Employee Share Ownership Plan

An Employee Share Ownership Plan (ESOP) allows employees, who qualify, to purchase shares in their employer's company. Employees can acquire shares, and ownership through an ESOP that can range from one per cent to 100 per cent.

The key aspect is that employees have an ownership stake in the company they work for, and share in the risks and rewards that accrue to it. ESOPs are started by employers to reward employees for their effort in making the company successful.

The most definitive study to date in Canada was done by the Toronto Stock Exchange, comparing ESOP versus non-ESOP public companies. For ESOP companies:

• Five-year profit growth was 123% higher
• Net profit margin was 95% higher
• Productivity measured by revenue per employee was 24% higher
• Return on average total equity was 92.3% higher
• Return on capital was 65.5% higher

From the perspective of an employee, the benefits of an ESOP include:

• Ability to directly share in the success of the company;
• Representation of worth to the employer;
• The potential for significant tax savings upon share disposal; and
• Instillation of pride due to ownership mentality and job satisfaction.