How Your Actions Affect Outside Stockholders
Whether you own a company or not, you may be wondering about how your actions affect your outside stockholders. Especially, if you are a public company, it is important that credit union stocks you keep in mind the rules surrounding your outside shareholders. Here are some of the things you should know.
Employee stock ownership plans (ESOPs)
ESOPs are a unique way to increase productivity and to provide employees with a tax deferred income. Besides promoting higher employee morale, offering ownership of a company may also protect the legacy of a business and improve its overall performance.
An ESOP is a retirement plan wherein a company pays money to an outside investor who in turn gives the company an equity investment in return. The funds are then used to purchase the company's assets.
ESOPs are available in a variety of industries, including manufacturing, professional services, engineering firms, dealerships, and more. They are becoming more common in the U.S., and approximately 6,600 companies currently have them. The National Center for Employee Ownership (NCEO) reports that the number of companies with ESOPs will reach fourteen million by 2020.
ESOPs offer a wide variety of tax benefits to the employees and to the company. They provide an excellent means to finance the company and keep staff focused on share price appreciation and corporate performance.
An ESOP is essentially a trust, which holds the shares of current and future employees. The shares are allocated to individual accounts based on a formula that is determined by the number of years an employee has been with the company. Different formulas may be used depending on the number of years the employee has been with the company, as well as the compensation the employee receives.
Power-sharing relationship between stockholders and public investors
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