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What does ESOP mean?
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Answer / nandhini
ESOP means Employee stock ownership plan
An employee stock ownership plan (ESOP) is a way in which
employees of a company can own a share of the company they
work for. There are different ways in which employees can
receive stocks and shares of their company. Employees can
receive them as a bonus, buy them directly from the company,
or receive them through an ESOP.
An ESOP is similar to a profit-sharing plan. A company
sets up a trust fund, into which it contributes either new
shares of its own stocks or cash to buy existing shares.
Another version of the ESOP borrows money in order to buy
existing or new shares. In this case, the company makes cash
contributions to the plan in order to repay the loan.
The main purpose of an ESOP is to reward and motivate
employees. They are also used to provide a market for
departing owners of successful companies. In most cases, an
ESOP is given to an employee, rather than purchased by an
employee.
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