Why Employee Stock Ownership Plan Companies Are More Profitable Than Traditionally Owned Companies

Running head: WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE

PROFITABLE THAN TRADITIONALLY OWNED COMPANIES 1

Why Employee Stock Ownership Plan companies are more profitable than traditionally

owned companies

Name

Institution

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 2

Table of Contents

Introduction ..................................................................................................................................... 3

Purpose of the study .................................................................................................................... 4

What ESOP is and how ESOP works ............................................................................................. 4

ESOP rules ...................................................................................................................................... 6

Why employee stock ownership plan companies are profitable that the traditionally owned

corporations..................................................................................................................................... 7

Benefits of ESOP .......................................................................................................................... 10

Comparison between ESOP and non ESDOP companies ............................................................ 12

Summary ....................................................................................................................................... 20

Conclusion .................................................................................................................................... 21

References ..................................................................................................................................... 23

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 3

Thesis statement

A comprehensive analysis of why Employee Stock Ownership Plan companies are more

profitable than traditionally owned companies.

Introduction

Employee Stock ownership plan (ESOP) is a concept that has widely gained prominence

globally among for-profit making companies. The concept has received immense acceptance in

most companies from both employees and managers. They cite that it is a viable and noble step

towards consolidating resources and fostering growth in the companies. Employees like the

concept as it gives them the opportunity to become shareholders thereby form part of the

company ownership. The companies also prefer the aspect of financial consolidation given that

they remain in control of the contributions made on behalf of the employees.

ESOP is a retirement plan where the company makes contributions to a trust unit based

on pre-determined amounts on behalf of employees to buy stock or shares. The shares can be for

the company where they work. That is the contributions are aimed at making employees part of

the company ownership by shareholding. The plan is executed purposely to serve employees

well and benefit them. As noted by Katz (2014), it is one sure way that employees can use to

gain part of the company shares and contribute in the decision-making process. Likewise, it is an

innovative way of motivating employees by attaching them to the company. The move makes

them feel part of the company thereby ignite a sense of dedication and determination to giving

the best (Grossman, 2015). Everything they do under such circumstances is characterized by

immense diligence, ethical values, and determination towards achieving the best results. This

paper provides comprehensive information on why companies that offer employee stock

ownership plan ESOPs are more profitable than the traditionally owned companies.

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 4

Purpose of the study

The analysis is purposefully meant to create awareness and understanding on why

companies that embrace ESOPs perform better or record higher profitability levels as compared

to the traditionally owned companies. The information is vital as it will help in influencing

decision-making in many institutions. It is bound to enlighten managers about the relevance of

the ESOP and why its adoption is necessary for the current century. The discussion will also

affirm or assert the concept’s ability to turn around performance in companies through its socio-

economic and cultural impact.

The target groups that the information is intended to reach include managers, employees,

company owners and investors. The study is to sharpen managers thinking and decision-making

regarding ESOPs. It aims at influencing those who have not adopted the concept to consider it

without undue delay. Likewise, it is a better way of advancing their knowledge on how to

improve and stabilize performance. For employees, the information aims at asserting the fact that

they can become owners of the companies where they work. They can be part of the ownership

and decision-making team under the structure.

Similarly, the information aims at sensitizing the employees about their ability to

accumulate wealth as they work through the ESOPs program. Credible awareness is equally

bound to be created particularly on the need for companies to embrace ESOP through the

comparative analysis between an ESOP and traditionally owned corporation.

What ESOP is and how ESOP works

As noted, ESOP is a retirement plan or a savings scheme or trust unit that is beneficial to

employees. The plan is managed by the company that the employee is attached including the

necessary contributions. The money remitted to the plan belongs to the employees and they can

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 5

access it upon retirement or when in need. In most cases, employees collect their returns after

retirement to enable them to cope and sustain their lives. ESOP accounts are managed on behalf

of the employees under a structured system (Chin, 2015). The system is characterized by

accountability and responsiveness to the owners’ needs. The plan provides the employees with

an excellent opportunity to own the company shares that in turn give them the authority to

participate in critical decision-making processes.

