ESOPs (Employee Stock Ownership Plans) are a unique benefit plan that allows employees, or “participant owners,” to acquire stock in the company. As of 2015, the National Center for Employee Ownership (NCEO) estimated that there were 7,000 companies that held ESOPs, covering 13.5 million employees.
First, they benefit employees by rewarding seniority. Employees gain an increasing right to the shares in their account as they gain seniority, which helps them accumulate greater retirement savings and more job security. The shares in a participant owner’s account are personal financial incentive for the company’s growth and performance, leading to higher levels of employee engagement. Companies with engaged employees outperform those without by up to 202% (Dale Carnegie) and engaged employees are 38% more likely to have above average productivity (Workplace Research Foundation). Engaged employees lead to higher service and commitment to quality which leads to higher customer satisfaction.
Second, they contribute to a company’s overall growth. A Rutger’s study conducted in 2000 found that companies that put ESOPs in place grew 2.3% to 2.4% faster than companies without ESOPs. Those ESOP companies that also implemented employee workplace participation programs were found to grow even faster – 8% to 11% per year, according to a 1986 study done by NCEO.
In addition to growth, companies with ESOPs exhibit higher performance levels in general. Companies with ESOPs and other broad-based employee ownership plans account for well over half of Fortune Magazine’s “100 Best Companies to Work for in America” list year after year (NCEO).
Kerr-Greulich Engineers, Inc. became an ESOP in October 2014. We are proudly reaping the benefits of an ESOP and our participant owners are as well. We have quarterly ESOP meeting to check in on the health of the ESOP and to educate ourselves further about the plan.