Source: NCEO analysis of the Private Pension Plan (PPP)
Research File made available by the Department of Labor from data reported on
the Form 5500 for filing year 2013.
To count literal ESOPs, we include
all sponsors with plan type codes 2O (ESOPs other than leveraged ESOPs), 2P
(leveraged ESOPs), and 2Q (S corporation ESOPs).
Total asset amounts
shown exclude funds held by life insurance companies under allocated group
insurance contracts for payment of retirement benefits. These excluded funds
make up roughly 10%-15% of total pension fund assets.
ESOP-like plans are
here defined as profit sharing, stock bonus, and other defined contribution
plans that are substantially (at least 20%) invested in employer stock, and have
at least five participants.
For
a more detailed description of the methodology used here, see the article NCEO Methodology for Counting
ESOPs. For our complete report on this subject, see our issue brief The
Changing World of Employee Ownership.
Age of ESOPs
| Plan Effective Year |
Number of Plans |
% of Plans |
Total Participants |
| Before 1980 |
785 |
12% |
5,955,922 |
| 1980-1989 |
1,210 |
18% |
4,224,420 |
| 1990-1999 |
1,612 |
24% |
2,570,461 |
| 2000-2010 |
2,055 |
38% |
973,678 |
| Since 2010 |
627 |
9% |
203,055 |
Summary Characteristics of ESOPs and ESOP Companies
| Privately held company |
92% |
| Public company |
8% |
| Leveraged ESOP |
44% |
| Nonleveraged ESOP |
56% |
| S corporation |
45% |
| C corporation |
55% |
| Fewer than 100 total participants |
57% |
| 100 or more total participants |
43% |
| Manufacturing sector |
22% |
| Other sectors |
78% |
Determining the percentage owned
by the ESOP is difficult since ESOPs are not required to report that figure.
From our own survey research and knowledge of the community, we estimate that 30
to 40% of ESOPs are 100% employee owned. Allocation amounts are also not
commonly reported. We estimate that the mean allocation to accounts as a
percentage of payroll is 3-4% for public companies and 5-8% for private ones.
Trends in ESOP Numbers and Participation
ESOPs were given statutory
authority in 1974. In 1975, we believe there were about 250,000 participants in
about 1,500 ESOPs. In the early 2000s, we saw the number of net plans (new plans
minus terminations) decline, largely the result of a large number of very small
and very dubious plans that were set up (and usually not even funded) to try to
take advantage of then recent S corporation ESOP tax law. Congress, the IRS, and
the ESOP community all acted to prevent these plans from operating and almost
all were then terminated.
Meanwhile, existing ESOPs were growing faster
than the economy, meaning that participant and asset numbers increased. One
notable development has been the growth of acquisitions of company by existing
ESOP companies. We estimate there are 300-400 such acquisitions each year, or
about as many new ESOPs are are being formed. For details on this development,
read Why
Has the Total Number of ESOPs Gone Down But Participation and Assets Gone
Up?
The table below shows that the number of plans identified as
ESOPs has decreased, but the number of active participants has steadily
increased. While 2,079 fewer individual ESOP plans filed in 2013 compared to
2002, the total number of participants increased from 10.2 to 13.9 million over
the same period. Currently employed workers covered by an ESOP (active
participants) increased from 7.9 million to 10.6 million.
| Filing Year |
Number of ESOPs |
Total participants |
Active participants* |
| 2002 |
8,874 |
10,230,425 |
7,946,652 |
| 2003 |
7,934 |
10,049,154 |
7,570,321 |
| 2004 |
7,348 |
10,243,283 |
7,826,741 |
| 2005 |
7,198 |
11,998,319 |
9,448,271 |
| 2006 |
7,384 |
12,584,772 |
9,850,008 |
| 2007 |
7,326 |
13,218,808 |
10,173,536 |
| 2008 |
7,305 |
13,037,946 |
10,055,117 |
| 2009 |
6,690 |
12,996,711 |
10,014,524 |
| 2010 |
7,138 |
13,477,187 |
10,306,818 |
| 2011 |
6,941 |
13,462,955 |
10,288,363 |
| 2012 |
6,908 |
13,823,595 |
10,603,334 |
| 2013 |
6,795 |
13,927,535
|
10,578,114 |
*Active participants include any workers currently in
employment covered by a plan and who are earning or retaining credited service
under a plan. This category includes any nonvested former employees who have not
yet incurred a break in service. Active participants also include individuals
who are eligible to elect to have the employer make payments to a Section 401(k)
plan.
ESOPs are stock bonus plans qualified to borrow money from or on the
sponsoring company's credit; otherwise, ESOPs and stock bonus plans are very
similar.
In 2002 there were 1,614 plans that fit into the category of
ESOP-like plans. These plans tended to be larger: 66% had more than 50
participants. Over the last several years, this pattern switched. There is also
evidence of an increase in these plans over the last several years of that
period as shown in the table below.
