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.

Case study: Central States Manufacturing, Inc

PurposeThis case study examines employee share ownership at Central States Manufacturing, where the employee stock ownership plan (ESOP) shares stunning sums of wealth with employees. Central States designs its ESOP to allow participants to access a portion of their ownership wealth while they are still employed at the company, through hardship and in-service withdrawals. This may make the “wealth benefit” of employee ownership more meaningful to lower-wage workers navigating economic challenges. The case study adds to the discussion about how employee ownership can benefit low- and moderate-wage workers and close the wealth gap.Design/methodology/approachData were collected via: (1) published accounts, (2) structured qualitative interview with the chief financial officer (CFO), (3) follow-up emails and phone communication with company contact and (4) review of plan document language.FindingsWorkers at Central States Manufacturing – including truck drivers and production workers – build large sums of wealth through the ESOP. Central States innovates in its ESOP by permitting workers to access a portion of their ownership wealth while they are still working through hardship and service withdrawals.Research limitations/implicationsThis is a mini-case study heavily reliant on the information provided by the CFO, in combination with background publications, and plan document language. It does not include employee interviews.Originality/valueThis paper lifts up an innovative company whose success and innovative ESOP plan design benefit frontline workers.

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.

PENGARUH EMPLOYEE STOCK OWNERSHIP PROGRAM (ESOP) DAN FIXED ASSET INTENSITY (FAI) TERHADAP KINERJA PERUSAHAAN

Artkel ini bertujuan untuk mengkaji dampak Employee Stock Ownership Program (ESOP) dan Fixed Asset Intensity (FAI) terhadap kinerja keuangan PT. Delta Dunia Makmur, Tbk. ESOP merupakan program yang diterapkan oleh perusahaan untuk melibatkan karyawan dalam kepemilikan saham perusahaan. Sedangkan FAI proporsi aset perusahaan terdiri dari aset tetap yang dimilikinya. Artikel ini menggunakan metode deskriptif-verifikatif dan pendekatan kuantitatif, cara menganalisis data dengan asumsi klasik, statistik deskriptif, dan analisis kuantitatif. Data dalam artikel ini merupakan data sekunder yang diambil dari laporan keuangan PT. Delta Dunia Makmur, Tbk. serta didukung oleh penelitian literatur dan dokumentasi. Berdasarkan hasil penelitian ini dapat disimpulkan bahwa secara parsial ESOP memiliki pengaruh terhadap kinerja keuangan. Namun untuk FAI tidak memiliki pengaruh terhadap kinerja keuangan. Secara simultan ESOP dan FAI tidak memiliki pengaruh terhadap kinerja keuangan dengan kontribusi sebesar 46,6 persen artinya 53,4 persen kinerja keuangan dipengaruhi oleh faktor lain yang tidak diteliti dalam penelitian ini.