ESOP (Employee Stock Ownership Plan)

What is ESOP?

An employee stock ownership plan (ESOP) is an employee benefit plan that gives workers an ownership interest in the company in the form of shares of stock.

ESOP stands for employee stock ownership plan. An ESOP grants company stock to employees, often based on the duration of their employment. Typically, it is part of a compensation package, where shares will vest over a period of time. ESOPs are designed so that employees’ motivations and interests are aligned with those of the company’s shareholders. From a management perspective, ESOPs have certain tax advantages, along with incentivizing employees to focus on company performance.