DEFINITION of 'Employee Share Ownership Trust - ESOT'

A program that facilitates the acquisition and distribution of a company's shares to its employees. ESOTs are trust accounts through which a company can sell its shares to employees. Employee share ownership is supposed to boost employee morale and improve employee incentives to work hard and make decisions that are in the company's best interests. Such an arrangement thus helps to align the interests of company employees with those of other shareholders.

BREAKING DOWN 'Employee Share Ownership Trust - ESOT'

Some reasons for a company to provide an ESOT include the following:

1. the ability for the company to test out how an employee share ownership plan would work
2. the creation of a mini market for the transference of a company's stock, which allows the company to obtain funds efficiently and educate its employees in share ownership
3. the provision of a tax incentive to shareholders should they decide to sell their shares in the company back to the company's ESOT

RELATED TERMS
  1. Key Employee

    An employee with a major ownership and/or decision-making role ...
  2. Employee Trust

    A trust fund established by an employer on behalf of its employees ...
  3. Employee Stock Ownership Plan - ...

    A qualified, defined contribution, employee benefit (ERISA) plan ...
  4. Corporate Pension Plan

    A formal arrangement between a company and its employees - or ...
  5. Revenue Per Employee

    An important ratio that looks at a company's sales in relation ...
  6. Exempt Employee

    The term “Exempt Employee” refers to a category of employees ...
Related Articles
  1. Financial Advisor

    Beware Of Company Stock In Qualified Plans

    While this strategy does have a few advantages, it can also pose some substantial risks to employees.
  2. Managing Wealth

    Get The Most Out Of Employee Stock Options

    Many corporations encourage employees to participate in the company’s growth by offering them a piece of the pie. That means employee stock options.
  3. Personal Finance

    Top 10 Companies With the Best Benefits (NFLX, ADBE)

    Find out which companies offer the most unique benefits. Discover the benefits that are most likely to help workers decide to accept a job offer.
  4. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  5. Managing Wealth

    Three Perks Business Should Give Their Employees

    Firms that treat their employees well have a competitive advantage over their rivals. Here are three important perks to give your employees.
  6. Managing Wealth

    5 Low-Cost Perks for Small Business Employees

    Money isn’t the only way to motivate employees. Here are some savvy strategies even the smallest business can use.
  7. Investing

    What is a Stock Option?

    An employee stock option is a right given to an employee to buy a certain number of company stock shares at a certain time and price in the future.
  8. Managing Wealth

    Company Policies you Did Not Know Might Be Illegal

    While you need an employee handbook to maintain law and order, trying to enforce illegal policies can land you in hot water.
  9. Small Business

    3 Reasons to Develop an Employee Handbook for Your Small Business

    Learn how a small business can benefit from an employee handbook covering labor laws, codes of conduct, leave policies and media relations.
  10. Financial Advisor

    4 Reasons Employee Wellness Matters

    Employees want more than a paycheck. They want rich benefits that include a health and wellness component. Companies that offer it stand to save.
RELATED FAQS
  1. What does a merger or acquisition mean for the target company's employees?

    Learn about the likely impacts of a mergers & acquisition deal on the target company's employees, their benefits and adjusting ... Read Answer >>
  2. Can LLCs have employees?

    Discover how limited liability corporations (LLC) can have an unlimited number of employees and the legal steps required ... Read Answer >>
  3. How do restricted stocks, treasury stocks and stock appreciation rights benefit employees?

    Restricted stock represents any equity that is conditionally given or sold to an insider as compensation or as part of an ... Read Answer >>
  4. How do firms improve their employees' human capital?

    Learn what human capital is, how a firm can benefit from improving human capital and some ways a firm can improve its employees' ... Read Answer >>
  5. Is an employee eligible for an SEP if the plan has already been set up for other ...

    It depends. The employee should meet not only the service requirements, but the age and compensation requirements as well. ... Read Answer >>
  6. Does technology follow the law of diminishing marginal returns?

    Learn how workers in the technology industry are affected by the law of diminishing marginal returns, and note the ways that ... Read Answer >>
Hot Definitions
  1. IRS Publication 970

    A document published by the Internal Revenue Service (IRS) that provides information on tax benefits available to students ...
  2. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  3. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  4. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  5. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  6. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
Trading Center