One-Third of Large Public Companies Dropped ESOPs Between 2004 and 2005

According to an NCEO analysis, one third of the largest 900 companies that had ESOPs in 2004 (the Fortune 500 and the Russell 400) had reduced the stock held in the plan to zero or close to it by the end of 2005. The analysis was done as part of a project for the Heron Foundation and the Innovest Group.

The data are based on an analysis of Form 5500 filings that looked at ESOP asset holdings in 2004 and 2005. If we found that the assets had moved into a master trust or 401(k) plan, we assumed that the ESOP was still in place, but as part of another plan. It is possible that inaccuracies in filings or the movement of the assets into other plans that we could not easily track would make these numbers somewhat smaller than they would have otherwise been, but only by a handful of companies. Overall, about 6% of the largest companies had ESOPs in 2005, all but 17 of which own less than five percent of company stock.

It is likely that the change is a direct result of concerns about legal fallout from the Enron, WorldCom, RiteAid, and other "stock drop" lawsuits that began earlier in the decade.

A list of the S&P largest 900 companies with ESOP or broad-based individual equity compensation plans (mostly options and restricted stock) is available from the NCEO for $100 to members and $150 to non-members. Note that the current list uses a somewhat different definition of the largest 900 companies than last year's version.