employee stock ownership plan

Many options are brought to the table concerning employee stock ownership. Among these, the employee stock ownership plan, otherwise known as the ESOP, is definitely the most common. Through the use of an ESOP, a company first places new and existing shares into a trust fund for the company. The shares in the trust essentially belong to the employees, because they are then distributed individually to each employee, who has their own account. In the case of most companies, shares in the company are given to all employees that meet full-time qualifications and are over 21 years in age. However, the amount given to each employee is not the same. It generally depends on the employee's pay or status in the company. Over the years, as seniority is obtained, employees eventually have full rights to the shares in their account. In investing, this full right to shares is called being 100% vested. If the company's stocks are public, the employee can sell their stock. If not, stocks can be sold back to the company upon retirement, or if the employee quits or is fired. Some companies also add the quality of votes to each share, so more shares gives a person more say in the company.

Fast Facts

Around 11,000 companies in the US have ESOPs

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