What Is an Employee Stock Ownership Plan?

Employee stock ownership plan is a new form of equity. Internal employees of the company subscribe for some or all of the company's equity, entrust the employee stock holding association (or a third party, generally a financial institution) as a corporate legal person to host and operate, centralized management, and the employee stock management committee (or council) as a community Legal persons enter the board of directors to participate in voting and dividends. There are two types: (1) employees of an enterprise own part of the property rights of the enterprise and acquire corresponding management rights by purchasing part of the company's stock; (2) employees purchase all of the company's equity and own all the property of the enterprise, so that their employees have complete ownership of the enterprise Management and voting rights. ^[1]

Employee stock ownership plan

Employee stock ownership plan is a new form of equity. Internal employees of the company subscribe for some or all of the company's equity, entrust the employee stock holding association (or a third party, generally a financial institution) as a corporate legal person to host and operate, centralized management, and the employee stock management committee (or council) as a community Legal persons enter the board of directors to participate in voting and dividends. There are two types: (1) employees of an enterprise own part of the property rights of the enterprise and acquire corresponding management rights by purchasing part of the company's stock; (2) employees purchase all of the company's equity and own all the property of the enterprise, so that their employees have complete ownership of the enterprise Management and voting rights. ^[1]

ESOP (Employee Stock Ownership Plans) is an employee stock ownership plan, also known as an employee stock ownership system. It is a form of employee ownership and a way for business owners and employees to share business ownership and future income rights.

In general, ESOP can be divided into two categories: non-

(1) Laying the foundation for democratic management of enterprises.

(2) Expand funding sources and increase employee income.

(3) Retain talents and provide security for employees.

(4) Adjust corporate income rights and change

1. Establish employee stock-holding meetings, and uniformly manage the capital contributions of employee shareholders

2. Define the functions and powers of employee stock-holding associations, and standardize the organization and behavior of employee stock-holding associations

3. Design of employee stock ownership plan

content include:

(1) The scope and number of beneficiaries is mainly to determine the qualifications of employees who hold shares.

(2) Control of total employee shareholding and distribution of employee stock.

(3) Custody of employee stocks.

(4) Sale of employee stock.

(1) Implementation of employee stock ownership plan

Judging from the common practice in foreign countries, it can be generally divided into non-leveraged ESOP and leveraged ESOP.

In practice, ESOP is widely used in a variety of corporate restructuring activities, including replacing or assisting the purchase of private companies,

The employee shareholding system, as a means to improve the corporate governance structure, enhance the labor enthusiasm of employees and the cohesion of the enterprise, has recently received more and more attention from the business community. The implementation of employee shareholding enables employees not only to have the right to receive labor remuneration according to their work distribution, but also to obtain the benefits brought by capital appreciation. It is also of great significance to strengthen the employee's protagonist consciousness and retain the backbone talents of the company.

In the process of the reform of the shareholding system in our country's enterprises and the establishment of a modern company system, employee shareholding can also effectively make up for the weak supervision and the serious problems of insider control caused by the absence of investment entities. In China, there are no clear laws and regulations to guide and regulate the management and operation of employee stock ownership. Most companies implementing employee stock ownership plans are also in the exploratory stage, especially in the context of China's corporate restructuring and economic transition. Different ownership structures and specific development history make it difficult for China's employee stock ownership to have a unified model and plan. However, several typical models of employee shareholding plans that have been implemented in China can still give us inspiration and lessons.

Managerial Financing Acquisition: Stone Model

Stone Group, as one of the largest private high-tech enterprises at present, is also one of the earliest private high-tech enterprises in China. It has been troubled by property rights. Qingxiang borrowed 10,000 yuan and set up a "Sitong New Technology Development Co., Ltd." based on Sijiqing Countryside. Although registered as a "collective ownership", Stone entrepreneurs have always adhered to "self-raised funds, free combination, and independent operation. The principle of self-financing. Both internally and externally tirelessly emphasize that they are "private-owned enterprises" and have no superiors to distinguish them from "government-owned collective enterprises". Sitong Qingxiang is also very cautious about its anchor units. Ten thousand yuan in loans, After three months, Sijiqing asked to return it, and the four reports were returned. In order to return its "other support", Stone gave it 50,000 yuan in profits every year for many years. Because of this, Sijiqing Township also asked later

After all, the employee shareholding plan is an imported product. Whether it can be combined with China's national conditions and the characteristics of the Chinese corporate culture to formulate an employee shareholding plan that is consistent with China's small and medium-sized private enterprises, is extremely important, especially

Some companies that have engaged in employee shareholding and those that are still implementing employee shareholding are also "tacitly secretive" about employee shareholding. Some interviewed business leaders and scholars also said that the employee share reform still needs to get out of the triple shadow. The first is to worry about "detailed rules, stop halfway." Many companies planning to implement employee shareholdings have expressed concern that the policy may face another "halfway stop". Second, they are worried about the "sequelae" of employee shareholding. Some companies that have engaged in employee shareholding have suffered from the sequelae of difficulty in withdrawing employee shares and the protection of employee shareholders interests. The main concern is that the loss of state-owned assets due to the failure to keep up with the supervision, especially the blind implementation of management shareholding, may turn the reform into a feast for the minority.

State-owned assets supervision cadres, business leaders, and experts suggest that Jingbang Group also reminds everyone that under China's national conditions, the society is highly sensitive to employee stock ownership issues, and trials of employee stock ownership must guard against several "mine areas."

First, avoid blindly running away with unclear rules. Some enterprises and state-owned cadres believe that as of now, there is still no systematic system norms and detailed implementation rules at the national level for employee shareholding. The employee shareholding policies currently in place or planned to be issued in various places are relatively principled. I don't know. " They suggested that the employee shareholding regulations and rules should be formulated at the national level as soon as possible to guide the orderly pilots in various places to avoid being passive because of blind "grabbing".

In particular, attention should be paid to the construction of an employee's shareholding exit mechanism to prevent holdings from becoming a solidified interest for a specific group of people. Otherwise, new conflicts and frictions will inevitably arise with the change of old and new employees and management of the company.

Secondly, to prevent employee welfare from causing "big pot rice". In response to the tendency of some companies to treat employees' shareholding policies as a one-sided distribution of benefits, Shao Ning, former deputy director of the State-owned Assets Supervision and Administration Commission of the State Council, said that shareholding is to put "golden handcuffs" on employees, which not only reflects the responsibility for risk, but also enables employees Personal value is manifested. Judging from the previous shareholding system reforms, the average and common employee shareholding is unsuccessful, it is easy to form a big pot, and the pressure on corporate dividends is high. He believes that, compared with full-share holdings, holding management and technical backbone shares will help stabilize the company's core team and activate the endogenous driving force for corporate development. ^[2]