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ESOP Participants Growing Steadily

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ESOP Participants Growing Steadily

By , July 21, 2020
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The number of ESOP participants are growing steadily in the United States, one of the leading countries in Employee Share Ownership Plan (ESOP) development. Patterns of ESOP development in the US tend to be replicated here in Australia due to the ESOP’s proven benefits for companies and employees.

In the US, the number of participants in ESOPs has grown notably since the beginning of the 21st century according to the National Center for Employee Ownership (NCEO). NCEO estimates that there are approximately 6,600 ESOPs with over 14 million participants as of 2020. The total number of ESOP participants is now estimated to be 32 million and employees control around 8% of corporate equity.

These growing numbers are not coincidental, numerous studies have proven ESOPs’ effectiveness in contributing to companies’ growth. A Rutgers Study found that ESOP companies grow at a rate of 2.3%-2.4% faster than they would have without an ESOP.

The benefits of ESOP are amplified when ESOP firms practice participative management, an NCEO study noted that these types of companies grow at a rate of 8%-11% faster than they would have without an ESOP. It is established that ESOPs also benefit employees immensely.

According to a Washington State study, ESOP members made 5%-12% more in earnings and had retirement assets worth almost three times as workers in comparable non-ESOP companies. Moreover, A survey conducted by the NCEO and thee Employee-Owned S Corporations of America (ESCA) established that employees in an ESOP have more than twice the average retirement fund of Americans nationally. Another study be the NCEO found that ESOP participants have 2.2 times as much in retirement plans and 20% more financial assets overall compared to non-ESOP companies.

Historically, ESOPs in Australian companies have continuously followed trends happening in the US; it is therefore fair to assume that these ESOP advantages, which are already being reaped here, will grow to this scale in Australia.

Elizabeth Tjan