ESOP works differently given that the accomplishment of employee ownership is

possible in diverse ways. The first method is where employees participate in buying the stocks

directly, through bonus issuance, receipt of stock options and a designated profit sharing plan

(Chin, 2015). The plans differ in context, but the result is the achievement of company

ownership. Evidently, some employees gain company ownership through worker cooperatives

that encourage equal voting rights while others embrace the ESOP system. From 1974, many

companies prefer the ESOP system and US companies are leading in the number of institutions

offering the program.

Over 13.5 million employees are under the program in the US and they are benefiting

greatly. The companies that embrace ESOP use it to motivate and reward employees, use the

money to acquire new assets cheaply or without the attachment of tax and provide readily

available share market (Chin, 2015). The ESOP provides the share market for the shares of the

departed owners of companies with closely held shares. Therefore, ESOP is a working concept

that any institution that seeks to consolidate its gains should not ignore especially in the current

competitive business environment.

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 6

ESOP rules

ESOP is a plan that is executed under strict standards and guidelines. The guidelines help

in streamlining its functioning and ensure that employees including the company get value for

money. Utz (2016) affirms that the rules promote accountability and credibility in the handling

of the resources. The level of accountability ensures that no amount of employee remittances is

delayed, no amount is lost, and every record of cash outflow and inflow is protected. The first

rule is that the company must have a trust fund where the contributions of new shares are

directed including those used in buying the existing shares. The company can borrow the money

contributed through formal systems to buy new shares or the existing ones (Locke, 2015). After

successful borrowing, the company is under obligation to pay cash contributions to the plan to

facilitate the loan repayment. To promote sanity, all the contributions are subjected to tax

deductions but within specific limits.

The next rule is that the allocation of shares in the trust unit is done to employee accounts

directly despite the existence of some exceptions. The allocations are done based on the

individual's relative pay amount or a balanced formula and seniority. Seniority applies given that

as the employees rise through the corporate ladder, their terms of work and benefits change (Utz,

2016). The changes must be reflected to increase the individuals’ benefits in the long run since

they also acquire the right to receiving more shares in their accounts. The process is normally

known as vesting, and every employee must be 100% vested. The process is scheduled in most

cases to take three to six years depending on whether the vesting is done gradually or once.

The rules also spell out how employees receive their shares or money when they retire or

in need. The procedure is that they must get back their shares through a buyout by the company

at the fair market value (Locke, 2015). For private companies, the share price is determined in an

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 7

annual outside valuation while in public companies employees allocate shares through voting on

the main issues. Despite the vote, the company reserves the choice on whether to pass voting

rights on the issues or not.

Why employee stock ownership plan companies are profitable that the traditionally owned

corporations

It is inevitably clear that ESOP companies report higher revenues and performance than

the traditionally owned companies. The exemplary performance in ESOP companies is

attributable to their model of operation, structural system and the incentives that are provided

(Utz, 2016). ESOP companies do everything within their power to ensure that every stakeholder

is satisfied from the community, employees, and suppliers among others. They engage in fruitful

deliberations that promote creativity and innovation during strategy formulation. The first reason

why ESOP companies record higher performance rates than the traditionally owned corporations

is that they are democratically managed and flexible.

The companies are managed under democratic structures that promote good relations

between the stakeholders such as employees, the management, investors, and suppliers.

According to Locke (2015), the structures provide clear channels of communication that is

necessary for sharing of ideas among team members. Regarding flexibility, the companies

operate under flexible policies that are adjustable to meet the changing needs and environmental

changes as compared to the traditionally owned corporations. The second reason is that the

ESOP companies allow employees to become owners through share purchasing. Most companies

do not allow this as they cite that conflict of interest may arise; however, ESOP entities do it

professionally (Katz, 2014).

