Employer Stock Ownership Plans: Who Benefits Most in Closely Held Companies?

The Employee Retirement Income Security Act of 1974 (ERISA) requires that Employee Stock Ownership Plans (ESOP) be established and operated exclusively for the benefit of participants and their beneficiaries. Additionally, ERISA (1) defines an ESOP as a stock bonus plan or a stock bonus and money purchase plan that meets the qualification requirements of the Internal Revenue Service; and (2) provides that an ESOP be designed to invest primarily in employer securities, and to maintain individual accounts for each participant. In order to determine if there are problems that require corrective legislation and to determine if employee motivation or productivity is affected by the ESOP, a review was undertaken of Federal contractors' ESOP. The review selected operational aspects of the ESOP at 13 companies where stock was closely held and at 3 companies where the stock was publicly traded.