivate employees through equity ownership, which can implicitly enhance productivity and profitability. For employees, ESOPs provide tax benefits and a sense of ownership. Employers benefit from increased productivity, employee retention, and financial flexibility. However, ESOPs also have drawbacks such as high administrative costs and complexity that require specialized resources to implement properly.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    24 views7 pages

    Reflection On Employee Ownership

    Uploaded by

    saurav dahal
    This document discusses employee stock ownership plans (ESOPs) and their benefits for both employees and employers. ESOPs are designed to motivate employees through equity ownership, which can implicitly enhance productivity and profitability. For employees, ESOPs provide tax benefits and a sense of ownership. Employers benefit from increased productivity, employee retention, and financial flexibility. However, ESOPs also have drawbacks such as high administrative costs and complexity that require specialized resources to implement properly.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 7

    1

    Reflection on Employee Ownership

    Saurav Dahal

    Westcliff University

    BUS 300 Foundation of Business

    Professor Hariom Sharma

    July 19 2020
    2

    Abstract

    An ESOP is an employee benefit plan designed with enough flexibility to be used to motivate

    employees through equity ownership. Therefore, according to theory, ESOPs implicitly enhance

    productivity and profitability and create a market for stock. This enhances shareholder liquidity

    and provides a vehicle for the transfer of ownership, which can assist in the transition from an

    owner/management group to an employee-owned management team.

    Keywords: ESOP, Productivity, ownership, stock, liquidity


    3

    Employee ownership Firm

    Employee ownership is a term for any arrangement in which a company employee own shares in the

    common stock. This broad concept can take many forms in practice, ranging from simple grants of

    shares to highly structured plans (Neco, 2020). Employee ownership make employee a sense ownership

    in an organization and serve many different goals in on organization such as retirement plans, boosting

    employee performance, tax advantages during selling small business, government tax incentive benefit,

    or providing voice for employee in management.

    The common plan used by Employee ownership firm is Employee stock ownership plan (ESOP). ESOP

    grants employee to purchase a specified number of shares on defined price of a stock. Employee have to

    work for certain period of time to exercise the ESCOP plan. The employee have to sell the stock within

    the company in case of selling the stock in market price.

    Why company offer ESOP Plan for Employee?

    Most organization provide ESOP plan to retain the Specified Employee or to attract talented

    manpower in the organization. Company usually provide ESOP benefit at the ending of the

    financial year. Therefore employee may have the incentive to stay in the company to receive

    grant.

    Company also have the long term vision to offer ESOP. Company not only provide ESOP to

    attract or retain employee but also to make them stake holders in the company. For example

    many startup IT Company provide employee with ESOP plan as they could attract stock benefit

    attracting talented people and also they could compassionate employee if there is low salary.

    Employee view on ESOP

    An ESOP provide significant assets in period of working for the company and the employer

    stock will be appreciated over a period of a time during the time of retirement. As ESOP is
    4

    provide to provide the benefit for the long standing employee based on the contribution they

    have made. Employee have to bear no cost for these benefit. The benefit of ESOP is that

    employee enjoy the tax benefit. Employee doesn’t pay tax on ESOP they have to pay the tax

    only in retirement or in employee amount contributed by employee until they receive actual

    distribution received in capital gains from ESOP. Employee fell a sense of ownership in the

    organization. A successful example of ESOP is Google making employee rich along with the

    founder.

    The overall working benefit for the employee is that there is no hierarchy in the organization

    employee have their voice in management as they become owners of the organization.

    Motivating Employee

    As we have disused above there are many ways company could motivate employee in ESOP.

    Employee are motivated to work providing productivity 100% as to receive the benefit they get

    in return from the organization. Employer can set the target for the employee to access the

    benefit of ESOP encouraging employee to meet the target to receive the plan.

    Employer benefits on ESOP

    As employee work provide direct incentive to their employee they have high motive to work for

    the organization gain. According to study conducted by National ESOP Commission the

    adoption of ESOP provides the result of increases in the annual sales by 2.4%, annually

    employment growth of 2.3% and there is high chance of survival of the company. ESOP is the

    only qualified employee benefit plan where employer are permitted to borrow funds on

    employee credit. These provide significance financial flexibility to acquire assets, refinance

    debts through third party.


    5

    ESOP have Major benefit for employer and the stockholder there are the positive results when

    employee have an equity ownership. Employee are more motivated towards the overall

    organizational success providing increase in productivity and cooperative working culture.

    Problem Related to Employee Ownership

    There are many benefit of ESOP for company from financial benefit to employee participation.

    However, ESOP are not good for all form of the organization. Employee ownership firm have

    very complex and expensive administrative run to complex rules. ESOP company need to

    require the internal as well external advisors resources specialized in ESOP program. In case of

    company not having specialized can face the potential violations or risk of running the company.

    After the establishment of the company the company needs the proper admiration including the

    trustee, valuation, legal costs, third party admiration. Company owners are to be aware about

    the expenses also the limited in capital raise as it have to reserve fund for buying back the stock

    in case of employee willing to sell or during retirement.

    The fund for the additional resources and the complexity in the working structure can create the

    crisis in the management.

    My Personal View

    Employee ownership firm have many advantages from increasing productivity and cooperate

    working culture. One must be aware of the expenses and the complexities running the ESOP.

    ESOP are best fit for the organization that wants to maintain long term legacy and focus on

    employee benefits. It is a way of experiencing self-employment and share investment without

    financial risks for individual.


    6

    Employee ownership doesn’t come in zero risks. One must consider the expensive working

    structure of ESOP and focuses on minimum financial loses avoiding the fees as much as

    possible. The success of the company depends on the benefit of each other’s.
    7

    References

    FOW, The pros and cons of ESOP https://futureofworking.com/14-significant-pros-and-cons-employee-


    owned-companies/

    Mercer,c The Basics and benefit https://mercercapital.com/article/esops-the-basics-and-the-benefits/

    Neco, 2020 What is Employee owership? https://www.nceo.org/what-is-employee-ownership

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