He could maintain effective control even if the ESOP held most of the stock. The employee participants are not stockholders and have no right to access corporate financials. The stock is allocated to the employees' accounts according to their compensation as the principal payments of the loan are paid. The ESOP participants are subject to a vesting schedule so that they will forfeit some or all of the accounts if they leave before becoming fully vested. Eventually, they will be paid out in cash when they terminate, retire or die.
Studies show productivity and profitability gains occur because of employee ownership through ESOPs.
Mr. Big was left with 49 percent of the outstanding stock. He wanted to transfer the balance of his stock to Tim. The ESOP helped Mr. Big achieve his succession plan with tax advantages to him and his corporation. Here are some ways in which they and their company might use the plan. It will let the company deduct both principal and interest on new or existing loans.