According to a recent report there were 9,000 ESOPs in the early 1990s, with that number falling to 7,700 plans in 2000 and climbing again to 9,225 plans in 2005.
The number of firms that are majority-owned by their ESOP is now estimated to be about 2,500, and roughly a thousand firms are believed to be 100% ESOP-owned. Today, about 10m employees participate in an ESOP, or about one of every 11 workers in the private sector, the article said.
While some argue that ESOPs are a method of sharing the capitalism, many companies implement the plans because of a belief that it encourages worker productivity and helps the business's bottom line. A 2006 survey found 91% of 426 responding companies said creating their ESOP was a good business decision that helped the company. Almost three-quarters also reported that their company stock outperformed three major stock indexes in 2005. A previous survey found that 82% of respondents said their ESOP improved worker motivation and productivity.
In 2002, testimony before the U.S. House Subcommittee on Employer-Employee Relations, Douglas Kruse of Rutgers University told congressional members that "25 years of research shows that employee ownership often leads to higher-performing workplaces and better compensation and worklives for employees."
In a 2003 working paper, research showed that “employee ownership firms tend to match or exceed the performance of other similar firms on average.” The authors also suggested that average productivity could be as much as 5% higher at employee-owned firms.
According to the article, a current project is aimed at looking more in depth at the problems with ESOPs, including the phenomenon called “shirking” (not all employees carry their weight equally) and the financial problem of lack of diversity of investments for those employees in an ESOP.
However, using data from the Shared Capitalism project in a paper for the annual conference of the Labor and Employment Relations Association the authors noted that “while far from adequate from the standpoint of financing retirement, the median pension wealth of ESOP participants is over four times higher than the median household pension wealth, and that company stock ownership in ESOPs, while highly concentrated, is considerably less concentrated than stock ownership.”
Source(s): National Center for Employee Ownership (NCEO), Employee Ownership Foundation, Federal Reserve, National Bureau of Economic Research (NBER)