Eva Comparison With Direct Employee Stock Ownership And Option Plans
EVA Comparison with Direct Employee Stock Ownership and Option Plans
An employee stock ownership plan (ESOP) is a type of defined contribution benefit plan that buys and holds company stock. Employees do not actually buy shares in an ESOP. Instead, the company contributes its own shares to the plan, contributes cash to buy its own stock or has the plan borrow money to buy stock, with the company repaying the loan. All of these uses have significant tax benefits for the company, the employees, and the sellers. Employees gradually vest in their accounts and receive their benefits when they leave the company. This differs from the EVA plan which provides the employee immediate payout.
As appealing as the tax benefits are, the employee stock ownership plan does have limits and disadvantages. The amount of time, effort and funds for developing an employee stock ownership plan is substantial, possibly $30,000 for the simplest plans in the smallest companies. Also, any time new......
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