What is an ESOP?
An ESOP is a long-term plan in which employees’ financial benefits are tied to ECS’ profitability and growth. A type of retirement plan, an ESOP invests in company stock and holds assets in a trust for employees.
Why did ECS create an ESOP?
The majority of ESOP companies report better performance, as the ESOP creates aligned incentives. Increased organizational performance leads to higher stock values and translates directly to higher balances in the employees’ accounts. The ESOP provides a mechanism for ownership transition, a retirement vehicle to vested employees, tax incentives to the corporation, improves employee retention and most importantly, creates an employee owner culture.
What is an employee owner culture?
An employee owner culture is where all employees share in the responsibility of business decisions, improving systems and operations, growth and optimizing profitability of the company for all to benefit. Employee owners do simple things like consider expenses (Do I really need that?) and turn off the lights when leaving the room, but there’s more to it than that. They also brainstorm on ways to reduce waste, implement efficiencies, create cross selling opportunities and are more likely to provide excellent customer service.
How do ESOPs benefit employees?
While ESOPs have a significant impact on overall retirement savings, ESOP benefits extend beyond the financial advantages. Studies show that shared capitalism improves each employee’s well-being, leads to greater job security and retention and increases trust in the firm and management.
ESOPs by the numbers
- 6,243 ESOP companies are spread across the US: That’s more ESOP companies than there are Walmarts and Targets in the US combined
- 10.6 Million ESOP owners: More than the entire workforce of the US auto industry
- $1.38 Trillion in value: Held by ESOPs, an average of $129,521 per employee
- 97% have access to a second company sponsored retirement plan, like a 401(k), in addition to the ESOP
Sources:
National Center for Employee Ownership