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 8

The companies give employees the opportunity to have shares that are normally being

bought back at fair market values when one is retiring from service. The aspect makes employees

feel happy and part of the company as compared to those of the traditionally owned entities that

rarely have little to be proud of. They feel that the company is theirs and every effort undertaken

can either make everyone lose or gain. Therefore, they strive to give their best to ensure that

outstanding outcomes are attained in all business units hence the growth in profitability. The next

reason why ESOP companies record better performance is the availability of the retirement plan

that is managed on behalf of the employees (Grossman, 2015). The plan is beneficial to the

employees, and they like the fact that employers make the contributions. The plan instills a

feeling of togetherness that inspires hope, motivates employees and ignites credible reasons to

act with determination. The level of motivation that fosters exemplary performance is unique in

the ESOP companies as compared to the traditionally owned corporations thereby explaining the

differences.

ESOP companies also lay off workers less often as compared to traditionally owned

institutions. The aspect translates into their good performance since they can have employees

who are nurtured, trained and committed to delivering quality results. The longer they stay with

the employees, the deeply rooted they get accustomed to the entity’s ethical guidelines, cultural

practices and the functioning of the business model (Chin, 2015). The entrenched employees

operate with fewer complications or report minimal mistakes as compared to institutions that

report higher rates of employee turnover as it takes time for the new staff to catch up.

Another driver of profitability of the ESOP companies is the connection with the locals

and community members. ESOP companies contribute towards improving the community

welfare by assisting to stabilize the local community economic base. The local participation is

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 9

achievable through a defined mechanism that allows local owners to cash out money or shares

upon retirement without the company getting affected financially (Grossman, 2015). The

community members are equally accorded a stake in the company, and they participate in

decision-making processes, a factor that is not common in the traditionally owned companies.

ESOP companies perform better because they provide greater opportunities for

employees than traditionally owned companies. The opportunities include higher wage earnings,

retirement income, participation in decision-making processes, and community involvement in

local assets management or control as compared to other entities (Daines, 2015). Similarly, the

accountability and credibility levels with which various activities are managed in the ESOP

companies influence their good performance compared to others. ESOP companies have viable

structures and action plans that stakeholders are not skeptical about in most cases. They do their

work knowing that their welfare is protected optimally. The aspect motivates them and

influences their good performance. Another key performance driver in ESOP companies is the

ability to mobilize funds internally and externally.

Foremost, the companies consolidate their resources given that they do not lose funds to

external trust units. They have trust units through which they channel the employee

contributions. The approach means that the money remains within. The companies can borrow

the contributions made to buy new or existing shares and to have money readily available to

repay an existing loan. The aspect of internal borrowing allows them to expand their investments

through a less costly source of capital. The strategy is beneficial and profitable since it eliminates

the expense that is associated with the cost of capital and many formal procedures required for

external borrowing. It instead ensures that money is readily available for usage when an

opportunity presents itself.

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 10

Indeed, the points indicate clearly that ESOP companies are more beneficial than the

traditionally owned entities. They are also profitable based on the evident incentives than their

counterparts.

Benefits of ESOP

ESOP is an investment plan that presents immense benefits to various stakeholders in

companies. The plan benefits companies, directly and indirectly, employees, the community and

even investors among other groups of people. For companies, the plan helps in achieving

tremendous progress structurally, financially and in policy making. The first benefit is that ESOP

concept help companies to double or triple their performance/profitability (Katz, 2014). The

concept provides requisite incentives that motivate quality output and employee participation in

sustaining value chain systems.

Companies that embrace ESOP have motivated employees who work with passion and

determination. They offer best customer care services, adhere to the ethical guidelines and ensure

that resources are used amicably. ESOP companies are also able to raise more capital for

expansion cheaply. The ability to raise cash easily is a huge advantage to the companies as

compared to traditionally owned corporations. The funds that are generated from the employee

contributions help them to buy new and existing shares and finance various projects.

Similarly, ESOP facilitates creativity, innovation, and teamwork in organizations. The

plan achieves this courtesy of its ability to bring people together, foster understanding and create

a sense of belonging among the stakeholders. The feeling that the company is ours leads to the

formation of working teams with the aim of attaining specific goals. People come together in the

working teams, share ideas and develop new ones out of creativity and innovation. The ideas are

used in propelling performance. The companies also benefit from the deeply-rooted attachment

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 11

that they have with the employees. The concept assists in ensuring that the trained employees

who understand the ethical values and operating standards continue to serve without

interruptions that normally create performance gaps.

