In an ESOP, how much control do employees have? Watch our video to learn more.
It’s first important to remember that the employees are not the shareholders of the corporation. The ESOP and the ESOP trustee own the shares. The ESOP trustee is the legal titleholder to the stock so in that sense ESOP employees don’t have a function directly in corporate control. It’s only in few circumstances that are listed in the Internal Revenue Code that employees actually have voting rights and those only come along at very rare events for mature ESOPs such as mergers, liquidations, sale of the company’s assets, etc. In the event of those transactions, the ESOP trustee is required to request that the participants instruct the trustee how to vote the shares.
With that being said, ESOP companies can enjoy great productivity enhancement if they give employees an avenue to show input over how their jobs are ordered and how they function and contribute to the productivity of the company, but that’s really an issue of management style not an issue of control from a corporate sense.