Employee Stock Ownership Plans

ESOPs (Employee Stock Ownership Plans) are typically created for succession planning in closely held companies, allowing employees to purchase corporate stock.
These plans are structured as trust funds and can be funded through various methods like issuing new shares, buying existing shares, or borrowing money to purchase shares. ESOPs are used by companies of all sizes, including large publicly traded corporations.
Contrary to some beliefs, ESOPs must be non-discriminatory, and a trustee is appointed to act as the plan's fiduciary. This ensures that senior employees don't receive preferential treatment, and ESOP participants have voting rights.

As ESOP shares are included in employees' overall compensation, companies can utilize ESOPs to maintain the focus of plan participants on the company's performance and the growth of its stock value. This approach is designed to motivate participants to act in the best interests of shareholders because the participants are, in essence, shareholders themselves.
Simultaneously, employees are offered an avenue to boost their income, enhance their overall compensation, and essentially receive recognition for their dedication and hard work. Having a stake in the company can foster a greater sense of value among employees and, perhaps, infuse a sense of excitement into their work.