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Ownership
Employee ownership plans are similar to profit sharing and are intended to
increase worker commitment and performance. Under an employee stock ownership
plan(ESOP), employees receive stock in the company. An ESOP is a qualified,
defined contribution employee benefit plan that invests primarily in the stock
of the employer company. ESOPs are qualified (i.e., tax-qualified) in that in
return for meeting certain rules designed to protect the interests of plan
participants, ESOP sponsors receive various- tax benefits. ESOPs are defined
contribution plans in that the employer makes yearly contributions that
accumulate to produce a benefit that is not defined in advance. ( in contrast,
many pension plans are defined benefit plans; employees are guaranteed a
specified benefit, which the company funds by making the necessary
contributions.)
Technically, an ESOP is a kind of stock bonus plan, or a combination of a
stock bonus plan and a money purchase pension plan. Stock bonus plans were
used originally in the 1920s. They are in reality employee benefit plans
designed to pay their benefits out in the form of company stock. Money
purchase pension plans are retirement-oriented plans that commit the company
to a minimum annual contribution. An ESOP is simply a variation of a stock
bonus or stock bonus/money purchase plan that is designed to invest primarily
in employer stock.59 If the value of the stock increases, the stock owners
(employees) could, by selling their stock, receive a good return.
People-Based Pay
Compensation design has been changing to meet the environmental challenges of
the 21st century.6 The bureaucratic job-based approach used in determining
pay is no longer the only game in town, nor will it the major format used to
design pay systems in the future. Instead, the new designs will he peoplebased. One of the factors driving this change is the fact that the major
growth engines in our economy are not manufacturing but the service and
knowledge sectors. Jobs in these sectors