Business owners who haven’t yet established an ESOP often wonder if doing so will cause them to lose control of their company. This is one of the 8 most common ESOP myths we hear when speaking with organizations about exploring and establishing Employee Stock Ownership Plans (ESOPs).
Remember that ownership does not equal control. While in non-public ESOP companies voting rights on shares allocated to ESOP accounts must be “passed through” to ESOP participants for votes on major corporate matters, other decisions can be voted by a named fiduciary or as otherwise designated in the plan. Often, this fiduciary is the selling shareholder of the stock, who takes that position after the sale of the stock to the ESOP has been completed. Additionally, wise employees recognize that decisions should be made by those individuals most qualified to make them. In other words, establishing an ESOP does not imply moving to a completely democratic business model; company leadership can and should remain intact.