ABRC-ESOP
Saturday, November 11, 2006
Companies with ESOPs Perform Better
Companies that adopt Employee Stock Ownership Plans (ESOPs) outpace industry peers in financial performance, according to a study.
Hewitt Associates, in conjunction with the Northwestern University's Kellogg graduate School of Management, analyzed all 382 publicly-traded U.S. companies that adopted ESOPs from the early 1970's to the early 90's.
In total shareholder return, those companies outperformed peers without such plans by a cumulative 6.9% percentage points in the four years after the ESOP was adopted. In return on assets, the difference was 2.7% annually.
Hewitt attributed the improved performance to the "ownership dynamic," in which employees feel a financial and psychological benefit to participating in ESOPs. 82% of company executives said their ESOPs had a positive effect on business results.
Hewitt Associates, in conjunction with the Northwestern University's Kellogg graduate School of Management, analyzed all 382 publicly-traded U.S. companies that adopted ESOPs from the early 1970's to the early 90's.
In total shareholder return, those companies outperformed peers without such plans by a cumulative 6.9% percentage points in the four years after the ESOP was adopted. In return on assets, the difference was 2.7% annually.
Hewitt attributed the improved performance to the "ownership dynamic," in which employees feel a financial and psychological benefit to participating in ESOPs. 82% of company executives said their ESOPs had a positive effect on business results.
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