An interesting paper by Ronald J Gilbert and Corey M Rosen comparing traditional Employee Stock Ownership Plans (ESOPs) with Employee Ownership Trusts (EOTs) in the US. Both Ron and Corey are highly experienced professionals. (Ron is a former member of the ESOP Association, NCEO board of directors and NCEO board of governors, and has served in numerous volunteer capacities for the Association over the last two decades. Corey is the founder of the National Center for Employee Ownership.)

EOTs have had success in the UK in recent years, with relatively little uptake in the US. The key feature is that EOTs provide collective ownership through a trust with lower costs but without the direct tax benefits for the employees or individual share ownership. The paper suggests that businesses considering employee ownership schemes should consider the benefits of traditional ESOPs, where employees can see in their individual accounts the number of shares they own and the resultant motivation linking their efforts to the company’s success.

To date, much of the literature has simply transferred the measured benefits of ESOPs to EOTs. More analysis needs to be done to understand the differences in impact between the two structures. Given the current low productivity levels, it is important that businesses do not disregard the benefits of direct share ownership in employee engagement.

To read the paper, open: Identifiable Stock Ownership

Robert Pay, Chairman, Esop Centre