Employee Ownership Month Quiz #3: How ESOPs Work

…at least once a year. If the plan allows, more frequently valuations are possible.

…tied to the end of the ESOP plan year. Valuations occur relative to the end of a particular ESOP’s plan year. While most ESOPs tend to operate on a calendar year basis—with the plan year ending on Dec. 31—they are not obligated to do so. For more information, see ESOP Brief #14: The Valuation of ESOP Stock.

…is required to operate the trust in the interests of the shareholders—the employees

…is obligated to oversee the activities of the Board

…may be personally sued for failing to uphold the obligations of a fiduciary

…may be a staff member of the company or an external party

Trustees must make decisions with the interests of the shareholders—the employee owners—in mind. They must monitor the activities of the Board and may be held personally liable (meaning they can be sued and may be forced to pay fines and other penalties out of their own pockets) for failing to meet their fiduciary obligations. Working at an ESOP means you are key to the business and there are mechanisms in place to protect your interests.

…increase. Paying down the loan reduces the company debt and should help boost share value. For more information, see ESOP Brief #14: The Valuation of ESOP Stock.