Number of ESOPs Plummets in 10 years

September 27, 2005 ( - Changing tax laws may have driven out many large public companies from having employee stock ownership plans, but the surviving plans are holding more shares than before.

A news release from the Employee Ownership Foundation and The ESOP Association about their latest poll of the Associations 1,400 corporate members found that 1% of large public companies currently participate in ESOPs, down significantly from the 12% seen more than a decade ago. However, the average amount of stock held by the ESOP in 2005 is 68% – more than twice the number reported over a decade ago.

Also, approximately 45% of ESOPs are related to purchasing of stock from an exiting shareholder, which is not surprising considering this has been the driving force behind the establishment of ESOPs for more than a decade, the poll said.  In addition to exit strategy, 18% of companies responded that their ESOP was created to provide additional employee benefits, which was followed by 17% who stated the attraction of the employee ownership concept was the reason for establishing the ESOP.

Of the companies surveyed, 87% of respondents reported the use of 401(k) plans, pension plans, stock purchase plans, stock option plans, and money purchase plans in addition to the ESOP.

As for benefits of having an ESOP, an overwhelming 82% of respondents reported that the ESOP improved motivation and productivity at their company.