Employee Share Ownership Plans (ESOP) – some performance

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Employee Share Ownership Plans ( ESOP ) – some performance


Employee Share Ownership Plans ( ESOP ) – some performance

By , October 6, 2010

• ESOP companies are more likely to continue operating as independent companies over the course of several years. (Drs. Joseph R. Blasi and Doulas L. Kruse, School of Management and Labor Relations, Rutgers University).

• ESOPs appear to increase sales, employment and sales per employee. (Drs. Joseph R. Blasi and Doulas L. Kruse, School of Management and Labor Relations, Rutgers University).

• ESOP companies that combine employee ownership with a participative management style grow 8-11 percent per year faster than they otherwise would have been expected to grow based on pre-ESOP performance. National Center for Employee Ownership. Harvard Business Review. September/October 1987).

• ESOP companies outperformed competitors on job growth measures 49 percent of the time and 50 percent showed the same growth rate. (Northeast Ohio Employee Ownership Center and Kent State University. 1993).

• ESOP companies showed a cumulative four-year Total Shareholder Return (“TSR”) 6.9 percentage points greater than industry peers for each of the four years following adoption (26.1% versus 19.2%). In addition, the surviving companies at the end of the four-year period performed 12 percentage points greater than peers. (“Unleashing the Power of Employee Ownership: A Research Report.” Greenslade, Shelli, Hewitt Associates LLC. July 1998).

• ESOP companies had sales growth rates of 3.4 percent per year higher and employment growth rates of 3.8 percent per year higher in post-ESOP periods than otherwise expected. (“Employee Ownership and Corporate Performance.” The National Center for Employee Ownership. Quarrey, Michael; and Corey Rosen. 1996).

• Compared to 500 private non-ESOP companies, ESOP companies paid better benefits, had twice the retirement income for employees, and paid higher wages than their non-ESOP counterparts. (“Wealth and Income Consequences of Employee Ownership: A Comparative Study from Washington State.” Kardas, Peter A., Scharft, Adria L., Keogh, Jim. November 1998).

• Studies between ESOPs and productivity growth have found greater productivity and profitability in the first few years after a company adopts an ESOP. (Dr. Doulas L. Kruse, School of Management and Labor Relations, Rutgers University. 1995).

• In the United States, more than 11,500 companies have an ESOP covering almost 9 million employees. (“An Introduction to ESOPs: How an Employee Stock Ownership Plan Can Benefit Your Company, Its Owners, and Its Employees. Third Edition.” Scott Rodrick. The National Center for Employee Ownership. October 1998).

• Of the estimated $8 trillion of corporate equity in the United States, employees own about $213 billion through ESOPs and similar stock plans. (“ESOPs, Stock Options and 401(k) Plans Now Control 8.3 Percent of Corporate Equity.” The National Center for Employee Ownership. 1997).

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.