Study Shows Companies with ESOPs Tend To Outperform Competitors - employee stock ownership plans - Brief Article

HR Magazine, July, 2001 by Bill Leonard

Employee stock ownership plans (ESOPs) actually improve sales and financial performance of a company, according to research conducted at Rutgers University. The study also found that ESOPs have a positive effect on an employer's ability to recruit and retain employees.

Douglas Kruse and Joseph Blasi, both professors of human resource management at Rutgers, found that companies with ESOPs are likely to stay in business longer than comparable companies without similar plans. They examined 343 companies with ESOPs and matched these to similar businesses without stock purchase plans. Nearly 70 percent of the ESOP companies continued to conduct business as the same entity through the end of 1999, compared to only 55 percent of the non-ESOP companies that were still in business at the end of 1999.

The results also showed that companies with ESOPs performed better, on average, in the three years after adopting an ESOP than in the three years before. Post-ESOP companies' enhanced performance averaged 2.4 percent greater annual sales growth, 2.3 percent greater annual employment growth, and 2.3 percent greater annual growth in sales per employee.