Employee Stock Ownership Plans (ESOPs)

Employee stock ownership plans (ESOPs) are employee benefit programs that make a company's employees owners of that company's stock. Two features of ESOPs make them unique among qualified employee benefit plans. First, ESOPs are required to invest mainly in the employer's stock. Second, these stock plans can borrow money from or on the credit of the employer, allowing ESOPs to serve as a tool of corporate finance.

ESOPs are the main form of employee ownership in the United States. At the end of 2004, the approximately 11,000 ESOPs in the United States owned an estimated $600 billion in assets and covered 10 million employees. Most U.S. ESOPs are large enough to exert a major influence on company strategy and culture, and about 2,000 ESOPs have total ...