ABRC-ESOP

One of the biggest barriers to employee ownership is that many business owners or executives simply do not understand how it works. They make assumptions about these plans that inaccurately lead them to believe it could not work for their kind of business. For example, they wrongly think that the only way that employees can become owners is to actually buy shares or believe that ESOPs give employees the right to elect management.

Often, their accountants or lawyers tell them that employee ownership would not work for them, sometimes out of ignorance, sometimes because they fear that if the company goes in that direction, they might lose their business to another adviser more expert on employee ownership. (ESOP Report)

This post was published to ABRC-ESOP at 12:34:53 PM 3/7/2007
The Role of The Board in an ESOP


One of the most common problems we see in smaller S. Corp. ESOPs is the lack of understanding of traditional corporate structure, in particular, the role of the Board of Directors. In most small corporations, the owners wear multiple hats and fulfill multiple roles. They are the Shareholder, the Chairman of the Board or a Board Member, and often the President of the corporation.
Who are the Board of Directors?
The Board of Directors (Board) is the highest governing body in a company. They sit between the shareholders and the CEO/President by representing the shareholders. The Board ensures the company is run in a prudent manner in the best interest of shareholders as a whole. The Employee Stock Ownership Plan (ESOP) does not have a direct relationship with management and is the only shareholder in a 100% owned the ESOP. The ESOP does not have a direct relationship with management and votes the ESOP shares elect Board members and other shareholder ballot measures.