The Expanding Role of ESOPs in Public Companies

The Expanding Role of ESOPs in Public Companies

The Expanding Role of ESOPs in Public Companies

The Expanding Role of ESOPs in Public Companies

Synopsis

This book, written by the leading experts in the field, offers a comprehensive look at the factors behind the remarkable growth in employee stock ownership plans (ESOPs) in public companies over the past few years. The contributors discuss the legal and financial structure, actual uses, and practical implications of ESOPs in publicly held companies, demonstrating how ESOPs can be an effective means of both improving corporate performance and discouraging hostile takeovers. Particular attention is given to the actual impact of ESOPs on companies, shareholders, employees, and taxpayers.

Excerpt

The number of employee stockholders has increased dramatically in the last few years. This has come about primarily as a result of employee stock ownership plans (ESOPs) being set up by public companies. Why has this proliferation occurred? How are companies actually structuring these plans? Are the new shareholders central or incidental to the process? And what role do and should they play? Information about these questions along with other technical and empirical material about public company ESOPs is presented in this book.

When I was putting material together for the book, one person I contacted told me that "the public market for ESOPs is dead because of what Congress is doing." What Congress has now done (see Chapter 9) is try to curtail expenditures of public monies where there is little or no return to those footing the bill. Someone should be keeping a close watch when ESOPs borrow money to the tune of $24 billion, as they did in 1989, with Uncle Sam, Aunt Sally, and Cousin Lem picking up the tab. In the words of former U.S. Senator Everett Dirksen (R. IL), "A billion here, a billion there, pretty soon you're talking about real money." Again, someone should be paying attention when at a roundtable gathering for public ESOP companies the talk all focused on EPSs, LBOs, and A-1s. Not one person mentioned employees, public support, or moral concerns.

That is not to say ESOPs should not be used and used wisely by any company. But it is to say benefits should and must accrue to all constituencies, not just a select few. The whole notion of employee stock ownership plans centers around broadening the benefits of capital accrual. This book, like ESOPs themselves, encompasses a spectrum from the scientific to the sublime. I beseech . . .

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