Key Takeaways from Verit Advisors^®’ Employee Ownership Monitor

Verit Advisors^® commissioned original research from an independent research firm to discover what company founders and C-suite executives think about employee ownership and employee stock ownership plans (ESOPs). Respondents comprised leaders from 200 companies across various industries, including 90 companies that had completed a full or partial ESOP, 80 companies considering establishing an ESOP, and 30 companies not considering one.

Highlights from Verit Advisors’ Employee Ownership Monitor include these takeaways:

Leaders of ESOP companies voice near-unanimous satisfaction with their employee ownership plan.

Moreover, respondents’ satisfaction with employee ownership increased with the passage of time.

Specifically, by at least 90%, leaders of ESOPs agree overwhelmingly that the ESOP structure:

Leaders of ESOPs and of companies considering one perceive significant employee retention and cultural benefits.

ESOP leaders note that employees gain a feeling of inclusion, equity and purpose from an ESOP, which they believe generates a higher retention rate for employees and management.

For companies considering an ESOP, networking proves a valuable source for information about employee ownership.

While online search provided much of their initial information about ESOPs, leaders of “prospective” ESOPs credit networking with their peers, as well as their advisors’ expertise, with supplying significant information and insights about employee ownership.

Advisors add value.

Nearly all ESOP leaders agree the expertise of an advisor proves valuable.

Taxes matter, but taxes alone aren’t enough to motivate forming an ESOP.

Company founders tend to prioritize personal tax benefits when considering an ESOP, while non-founder ESOP leaders find corporate tax benefits more motivating. But if taxes are the sole priority without evaluating its workplace culture and employee benefits, leaders considering an ESOP are less likely to actually complete the plan.

ESOP leaders most often cite the challenges and complexities of regulatory reporting, including time involved.

If they could offer one piece of advice it would be to be proactive in reaching out to your advisors post transaction.

With the exception of operating rules and regulatory oversight, ESOP leaders say other potential challenges proved to be less severe than anticipated.

These include the cost of repurchasing shares, company capitalization, employee understanding of the ESOP structure, the lack of diversified employee compensation, and absence of a clear successor.

Once the ESOP structure takes root, its perceived benefits evolve over time. 

Leaders of ESOPs completed within the last five years most prize an ESOP’s tax and operating benefits and that the company’s legacy is preserved. Leaders of ESOPs completed at least a decade ago most value their employees’ higher sense of purpose and the advantages they perceive the ESOP structure gives them.