Top Definition
(BUSINESS) Employee stock ownership plans are qualified retirement plans designed to invest in the stock of the companies that adopt them. The idea is that by participating in these plans, employees become, over time, owners of their own employers. However, in most cases employee ownership does not translate into employee control.

ESOP's are usually set up as an employee benefit trust; the employees' retirement pension fund is invested in shares of the company. ESOP contributions are tax deductible, so the company basically gets a tax break for its employee benefits. The downside of this is that the employees are totally dependent for their retirement on a single company, rather than many (as with an ordinary pension plan).
In 1974, the US Congress passed ERISA. This imposed rules for the organization and vesting of pension plans. It established rules for setting up an ESOP. Eventually, thousands of ESOP's were set up.

Sen. Russell Long (D-LA) managed to use his senior position and powerful connections to push for laws that promoted ESOP's. The immense tax advantages caused ESOP's to be widely adopted. Later, those provisions were eliminated but the ESOP's remain.
by Septimus Severance September 04, 2010
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