The ESOP ASSOCIATION CANADA
(Employee Share Ownership Plan)
is a non-profit organization founded in November 1990 for the purpose of promoting the concept of employee ownership for business in Canada. Employee ownership is an important tool for economic growth and restructuring business enterprises.
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IS AN ESOP?
An Employee Share Ownership
Plan (ESOP) allows employees, who qualify, to purchase shares in their employer's
company, with or without the monetary assistance from the company. Employees can
acquire shares, and ownership through and ESOP that can range from one per cent
to 100 per cent. An excellent method for small business owners wishing to retire
and sell their business.
The key aspect is that employees have an ownership stake in the company they work for, and share in the risks and rewards that accrue to it.
ESOPs are appropriate for companies of small to large size, in all kinds of industries. They are being used in Britain and other European countries, the United States and Japan. China is also experimenting with employee ownership.
Types of ESOPsCurrently, there are four types of ESOPs in Canada:
- ESOPs started by employers to reward employees for their effort in making the company successful. Some date back 40 years.
- ESOPs started by public companies to reward key employees for their efforts, then expanded to all employers through matching share purchase programs. Over 80 per cent of these plans were started within the last 15 years.
- ESOPs started due to financial crisis, utilizing provincial ESOP legislation. A relatively recent development, these are used mainly to save jobs. Examples are Algoma Steel, Spruce Falls and Canadian Airlines.
- ESOPs started by employers and /or employees utilizing current tax laws and provincial legislation - some are for companies in crisis as well as healthy companies. So far, these ESOPs are few in number and have been happening only in the past three years.
Does employee ownership work in Canada?The most definitive study to date in Canada was done by the Toronto Stock Exchange, comparing ESOP versus non-ESOP public companies. For ESOP companies:
- Five-year profit growth was 123% higher
- Net profit margin was 95% higher
- Productivity measured by revenue per employee was 24% higher
- Return on average total equity was 92.3% higher
- Return on capital was 65.5% higher
Canadian Employee Ownership ConferenceThe first Canadian Employee Ownership Conference was held in Winnipeg June 3-5, 2015.