According to Katz (2014), ESOP is beneficial to companies as it helps in creating a good

relationship between the community members and the company. The cordial relationship asserts

the company’s acceptance among community members that attracts goodwill from the public.

Any company that seeks to operate with minimal complications must have the community’s

acceptance. Without their involvement and support, quality performance cannot be achieved as

evident in the ESOP companies (Daines, 2015). Likewise, ESOP concept enables companies to

buy shares from the departing owners at the fair market value. The purchasing of shares ensures

that the stocks are consolidated and used to better services going forward.

Employees benefit greatly from ESOP plan in various companies. The first benefit is that

the plan enables them to accumulate wealth and grow financially. It gives them the opportunity

to own shares that are issued after retirement. The money or contributions made is accumulated

in their specific accounts for accountability (Daines, 2015). The second benefit is that they can

participate in their respective company decision-making processes. The concept allows them to

have shares that in turn make them significant company owners whose decisions count.

They participate in decision-making by virtue of their position as employees and

shareholders. EOSP concept is equally beneficial to the employees as it allows them to work

under favorable terms and conditions (Katz, 2014). ESOP employees are paid well, earn more

wages, retirement income and gain promotions to higher positions. The terms of work are

encouraging as compared to employees who work in other companies. ESOP guarantees

individuals or employees access to their money or shares after retirement.

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 12

Comparison between ESOP and non ESDOP companies

This section provides a comparative analysis of two companies that are known as WinCo

Foods and Weis Markets, Inc. The comparative aspect is based on ESOP concept that aids

performance in most institutions. One of the companies operates a vibrant ESOP plan while the

other works under the traditionally owned company concept. The aim of the analysis is to show

the difference between ESOP companies and non-ESOP entities regarding profitability including

general performance.

Indeed, WinCo Foods Company is a fast growing chain store or supermarket that is

located in Arizona, US (Jensen & Phillips, 2015). The American based supermarket has grown

from strength to strength since its inception in the year 1967. It has expanded its distribution

networks, increased business units, product portfolio and profitability. The company has also

increased its employees’ numbers to 15,000 people. The exemplary performance is attributable

to the effective operating strategy, marketing plans, product quality and above all the ESOP

program (Jensen & Phillips, 2015). The company is privately held, and the employees own

majority shares. The ESOP concept has acted as a genuine motivation to the employees who in

turn have been giving their best to the company. Their work has been excellent over the years.

They have helped the company to expand its profitability index to over 4.73 billion and business

units to over 107 internally and externally. Its financial performance has been increasing yearly.

The company performs better that Weis Markets company that was formed in the year

1912. The company whose shares are owned by the three brothers has been focusing its energies

on providing food items and other valuable to consumers. The Mid-Atlantic Food Retailer

operates several business units that contribute to its overall performance (In Hammoudi, et al.,

2015). It has not been doing badly either from the first date of operation; however, the

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 13

performance has not been stable as compared to that of WinCo Foods Company. The variance in

performance is shown in the charts below. This first chart shows WinCo’s performance trend

while the second one shows Weis Company performance trend.

WinCo Company

https://www.google.com/search?q=Weis+Markets+Company+financial+statements&client=firefox-b-

ab&source=lnms&tbm=isch&sa=X&ved=0ahUKEwip-

9Wo98HQAhXIsI8KHWIoDiwQ_AUICSgC&biw=1366&bih=635#imgrc=fBE7c41f2ygQFM%3A

Graph 2: Weis Markets Company

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 14

https://www.google.com/search?client=firefox-b-

ab&biw=1366&bih=635&noj=1&tbm=isch&sa=1&q=winco+company+financial+performance+graphs&o

q=winco+company+financial+performance+graphs&gs_l=img.3...396988.402447.0.403369.14.13.0.0.0.0

.665.1328.5-2.2.0....0...1c.1.64.img..12.0.0.-IqqFahGmSY#imgrc=V34NC6B5HuDl7M%3A

Subsequently, significant growth has been recorded but more needs to be done. Its

financial performance stands at $2.8 billion as at 2015 and 2.7 billion as at 2014 as compared to

the WinCo’s revenue base of over $4.7billion (In Hammoudi, et al., 2015). Despite that it has

been reporting varying figures over the years due to some operational challenges. One of the

challenges includes lack of motivated employees. The employees are not highly motivated as

compared to those of WinCo Foods company thereby affect the commitment to the provision of

quality services.

