Communicating ESOPs in the Company

ESOPs should not be presented as more than they are.

One of the basic errors is to present your company Employee Share Ownership Plan (ESOP) as something more than it is intended to be. A company that provides an ESOP simply as an additional employee benefit should not attempt to tout it as a plan to make everyone a partner in the business. Employees will immediately spot the phony rhetoric and turn their backs on the plan.

If, on the other hand, an ESOP is intended to promote “partnership” in the company, then those designing the plan need to reject the temptation to tokenism. If the ESOP is to have an effective role in transforming company culture, then the ESOP must be designed to cut in the employees in a significant way. The efficiency, productivity, and employee retention gains associated with ESOPs show themselves in a sustained way only when the employees acquire a substantial stake in the business

ESOPs aren’t retirement plans

An ESOP should not be promoted as a retirement plan. In Australia, superannuation is designed for that. Though certainly a savings vehicle, an ESOP is quite different from “super”. For one, it provides an accessible savings pool, something attractive to employees who are typically irked by the fact that they are obliged compulsorily to lock up money in a “super” fund. To talk up the supposed retirement advantages of ESOPs would go down with the workers like a lead balloon.

ESOP’s aren’t risk free

Also, never pretend that there is no “downside” to owning shares via an ESOP. Shares go up and down in price. ESOP shares are no different. So an ESOP engages a certain amount of risk: just like – come to think of it – superannuation.

Of course, companies could reduce the risk to employees by offering all-employee option plans. If the bosses can have options, why not the rank-and-file? So there is something quite practical that companies can do themselves to reduce ESOP risk – treat the employees just as if they were the senior managers.

Communicating ESOPs in the Community

Bad corporate citizens.
Ideological holdouts.
Tax avoidance claims.
ESOPs and wages.

Communicating ESOPs to the Labor Movement