
Employee Stock Ownership Plan (ESOP)
Employee Stock Ownership Plan (ESOP)
An Employee Stock Ownership Plan (ESOP) is a benefit plan that allows employees to acquire ownership in their company through shares of stock. The company contributes shares to the ESOP trust, which allocates them to individual employee accounts based on factors such as salary and tenure. As the company grows and its stock value increases, so does the value of the employees’ accounts. ESOPs offer several benefits, including improved employee motivation and retention, tax advantages for the company, and a potential succession planning tool. However, they also involve complex legal and financial requirements, and the value of the stock can fluctuate. Proper design and communication are critical for a successful ESOP.