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 15

From the accounting or financial statements, it is clear that the two companies have had

different performance trends. WinCo has had a steady growth to date as compared to Weis

Markets Company as shown above. The trend is worrying for Weis Company as this year also

they have been recording inconstant progress. The inconsistency in performance is shown in the

chart below.

https://www.google.com/search?client=firefox-b-

ab&biw=1280&bih=671&tbm=isch&sa=1&q=Weis+Markets+Company+financial+statements&

oq=Weis+Markets+Company+financial+statements&gs_l=img.12...4595971.4605875.0.460784

7.33.23.0.0.0.0.0.0..0.0....0...1c.1.64.img..33.0.0.v27YnqYskvs&bav=on.2,or.r_cp.&bvm=bv.139

782543,d.ZGg&dpr=1&ech=1&psi=efs2WIL4J8fegAa4rYPwBg.1480007815357.3&ei=efs2WI

L4J8fegAa4rYPwBg&emsg=NCSR&noj=1#imgrc=1D-QevmeCCC0-M%3A

WinCOCompany also records more sales and changes in asset value than Weis

MarketsCompany. The variance depicts that WinCo is doing the right thing at the right time that

would include the use of innovative sales strategies as compared to Weis Company that seems to

record fluctuating figures. The changes are shown in the financial statement below. For example,

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 16

total assets for Weis Company stood at $1,235.959, $1,191.119 and $1,148.2419 in 2015, 2014

and 2013 respectively while WinCo recorded an asset base of $6,878.966 in the year 2014 and

6.591.118 in the year 2013 respectively(Jensen & Phillips, 2015). The differences show the

performance variance between the two companies. Other aspects of performance can equally be

established from the reports below. The first statement is for WinCo Foods Company and the

second one is for Weis Markets, Inc.

statement (WinCo’s Balance Sheet Statement)

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 17

statement (Weis Markets Balance Sheet Statement)

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 18

Assets (mil)

2015

2014

2013

Current Assets

Cash

$17.596

$22.986

$17.965

Net Receivables

$88.083

$70.642

$57.193

Inventories

$229.399

$239.641

$240.452

Other Income Assets

$17.198

Asset Summary

Total Current Assets

$454.65

$434.393

$404.748

Net Fixed Assets

$738.985

$716.86

$704.985

Other Noncurrent Assets

$7.162

$4.704

$3.347

Total Assets

$1,235.959

$1,191.119

$1,148.2419

Liabilities (mil)

2015

2014

2013

Current Liabilities

Accounts Payable

$160.441

$144.812

$133.568

Short Term Debt

Other Current Liabilities

$6.898

$12.52

$12.903

Liability Summary

Total Current Liabilities

$221.928

$210.617

$193.22

Long Term Debt

Other Noncurrent Liabilities

$30.896

$3.242

$5.934

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 19

Total Liabilities

$364.212

$333.287

$314.189

Stakeholder's Equity (mil)

2015

2014

2013

Equity

Preferred Stock Equity

Common Stock Equity

$9.949

Equity Summary

Total Equity

$871.747

$857.832

$834.053

Shares Outstanding

26.9

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 20

Summary

This section provides a detailed summary of the information that is contained in the

paper. It covers fundamental points about ESOP concept, its application in companies, the rules

governing its application, and how it works, comparative analysis of two companies.

Subsequently, the section covers the key reasons why ESOP companies perform better than

traditionally owned corporations.

Apparently, many companies that embrace ESOPs record exemplary performance in all

dimensions as compared to the traditionally owned corporations. They manage their affairs

effectively, attend to customers well, produce quality products and remain competitive. Such

companies rarely record losses given that their books are always positive due to the increased

sales levels. It must be noted that most companies that embrace the practice are for-profit

entities. The companies adopt the practice as a strategy for improving performance and ensuring

satisfaction to all stakeholders. They also embrace it as a way of maximizing the available

resources by making sure that the employee contributions to such schemes are not remitted to

other entities but within its circles.

