An employee stock ownership plan (ESOP) is when the company offers shares of the company’s stock to employees as part of their compensation.
This method of compensating employees has two tremendous upsides. The first upside is a partial solution to the conflict of interest you and your managers deal with on a regular basis. That is, your attempt to keep your employees motivated and working efficiently, while under traditional plans, employees are gaining little to nothing from increasing the firm’s bottom line.
However by offering ESOPs to employees, they feel tied to the firm due to the benefits of an increase in the company’s stock price. It’s a manager’s dream, and often results in a very loyal and highly motivated workforce. Their hard work and performance will be reflected in the company’s valuation, which may result in net wages that exceed traditional payment plans. Continue reading ‘Alternative Financing Sources – Employee Stock Ownership Plans (ESOPs)’ »