Employee ownership is a business model in which a company's employees hold shares in the company itself, or in its parent company, aligning workers' financial interests with the business's performance. In the United States it is typically structured through stock option or stock ownership plans, most notably the Employee Stock Ownership Plan structure pioneered by investment banker Louis Kelso, while in the United Kingdom it has often been implemented through salary-deduction share schemes, with a notable wave following the privatization of bus services under Margaret Thatcher's government in 1985. Genuine employee ownership is generally distinguished from ordinary stock-based compensation by employees holding a significant collective stake, commonly cited at 25 percent or more, large enough to give them a real voice in how the company is governed.
Facts
Core MechanismEmployee ownership gives a company's own workforce a stake in its equity, most commonly in the United States through an employee stock ownership plan: a trust that holds company stock on employees' behalf and allocates shares to individual accounts. It is often used to buy out a retiring founder's shares or to fund retirement benefits tied to the company's own performance rather than an outside investment portfolio. 1 Origin Year1974 is the year the ESOP, the dominant modern US legal mechanism for employee ownership, became a qualified retirement plan under IRS and ERISA rules; employee profit-sharing and cooperative ownership predate this. Cross-Tradition Connections
Associated With
Employee ownership and the cooperative model are the two live alternative-ownership structures that redistribute control to stakeholders beyond outside shareholders, though they differ in mechanism: an equity stake in an existing company versus member ownership from the start.
Employee ownership is a well-established structure in the retail industry, where employee-owned chains hold significant market share in several countries.
Steward ownership separates a company control and voting rights from its cash-flow rights so profit cannot be extracted by outside shareholders, a goal it frequently pursues in combination with employee ownership of the underlying shares.
Sources
1. Wikipedia, Employee Stock Ownership Plan
WikipediaWikipedia: ESOP, lead paragraph, first sentenceQuote, Wikipedia: ESOP, lead paragraph, first sentence
An employee stock ownership plan (ESOP) in the United States is a defined contribution plan, a form of retirement plan as defined by 4975(e)(7) of Internal Revenue Service (IRS) codes, which became a qualified retirement plan in 1974.
1. Wikipedia, Employee Stock Ownership Plan
WikipediaWikipedia: ESOP, lead paragraph, ERISA qualification clauseQuote, Wikipedia: ESOP, lead paragraph, ERISA qualification clause
which became a qualified retirement plan in 1974
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