Most managers affirm that the growth in profitability that they recorded is as a result of

the stable relationship between the companies and employees. The relationship creates a sense of

belonging that motivate employees to offer their best in everything they do. In the process,

customers get satisfied, and in turn, sales increase thus flexes the profitability index upwards.

Such companies are highly competitive as compared to the traditionally owned entities that do

not entirely embrace the concept. The traditionally owned companies find it hard to cope with

the level of competition in the industries of operation. The aspect is apparent in the comparative

analysis between WinCo Company and Weis Markets, Inc. WinCo Company records steady

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 21

performance than xx that seems to be struggling. The exemplary performance is attributable to

the adoption of ESOP concept.

The implementation of ESOP is based on clear-cut guidelines and rules. The rules

facilitate the realization of sanity regarding the handling of various issues relating to employee

contributions. Some of the rules include the requirement that the companies must have a trust

fund, borrowings must be done through a formal procedure, loan paybacks must be done in time,

and employee contributions must be protected until retirement when buyout takes place at the

fair market value.

Conclusion

It is justifiable to conclude that ESOP presents tremendous benefits to companies and

employees including other stakeholders. The benefits range from socio-economic and cultural

achievements. In particular, many companies record improved performance due to the ESOP

concept. The companies that embrace the concept record the high amount of revenues as

compared to those that operate under traditional guidelines. The companies also provide quality

products and services that promote sales including customer numbers. Performance in ESOP

companies always advances due to the incentives and opportunities that the concept provides.

The incentives and opportunities motivate further effort in employees and other

stakeholders to work diligently. They also facilitate innovation and teamwork in companies that

remain key drivers of competitiveness in the dynamic business environment. Teamwork is

necessary for any organization to meet its objectives. It guarantees good relations, sharing of

ideas and strategic communication that is good for quality business engagement. The fact that

ESOP aids effective participation of employees in decision-making is a great achievement since

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 22

it helps in building strong companies. Employee involvement in such processes ensures holistic

implementation of the quality decisions made.

Likewise, ESOP is appropriate for companies given that accountability and strict

guidelines characterize its management. The guidelines avert any form of misappropriation;

promote effective deduction of tax amounts and management of employee accounts. The benefits

influence productivity in the organizations as evident in WinCo Foods and Weis Markets

companies.

WHY EMPLOYEE STOCK OWNERSHIP PLAN COMPANIES ARE MORE PROFITABLE

THAN TRADITIONALLY OWNED COMPANIES 23

References

Chin, F. (2015). How Does an Employee-Owned Company Work?. Retrieved from,

http://smallbusiness.chron.com/employeeowned-company-work-44184.html

Daines, K. W. (2015). IRS guidance allows pre-approved ESOPs and cash balance plans.

Journal of Pension Benefits, 23(1), 47-48.

Grossman, J, (2015). Heed Vital Guidance on ESOP Valuation Provided in Greatbanc Trust.

Valuation Strategies, 18(3), 4-11,47-48.

In Hammoudi, A., In Grazia, C., In Surry, Y., & In Traversac, J.-B.(2015). Food safety, market

organization, trade and development. New York: Springer.

Jensen, C & Phillips, P. (2015). ESOPs in Canada: How to Implement an Employee Share

Ownership Plan to Grow ... New York: Friesen Press.

Katz, H. (2014). ESOPs: A Path To Increasing a Company’s Sales, Profitability, Employee

Satisfaction and Job Security. Retrieved from,

http://www.foxrothschild.com/publications/esops-a-path-to-increasing-a-

company%E2%80%99s-sales-profitability-employee-satisfaction-and-job-security/

Locke, D. (2015). An ESOP Can Lead to More Productive, Satisfied Employees. Retrieved from,

http://www.mossadams.com/articles/2015/september/esop-exit-strategy-with-tax,-

retirement-benefits

Utz, J. L. (2016). Employee stock ownership plans: Legal and regulatory update. Journal of

Pension Planning and Compliance, 42(1), 16-64.

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