Employee Incentive ESOPs: An Equity Tool to Promote Engagement and Performance

Employee stock ownership plans (ESOPs) are experiencing renewed interest in America. In recent years, new ESOP formation was largely driven by the aging of the Baby Boomer generation (widely defined as those born between 1946 and 1964), and their desire to liquify their ownership in closely held businesses while rewarding their employees. There are other new forces driving this trend—the quest for equitable solutions for the growing divide between have and have-nots, the need for employers to retain and reward employees in a competitive talent market, and succession planning. In this article, I will discuss how an Employee Incentive ESOP can be used to promote performance and engagement in a broad-based manner.

Employee Stock Ownership in Morocco

Today, the notion of social interest occupies an essential place in legal science. For a long time limited to the shareholders' own interests, today a large part of the legal doctrine insists on the necessity to take into consideration all the interests that contribute to the prosperity of the company, such as its employees, its suppliers, its customers. This is the sense in which the current debate on corporate governance and CSR (corporate social responsibility) is heading. In the context of this study, attention will be focused on the case of the employee. How does one take into consideration the interest of the latter in the company? Both forms of involvement are important, but the authors limit themselves to the second one, namely employee stock ownership.

Dealing With COVID-19 Through Employee Stock Ownership Plans

In this chapter, the authors argue that far from the shocking decision of firing employees to leverage their short-term liquidity, organizations may draw other innovative options such as giving company shares to their employees. Employee stock ownership (ESO) plans have the potential to secure financial liquidity for firms while simultaneously providing social inclusion as well as empowerment to people, relating their efforts directly to firms' performance and driving the economic system into a shared capitalism. However, while companies may be solving their financial constraints through ESO, the authors identified a trade-off related to the traditional position of hegemony of firms. They argue that the decision to share the risk through paying wages using firms' stock options derives in a progressive detriment of power and control that some organizations would not be willing to suffer.

The Impact of Employee Stock Ownership Plan on the Cost of Equity Capital: Evidence from China

Due to the immaturity of bond market and the defects of internal governance structure, Chinese-listed companies have a strong preference for equity financing. How to reduce the cost of equity capital is particularly important for Chinese-listed companies. As an equity incentive system, employee stock ownership plan (ESOP) can reduce the agency conflicts among shareholders, executives, and employees to some extent. These reduced conflicts will, in an efficient capital market, be reflected in a lower cost of equity capital. This paper investigates whether the implementation of ESOP in a new era in China affects the cost of equity capital and further explores whether the impact of ESOP on the cost of equity capital is affected by the ownership nature, the firm size, and the contract design of ESOP. The results show that the implementation of ESOP reduces the cost of equity capital of enterprises. Compared with state-owned enterprises and large enterprises, the implementation of ESOP is more likely to reduce the cost of equity capital in non-state-owned enterprises and small enterprises. Furthermore, the reduction effect of ESOP on the cost of equity capital is influenced by the contract design of ESOP. This study not only enriches the literature on the relationship between employee stock ownership and the cost of equity capital but also provides a new idea for listed companies to reduce the cost of equity financing.

The Behavioral Agency Model and Innovation Investment: Examining the Combined Effects of CEO and Board Ownership

The Behavioral Agency Model (BAM) offers a behavioral account of executive incentives, according to which the perceived threats to CEO wealth, that is, CEO risk bearing, influence a CEO’s propensity to undertake innovation investments. While examining stock options extensively, the extant BAM research devotes relatively scant attention to other forms of incentives, such as stock ownership, that are conducive to one source of risk bearing, that is, employment risk. Furthermore, with an emphasis placed on the CEO, much BAM research neglects the interactive risk preferences of the CEO and the board. This study refines the BAM and empirically explores the countervailing forces exerted by the CEO and board ownership. It elucidates that while CEO ownership exhibits an inverted U-shaped relationship with innovation investment, board ownership weakens that relationship. An exploratory test on a sample of 108 Italian manufacturing firms provides support for the hypothesized effects. The refined BAM sheds further light on executive incentives through a behavioral lens, by elucidating the role of stock ownership and the interactive risk preferences of the CEO and the board.

Employee Stock Ownership Plans for Tobacco Concept Stock Listed Companies and Corporate Innovation Investment

In this study, we discussed the influence of employee stock ownership plan (ESOP) on innovation investment in Chinese tobacco concept stock listed companies. Methods: we firstly performed empirical research method to investigate the differences in innovation investment between companies implementing ESOPs and companies not implementing ESOPs by using the panel data of tobacco concept stock listed companies from 2014 to 2020. Secondly, we further performed case study method to test the changes in innovation investment of tobacco concept stock listed companies before and after implementing ESOPs by choosing Hengfeng Paper as a research subject. Results: In tobacco concept stock listed companies, companies implementing ESOPs had higher level of innovation investment than companies not implementing ESOPs. After implementing the ESOP, Hengfeng Paper significantly increased its investment in innovation. Conclusion: In tobacco concept stock listed companies, the implementation of ESOP with ordinary employees as the main incentive object helps to promote innovation investment.

Use of social networks in stock investment

PurposeDrawing on the literature regarding the social network and stock investment, this paper aims to focus on the use of the social network on stock ownership decisions at individual levels. This paper also attempts to shed light on potential mediators of the relationship between the social network and stock ownership.Design/methodology/approachTo determine the relationship between stock ownership and using the social network, logistic regression was used. In order to isolate the effect of using hs on stock ownership, a decomposing method was adopted.FindingsThe findings provide evidence of the positive contribution of the use of social networks in stock ownership. Personal characteristics, such as household net worth, homeownership, education level and risk tolerance, may play a vital role in influencing individuals' decisions regarding stock investment. In addition, this study contributes to our understanding of income's mediating role in stock investment decisions.Originality/valueFirst, the authors contribute theoretically by drawing from the assumptions of social networking contagion theory, social influence theory, and social capital theory. Second, we explored potential mediators of the relationship between the social network and stock ownership. Third, this study complements the literature in incorporating the social network in business, financial professionals to be exact.