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ESOPs: Panacea or Placebo?
Sullivan, Donald E.
20/1  (Fall 1977): 55-61

The article focuses on leveraged employee stock ownership plan (ESOP). The ESOP, according to San Francisco attorney Louis Kelso, who is said to have invented it, can redistribute wealth within the framework of the capitalist system, assist in capital formation, motivate workers, promote economic growth, reduce welfare costs, and accomplish a number of other ends that he and others regard desirable. In fact, for more than 20 years, Kelso has been advocating the ESOP as a kind of broad-spectrum, sociofinancial antibiotic that treats several ills at the same time. Until concern arose recently over the availability of capital, however, the idea gained little attention. Kelso's idea is basically simple, and its prime target is the closely held corporation. As contributions flow into the trust, stock is allocated to the accounts of employees, generally in proportion to their compensation, for eventual distribution to the them or on their behalf upon retirement, death, or other termination of employment. Kelso's critics point out that, by its very nature, the ESOP invests primarily, if not exclusively, in employer stock-now and in the future.

 

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