Leveraged Employee Stock Ownership Plan - LESOP

AAA

DEFINITION of 'Leveraged Employee Stock Ownership Plan - LESOP'

An equity compensation system in which the sponsoring company typically leverages its credit to borrow money, which it then uses to fund the plan, in order to purchase company shares from the company's treasury. The shares are used for the purposes of the stock ownership plan, and the company pays back the original loan with annual contributions.

INVESTOPEDIA EXPLAINS 'Leveraged Employee Stock Ownership Plan - LESOP'

Typically, companies choose to use stock ownership plans or equity compensation systems in order to tie a portion of their employees' interests to the bottom-line share price performance of the company's stock. In this way, all employees who participate in the plan have an incentive to make sure the company's operations run as smoothly as possible. By leveraging the company's assets to fuel a LESOP plan, the business is able to provide for its stock ownership plan without immediately putting up all the capital required to do so.

RELATED TERMS
  1. Cafeteria Plan

    An employee benefit plan that allows staff to choose from a variety ...
  2. Employee Stock Ownership Plan - ...

    A qualified, defined contribution, employee benefit (ERISA) plan ...
  3. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  4. Defined-Contribution Plan

    A retirement plan in which a certain amount or percentage of ...
  5. Corporate Pension Plan

    A formal arrangement between a company and its employees - or ...
  6. Pre-Disability Earnings

    The amount of qualifying income that a disability insurance policyholder ...
Related Articles
  1. Retirement

    The Investing Risk Of Underfunded Pension Plans

    Determine the risk to a company's EPS and financial condition resulting from an underfunded pension plan.
  2. Options & Futures

    A New Approach To Equity Compensation

    The new financial accounting standard known as FAS 123R could take a bite out of your portfolio. Find out why here.
  3. Investing

    How To Evaluate Pension Risk By Analyzing Annual Costs

    Learn how to assess whether a company's pension plan is posing more risks than what the footnotes indicate.
  4. Mutual Funds & ETFs

    How do hedge funds determine what assets to own?

    Learn about the various types of investments that hedge fund managers use, and explore basic hedge fund management trading strategies.
  5. Professionals

    What's the average salary of a bank teller?

    Read this article to find out more about average bank teller salaries, median hourly wage rates and potential future career prospects.
  6. Investing Basics

    How To Calculate Goodwill

    Goodwill is an intangible, but it is still possible to effectively calculate or estimate goodwill for a company.
  7. Professionals

    What's the average salary of a business operations manager?

    Read about the average yearly salary of business operations managers, and find out which locations and industries offer the best pay for these professionals.
  8. Personal Finance

    What's the average salary of an operations research analyst?

    Learn how much operations research analysts at different experience levels make on average across the nation and in specific regions.
  9. Professionals

    What's the average salary of a financial advisor?

    Learn about average salaries for financial advisors. Explore different levels of compensation financial advisors receive based on skills and experience.
  10. Professionals

    What's the average salary of a compliance officer?

    Learn about compliance officers, the locations and industries in which compliance officers work and how much they earn on average.

You May Also Like

Hot Definitions
  1. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  2. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  3. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  4. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Law Of Supply And Demand

    A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply ...
Trading Center