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MOST DEFINITIVE STUDY ON ESOP COMPANIES RELEASED; HIGH NUMBER OF COMPANIES IN MANUFACTURING, HIGH RATE OF RETURN FOR ESOP PUBLIC COMPANIES

MOST DEFINITIVE STUDY ON ESOP COMPANIES RELEASED; HIGH NUMBER OF

COMPANIES IN MANUFACTURING, HIGH RATE OF RETURN FOR ESOP PUBLIC
 COMPANIES
 WASHINGTON, Feb. 5 /PRNewswire/ -- The ESOP Association, a Washington-based trade association of ESOP companies, has released the most definitive study of ESOP companies ever assembled. It is estimated that 9,000 companies in America have ESOPs (Employee Stock Ownership Plans) and the recently released study has a sample size of 2,776 -- over 30 percent of the ESOP universe. This makes the study not only the most comprehensive ever done on ESOPs, but it adds to the growing body of knowledge on employee-owned companies in the United States. The study utilizes information on 2,776 ESOPs compiled from IRS form 5500 for plans operating during Jan. 1, 1988, through Nov. 30, 1989. The report was prepared for The ESOP Association Foundation by Dr. Michael Conte, Ph.D., the director of the Center for Business and Economic Affairs at the University of Baltimore, and a widely known and respected researcher on employee ownership.
 Some of the highlights of the study include:
 -- Industry Breakdown -- A higher percentage of ESOPs are in manufacturing companies than were previously thought. According to the study, 38.7 percent of ESOPs exist in manufacturing firms. It was thought that manufacturing made up only 25 percent of the ESOP universe, meaning the issues of competitiveness and employee ownership may be more closely linked than previously believed.
 In other sectors: 18.7 percent of ESOPs in finance, insurance and real estate; 16.2 percent in trade; 13.2 percent in services; 8.9 percent in transportation, communications and public utilities; and 4.2 percent in construction.
 -- Rate of Return -- While there are believed to be a variety of benefits to working in a well-run employee-owned company, such as pride in a sense of ownership, bonuses, etc., one additional benefit marker is the rate of return. ESOPs, which are defined contribution pension plans, are required to be "primarily" invested in their own employer's securities. The returns on plan investments are closely tied to the performance of the sponsor's stock.
 The mean rate of return on investment for public company ESOPs in 1988 was 15.2 percent. This contrasted with a lower average pretax return of 12.4 percent and an average after-tax return of 10.2 percent for a representative sample of 30 mutual funds which held balanced portfolios in 1988. The highest returns for any class of mutual funds in 1988 was 14.5 percent for funds which had a mixed objective: growth combined with current income. The estimated after-tax return for those funds were 12.3 percent. (Note that the most appropriate comparison is with the after-tax return vs. the pre-tax return. This is because ESOP investments are made with pre-tax dollars, while mutual fund investments are made with after-tax funds. Also, the income from mutual fund investment is taxed as it is realized. The proceeds of ESOP investments, in comparison, are taxed only in the year of distribution.) For this comparison, mutual fund data from the authoritative "Weisenberger Guide to Investment Companies, 1989" was used. The top 25 percent of ESOP public companies averaged a 29.4 percent return. The top 25 percent of private company ESOPs averaged a return of 18.2 percent in 1988. The mean return on investment for private company ESOPs that year was 10.3 percent.
 -- Public Companies -- A higher percentage of ESOPs are in public companies than previously thought. According to the study, 31.1 percent of ESOPs were sponsored by publicly traded companies, and 68.9 percent were sponsored by privately held firms.
 -- Other Plans -- In 1988, 14.9 percent of ESOPs had a 401(k) feature, commonly known "K-SOP." Public companies in the study were twice as likely to sponsor a K-SOP as privately held corporations. The number of K-SOPs is believed to have increased since 1988.
 -- ESOP Maturity -- ESOPs have been around longer than previously believed: 14.3 percent of ESOPs were created before 1975; 19.8 percent were created between 1975 and 1985. The mean age of ESOPs in the study was 7 years, with more than one-third in existence for over a decade.
 -- Unionized -- 4.4 percent of ESOP companies are unionized.
 -- Size of Company -- 27.8 percent of ESOP companies have fewer than 250 employees; 36.7 percent have 251 to 1,000 employees; 19.8 percent have 1,001 to 5,000 employees; and 15.7 percent have more than 5,000 employees.
 -- Company Contribution -- On average, publicly traded companies contributed nearly $3.7 million per year to their company's ESOP. Privately held companies contributed, on average, $1 million each to their Employee Stock Ownership Plan.
 -0- 2/5/92
 /CONTACT: Stuart Anderson, communications director, The ESOP Association, 202-293-2971; or Michael Conte, director of the Center for Business and Economic Affairs, University of Baltimore, 301-625-3437/ CO: The ESOP Association; Center for Business and Economic Affairs,
 University of Baltimore ST: District of Columbia IN: SU:


DC -- DCFNS1 -- 6981 02/05/92 07:32 EST
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