Employee stock ownership plan - Wikipedia, the free encyclopedia. An 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, often at no upfront cost to the employees. ESOP shares, however, are part of employees' remuneration for work performed. 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. Some corporations are majority employee- owned; the term . Such organizations are similar to worker cooperatives, but unlike cooperatives, control of the company's capital is not necessarily evenly distributed. 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. United Kingdom. Councils seeking to protect workers ensured that employees accessed shares as privatisation took place, but employee owners soon lost their shares as they were bought up and bus companies were taken over. View Jackson Carcueva’s professional profile on LinkedIn. Connecting Buildings, Hearts and Minds Smart Buildings and Energy Management Director, BC Housing Jennifer Sanguinetti #psf11. BC Housing is reviewing the public and non-profit housing stock to identify opportunities to improve energy and water efficiency. This public housing portfolio. This report listed several major advantages of employee ownership including stronger longterm focus, increased employee representation at board level and greater preference for internal growth. The report also highlighted that employee owned businesses face greater problems when it comes to raising capital and dealing with regulatory requirements. The study was based on data from a survey of 4. United Kingdom, and also draws upon the published financial data of 4. EOBs and 2. 04 non- EOBs in the UK. The Chancellor of the Exchequer George Osborne announced in a speech at the Conservative Party Conference on 8 October 2. The consultation by the Department for Business, Innovation and Skills was published on 1. October 2. 01. 2. In practice, those entrepreneurs will be far more 'owner' than 'employee' and the employment rights they will be giving up are likely to be of much less value to them than to ordinary employees and so the tax advantages of far greater value to them than to ordinary employees. On 3 December 2. 01. It had decided to press ahead with the changes despite 9. Lawyers have commented that uncertainty remains as to how these proposals will operate in practice. In April 2. 01. 3, the Enterprise and Regulatory Reform Bill was passed and received Royal Assent. Implementation of the employee- shareholder provisions was expected to take place in October 2. The employee ownership provisions received significant amendment in the House of Lords, with the unintended consequence possibly being that trade unions may now benefit. Internal Revenue Code section 4. Today, most private U. S. Many of the early proponents of ESOPs believed that capitalism's viability depended upon continued growth and that there was no better way for economies to grow than by distributing the benefits of that growth to the workforce. This ensures that the ESOP includes everyone from the receptionist to the CFO. In an ESOP, a company sets up an employee benefit trust that is funded by contributing cash to buy company stock or contributing company shares directly. Alternately, the company can choose to have the trust borrow money to buy stock (also known as a leveraged ESOP. Generally, almost every full- time employee with a year or more of service who worked at least 2. ESOP. The United States ESOP model is tied to the unique US system encouraging private retirement savings plans and tax policies that reflect that goal. That makes it difficult to compare to other tax codes from other nations. S corporation ESOP. The United States Congress established S ESOPs in 1. American workers the opportunity to have equity in the companies where they work. ESOP advocates credit S ESOPs with providing retirement security, job stability and worker retention, by the claimed culture, stability and productivity gains associated with employee- ownership. A study of a cross- section of Subchapter S firms with an Employee Stock Ownership Plan shows that S ESOP companies performed better in 2. S ESOP firms, paid their workers higher wages on average than other firms in the same industries, contributed more to their workers' retirement security, and hired workers when the overall U. S. They maintain that no studies have shown that the presence of an ESOP itself causes any positive effects for companies or workers.. Also, the study found that total output was equivalent to 1. U. S. They can roll the amount over into an IRA, as can participants in any qualified plan. There is no requirement for a private sector employer to provide retirement savings plans for employees. Some studies conclude that employee ownership appears to increase production and profitability and improve employees' dedication and sense of ownership. Employee stock ownership can increase the employees' financial risk if the company does badly. Such concentration is contrary to the central principle of modern investment theory, which is that investors should diversify their investments across many companies, industries, geographic locations, etc. Employees at companies such as Enron and World. Com lost much of their retirement savings by overinvesting in company stock in their 4. Enron, Polaroid and United Airlines, all of which had ESOPs when they went bankrupt, were C corporations. Most S corporation ESOPs offer their employees at least one qualified retirement savings plan like a 4. ESOP, allowing for greater diversification of assets. Studies in Massachusetts, Ohio, and Washington State show that on average, employees participating in the main form of employee ownership have considerably more in retirement assets than comparable employees in non- ESOP firms. The most comprehensive of the studies, a report on all ESOP firms in Washington state, found that the retirement assets were about three times as great, and the diversified portion of employee retirement plans was about the same as the total retirement assets of comparable employees in equivalent non- ESOP firms. The Washington study, however, showed that ESOP participants still had about 6. Wages in ESOP firms were also 5- 1. National data from Joseph Blasi and Douglas Kruse at Rutgers shows that ESOP companies are more successful than comparable firms and, perhaps as a result, were more likely to offer additional diversified retirement plans alongside their ESOPs. Opponents to ESOP have criticized these pro- ESOP claims and say many of the studies are conducted or sponsored by ESOP advocacy organizations and criticizing the methodologies used. ESOP advocates agree that an ESOP alone cannot produce such effects; instead, the ESOP must be combined with worker empowerment through participatory management and other techniques. Critics point out that no study has separated the effects of those techniques from the effects of an ESOP; that is, no study shows that innovative management cannot produce the same (claimed) effects without an ESOP. Newer employees, even at stable and mature ESOP companies can have limited opportunity to participate in the program, as a large portion of the shares may have already been allocated to longstanding employees. About 1. 7% of total 4. ESOP advocates concede that it may be an excessive concentration in a plan specifically meant to be for retirement security. In contrast, they maintain that it may not be a serious problem for an ESOP or other options, which they say are meant as wealth building tools, preferably to exist alongside other plans. Nonetheless, ESOPs are regulated as retirement plans, and they are presented to employees as retirement plans, just like 4. Conflicts of interest. According to citing ESOP Association statistics as cited in. Only in the U. S., however, is there a widespread practice of sharing this kind of ownership broadly with employees, mostly (but not entirely) in the technology sector (Whole Foods and Starbucks also do this, for instance). The tax rules for employee ownership vary widely from country to country. Only a few, most notably the U. S., Ireland, and the UK, have significant tax laws to encourage broad- based employee ownership. This differentiates co- operative ownership (in which self- employed owner- members each have one voting share, or shares are controlled by a co- operative legal entity) from employee ownership (where ownership is typically held as a block of shares on behalf of employees using an Employee Benefit Trust, or company rules embed mechanisms for distributing shares to employees and ensuring they remain majority shareholders). Key agents of employee ownership, such as Co- operatives UK and the Employee Ownership Association (EOA), play an active role in promoting employee ownership as a de facto standard for the development of social enterprises. Other varieties of employee ownership include: Direct purchase plans. For instance, in the U. S., employees can put aside after- tax pay over some period of time (typically 6. Options, and all the plans listed below, can be given to any employee under whatever rules the company creates, with limited exceptions in various countries. Restricted stock. They require members to join. Each worker- member buys a membership interest at a fixed price, or buys a share. Only workers can be members, but cooperatives can hire non- worker owners. Each member gets one vote. See also. Department for Business Innovation & Skills.
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