NORTH AMERICA CHAPTER

An employee share scheme (ESS) gives employees actual shares in a company, providing immediate ownership rights such as dividends and voting power, while an employee stock ownership plan (ESOP) grants options—the right to purchase shares at a set price in the future. The key difference is that shares provide instant ownership and benefits, whereas options only become valuable if exercised when the market price exceeds the strike price. Both models are used by companies, including startups and listed firms, to attract and retain talent, but they differ in timing of benefits, tax treatment, and flexibility in participation.

Since 1974, ESOPs have expanded dramatically in the U.S., growing from 1,600 to over 8,000 companies and giving more than eight million employees an ownership stake. Studies show that ESOP firms grow faster in sales and employment than comparable companies, especially when employee ownership is combined with genuine participation in decision-making. Beyond financial gains, ESOPs foster stronger engagement, motivation, and long-term stability, proving most effective when both ownership and participation are present together.

Research shows that employee share schemes can boost productivity, corporate performance, growth, and employee compensation, particularly when combined with wider employee participation in decision-making. Large-scale studies found that ESOP companies often achieve higher returns on assets, sales growth, wages, and organizational stability compared to non-ESOP firms, with markets responding positively to their adoption. While results vary depending on structure and motivation, overall evidence suggests that employee ownership fosters stronger financial outcomes and a more engaged, stable workforce.

Employee ownership is generally associated with higher productivity, job stability, company survival, and broader sharing of wealth, which can help reduce inequality and improve economic resilience. While risks such as free-riding and financial exposure exist, evidence shows these can be mitigated through supportive policies like employee participation, training, and diversification. Given its potential benefits for both firms and society, many argue that public policies—such as tax incentives, supportive infrastructure, and legal frameworks—are justified to encourage wider adoption of employee ownership.

Research consistently shows that employee share ownership can improve company performance, especially when combined with wider employee participation in decision-making. Studies across the U.S. and U.K. found higher productivity, sales growth, return on assets, and shareholder returns among companies with share ownership plans compared to peers. Surveys also highlight cultural benefits, with employees reporting greater motivation, loyalty, job satisfaction, and alignment with company values.