CLEO Logo

School of Management and Labor Relations

Keyword Search

ESOP Basics: Creating an Ownership Culture 

by:
Source: Ohio Employee Ownership Center, Kent State University 

The backbone of the American economy is the small family-owned business. The responsibility of running such a business on one's own involves a great deal of both stress and time. Often, the owner has no one to trust to take care of the company while going on a much needed vacation. Not only is their time for relaxation severely limited, but they also have to shoulder all of theresponsibilities of the firm. The obvious solution is to share responsibility, but it is hard to pay competent employees enough to retain them and employees rarely feel the same sense of responsibility that owners have. Sharing ownership with employees offers the opportunity to involve the workforce in the business with the same sense of responsibility that an owner has.

Sharing ownership through an Employee Stock Ownership Plan (see 'When Employee Ownership Makes Sense' in the Family Business Journal [Winter, 1998]) is one of the necessary ingredients to establish a successful ownership culture. However, employee-ownership by itself will not increase employee motivation and performance.

This is the conclusion of the U.S. General Accounting Office (GAO) which compared ESOP companies with traditionally owned firms. The GAO's study found that the combination of employee ownership and employee participation yields substantial improvement in firm performance. It is precisely this type of genuine employee partnership which can lead your employees to take on some of the responsibility.


Details

Link: None
Publication Date: 2009-01-01
Pages: 3

Attachments

ESOP Basics