The Effectiveness of Employee Stock Ownership Plans Essay

The Effectiveness of Employee Stock Ownership Plans - Essay characterEmployees do not have to pay taxes on the contri exceptions when they work in a company. Only when they forsake their job, they have to make either payments. It means that employees have a strong indigence to increase their productivity and generate higher revenues for the company in general not only because it increases their personal wage but also because they be the co-owners of the company. Thus, the effect on employees motivation is highly positive.Another important locution is that employees are interested in the successful implementation of job functions of their colleagues while in the absence of this plan, they are principally neutral. If other employees work more efficiently, it will lead to a higher gross output, and the market prise of the company will increase. Consequently, the given employee whitethorn receive higher revenues even if his/her personal productivity has not increased. Thus, it ma y be expected that the corporate culture within such organizations will be give way than in other companies. ESOP encourages the development of non-material assets in the company.However, ESOP also has some disadvantages for employees. I particular, it concentrates all employees shares in one company. It leads to over-concentration of risks that is generally considered as being highly negative. Therefore, employees tend to become too hooked over the dynamics of market prices of the company. In some situations, this dynamics does not correspond to their productivity. For example, during economic recessions, song prices usually fall dramatically that may decrease the revenues of employees even if their productivity keeps rising.Another problematic aspect is that ESOP does not always result in a higher productivity of employees. It means that motivation alone is not sufficient for higher output and better overall economic results. Moreover, some employees may hope to receive a highe r remuneration in an