ESOP Companies Increasingly 100% ESOP Owned
NCEO founder and senior staff member
As part of a survey the NCEO is conducting on ESOP repurchase obligation, 40% of the 256 respondents indicated that the ESOP owned 100% of the stock, while another 26% were more than 50% owned by the plan. The survey was sent to NCEO members and clients of four major plan administration companies. As such, there is almost certainly a bias toward majority employee-owned companies, but when the question was asked of a similar sample in 1999, only 29% were 100% ESOP. As in the past, few companies indicated that the ESOP's percentage of ownership will decline, while 23% said it would increase. Eighty percent of the companies used the ESOP to buy out an owner.
The companies have managed to do reasonably well over the last five years. Only 12% had negative stock returns, while 40% averaged between 0% and 10% per year, 24% saw gains in the 10%-19% range, and 25% saw gains of 25% or more. Given the markets' dismal performance in 2001-2003, this holds up well.
The repurchase study will be complete soon and will be incorporated into an NCEO publication on repurchase issues.