Frequently Asked Questions

Employee Ownership FAQs

Common questions about employee stock ownership plans (ESOPs), employee ownership trusts (EOTs), and other forms of employee ownership, from the basics to technical topics.

This FAQ is written primarily for business owners, managers, and advisors involved in setting up or running an employee ownership plan. If you're an employee at an ESOP company looking to understand your own benefits and rights, see our articles on Working at an ESOP Company and The Rights of ESOP Participants.

NCEO employee ownership FAQ hero (keyboard)

Who controls an ESOP?

The ESOP is governed by a trustee who must act for the exclusive benefit of participants. In closely held firms, employees must be able to direct the trustee as to the voting of the shares only on very limited issues, most notably the sale of all or substantially all the assets of the firm (but not on a stock sale; in publicly traded firms, votes pass through on all shareholder issues. Other than an asset sale, it would be very rare for there to be a voting issue. Employers can pass through full voting rights if they choose. In practice, the trustees vote for a slate of board members nominated by the board. The board appoints the trustee. Trustees almost never seek to be involved in business decisions of any kind. So the operational control of an ESOP company rests with the board and management.

For more details on governance, see ESOPs and Corporate Governance.

Link to this FAQ Topic: Governance, Fiduciaries & Compliance