This content appeared in Construction Executive, the magazine for the business of construction. It reaches more than 55,000 commercial, industrial and institutional contractors and construction – related business owners.
Although there are a number of ways employees can gain ownership in a company, one of the most well-known methods is the employee stock ownership plan (ESOP). At a basic level, an ESOP is a retirement plan that, like a profit-sharing plan, allows employee participants to share in the company’s success. More specifically, an ESOP is a trust set up by a corporation. The company contributes its stock—or, alternatively, cash to buy its stock—to an ESOP trust. Shares of stock are then allocated to the company’s employees over time based on their compensation levels as well as how long they have worked for the company; as employees accumulate seniority, they become increasingly vested in the account.
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