Trends in ESOP-Like Numbers and Participation
| Filing year |
50 participants or fewer |
More than 50 participants |
All ESOP-like plans |
| 2002 |
546 |
1,068 |
1,614 |
| 2009 |
717 |
565 |
1,282 |
| 2010 |
1,144 |
532 |
1,676 |
| 2011 |
1,529 |
456 |
1,985 |
| 2012 |
1,888 |
343 |
2,232 |
| 2013 |
2,085 |
443 |
2,528 |
The vast majority of ESOP-like plans are
profit sharing plans. In 2002, 88% of these plans identified as profit sharing
plans (code 2E); in 2011, it was up to 97%. In contrast, the number of ESOP-like
stock bonus plans has decreased significantly. The plans in the "Other plans/not
specified" category were most frequently 401(k) plans and participant-directed
account plans where participants exercise control over assets in their
individual accounts. For a comparison of ESOPs, profit sharing plans, and stock
bonus plans, see How
ESOPs, Profit Sharing Plans, and Stock Bonus Plans Differ as Employee Ownership
Vehicles.
Survey Data on Broad-Based Employee Ownership in the US
The NCEO
estimates that approximately 32 million Americans own employer stock through
employee stock ownership plans (ESOPs), options, stock purchase plans, and
401(k) plans. The estimate is based a variety of company surveys and, where
available, government data. Another way to look at the data was provided by
several questions included in the General Social Survey (GSS), a 2014 random
sampling of working adults performed by the National Opinion Research Center
(NORC) of the University of Chicago. Joseph Blasi and Douglas Kruse of Rutgers
and Richard Freeman of Harvard, all affiliated with the Shared Capitalism
Project of the National Bureau of Economic Research, organized the questions and
their analysis. The NCEO was one of the sponsors of the survey questions, along
with the Shared Capitalism Project, the Beyster Institute, the Plan Sponsor
Council of America, and the Employee Ownership Foundation. The Shared Capitalism
Project receives support from the Rockefeller and the Russell Sage
Foundations.
The GSS data are reported in detail in a separate page
on this site. In sum, however, they showed that as of 2014, 19.5% of all
employees working in the private sector reported owning stock or stock options
in their companies, while 7.2% specifically held stock options. Looked at
another way, 36% of employees working for companies with stock (this excludes
government employers, nonprofits, partnerships, etc.) owned stock or options in
their companies. This means that approximately 32 million Americans own employer
stock through ESOPs, options, stock purchase plans, and 401(k) plans.
In
what follows, we present estimates of equity grants (primarily stock options and
restricted stock), and employee stock purchase plans (ESPPs). While about 8% of
401(k) assets are in company stock, these plans serve a very different purpose
than other kinds of employee ownership plans and so are excluded from this
analysis.
Note that some companies offer multiple employee ownership
plans, and many employees participate in more than one plan. For example, many
ESPP participants also own stock in a 401(k) plan, get stock options, or have
other equity compensation plans. Hence, the total number of participants in all
employee ownership plans cannot just be added up to get the total number of
employee owners.
Broad-Based Equity Grants
"Broad-based equity grants" are those that
grant stock options to 50% or more of full-time employees. Unlike the case with
ESOPs, it is not realistic to chart the growth of stock options year-by-year
because there are no hard data compiled on a comparable basis year-by-year. We
can look back at 1990 and estimate roughly 1 million option holders and look at
the present day and estimate roughly 9 million option holders, but it is
impossible to accurately say how many employees held options or similar equity
awards in any particular year. Why? ESOPs are highly regulated retirement plans,
and companies with ESOPs must tell the government every year how many employees
are in the plan. The government regularly publishes summaries of these data.
Although it is imperfect, it gives us something to go on. For stock options, on
the other hand, nothing of the sort is available.
The best data come from
the quadrennial General Social Survey, which has been asking respondents if they
get stock options at work since 2002. The percentage of all private sector
workers receiving options fell from 12.3% in 2002 to 7.2% in 2014, which
translates into 8.5 million employees compared to 13.4 million in 2002. New
shareholder approval rules, growing concern with dilution, and new accounting
rules are the primary culprits. Unfortunately, the GSS data does not provide on
how many people get restricted stock and similar equity grants, although we know
that with changes in accounting rules for stock options in 2006, many companies
shifted to these awards.
Employee Stock Purchase Plans (ESPPs)
Employee stock purchase plans
(ESPPs) include both tax-qualified "423 plans," which about 2,500 companies
offer, and nonqualified plans, which about 1,500 companies offer. Data are based
primarily on the National Association for Stock Plan Professionals' Stock Plan
Design and Administration Survey (1998 and every two years thereafter),
especially the more recent surveys, and a 2012 paper "Do non-executive employees
have information? Evidence from employee stock purchase plans," by Ilona Babenko
and Rik Sen. To estimate the number of employees covered under the plans, they
took the total number of companies offering plans, multiplied those numbers by
the average number of employees in the companies, and multiplied that number by
the average percentage of participation in the plans. Almost all companies with
ESPPs are public. Babenko and Sen found that in companies with ESPPs between
1998 and 2007, the mean annual contribution of participating employees was
$1,630 per year.
Employee Ownership and Corporate Performance
This issue is described in
detail in our article Research
on Employee Ownership, Corporate Performance, and Employee Compensation.
Generally, the results show that ESOPs make a significant contribution to
corporate performance, particularly when combined with management styles that
stress employee involvement in decision-making at the job level and sharing
financial information with employees. Data for broad-based stock options also
paint a positive picture, although the results are somewhat more ambiguous.
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