ESOPs Decline, But Ownership Expands

March 19, 2001 ( - The number of companies sponsoring an employee stock ownership plan, or ESOP, has declined significantly over the past decade, but the average amount of stock held ESOPs has nearly doubled during the same period, according to a new survey.

A new survey by the ESOP Association reveals that a decade ago nearly 12% of its membership sponsored ESOPs at publicly traded firms, compared with just 3% in their 2000 member survey.  At the same time, the average amount of stock held by the ESOP is 66%, nearly double the level of a decade earlier.

Desired Outcome

More than 60% of ESOPs are related to purchasing company stock from an exiting shareholder.  However, more than a third (35%) established the ESOP because of the desirability of employee ownership as a benefit. Nearly three-quarters of survey respondents reported that the ESOP improved employee motivation and productivity.

More than 76% of respondents have 401(k) plans in addition to the ESOP and 10% have pension plans. All in all, 86% of ESOP companies offer an ERISA retirement plan in addition to the ESOP.

Roughly half (49%) of survey respondents were S Corporation ESOPs, while 25% of respondents who are presently C Corporation ESOPs are considering converting to S Status.  S Corps. have been permitted by law to sponsor ESOPs since 1998, according to the ESOP Association.

The ESOP Association is a national trade association representing more than 2100 ESOP companies and their approximately 750,000 employee owners.

– Nevin Adams