Definition: An employee stock ownership plan (ESOP) is an employee benefit plan that provides a company’s workers with an ownership interest in the company. The employer allocates a certain number of shares of the company to each eligible employee; shares are allotted based on pay scale or some other similar form of distribution.
Each employee’s shares are held in the company’s ESOP trust until he leaves or retires. ESOP provides an employee with further encouragement to remain at his company and contribute to its financial success.
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Also Known As: Stock Purchase Plan
