Eighty-one percent believed the ESOP was a wise decision that helped out the company. Several other studies have shown a definite positive relationship between the ESOP and the stock of the company. The theory is that by giving the employees a piece of the company they are likely to be more efficient. Creating an ESOP can be rather complicated. First one must decide what formula is to be used for the allocation of stock to employees.
Some companies use years of service and others just divide it equally.
Usually an employee begins receiving allocations after they have been working for the company for about a year. Before an employee is entitled to receive the shares of stock, the shares must be vested. When an ESOP employee reaches 55, and has at least ten years of participation, he must be given the option of diversifying his ESOP account up to a quarter of its value. This option will continue to he reaches the age of sixty. At that time he has the onetime option of diversifying his holding up to fifty percent of the value.