The Benefits of Employee Ownership
More about employee ownership
An ESOP is a type of retirement plan, governed under ERISA, that invests primarily in company stock and holds its assets in a trust for employees. ESOP participants (employees) accrue shares in the plan, over time, and “cash out” by having their shares bought back, typically after they leave the company. There are about 6,500 active ESOP firms in the U.S., holding assets of more than $1.6 trillion, and representing some 14 million participants.
Working towards the same goals
One of the distinguishing traits of an ESOP is that everyone benefits from the improvement of the company’s performance. Every employee is also an owner (as a shareholder.) If revenue and profit grows, all shareholders win. If innovation attracts new customers, all shareholders win.
Employee ownership fosters a spirit of collaboration, mutual success and belonging
According to Harvard Business Review, “Businesses with 30% or more employee ownership are more productive, grow faster, and are less likely to go out of business than their counterparts.”1
Why is it smart to build your future at an employee-owned company?
Your “nest egg” can grow faster
Employee-owned companies perform better and grow faster than their non-employee-owned counterparts. In one 10-year study, ESOP companies experienced sales growth at a rate that was 5.4% faster compared with non-ESOP counterparts.
Your retirement savings can grow bigger
Market data shows that ESOP Index returns have outpaced the returns of the S&P 500 and other
stock indices—beating them by 2X in some instances.
In an academic survey sponsored by the National Center for Employee Ownership, authors Nancy Wiefek, Ph D. and Nathan Nicholson found that ESOP participants had more than twice the average total retirement balance of Americans nationally: $170,326 versus $80,339.2
1. Harvard Business Review, “The Big Benefits of Employee Ownership”, May 2021
2. ESOPs and Retirement Security By Nancy Wiefek, Ph.D. and Nathan Nicholson, December 2018