The Path Forward
ESOPs can reward workers while driving growth.
Our goal is to promote ESOP formation across a greater number of companies, spanning a broader range of industries, sizes and structures, particularly through partial ESOP formation.
Today
100% ESOP
Typically structured as an S-Corp, a majority of ESOPs being formed today are these. Where the structure fits, the results for workers and companies are exceptional, and it should keep being encouraged.
This means the owner has to hand over the entire company, and the ESOP usually puts up no money in exchange. Only a narrow set of companies can do that.
What’s missing
The partial ESOP
A company contributes stock, or an owner sells stock in the company, to a trust held on behalf of the workers.
Targeted changes to existing law can scale partial ownership and make it accessible to a wider range of companies.
Our seven core principles
For ESOPs to flourish in a manner that is good for a greater number of workers, companies, and for our broader economy, we believe that any plan to expand their usage would need to address the following:
01
Align tax incentives as to be suitable for partial ESOPs.
02
Offer valuation safe harbors for situations where fair value should not be in question.
03
Give disproportionate ESOP benefits to front-line workers (as opposed to highly-compensated executives).
04
Protect the spirit of the ESOP by assuring workers receive meaningful value in situations where companies utilize tax incentives.
05
Provide the ESOP at no cost to the employees, and ensure that the ESOP is not the sole retirement plan for workers.
06
Allow workers to access a portion of their ESOP value before retirement without penalty.
07
Maintain the current structure and benefits that have been highly effective for existing ESOPs (particularly 100% ESOPs).
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