An Employee Stock Ownership Plan (ESOP) is the most common vehicle for broad-based worker ownership in the United States. An ESOP is a legal trust that holds the shares of all the workers in a firm and thus makes it possible to have long-lasting worker ownership. Under US law existing companies can contribute stock or cash to this trust in order to buy shares of company stock to gradually establish worker ownership. Probably, unique to the United States, this workers’ trust can borrow funds to buy shares on behalf of workers in order to establish significant, majority, or even 100 per cent worker ownership in one single transaction. All company contributions to the worker trust, whether in cash or stock or to repay loans used to buy stock for workers, gives the company a tax deduction under US federal law. Also interest on the loan is deductible.
Employee Stock Ownership Plans