The leveraged employee stock ownership plan (ESOP) is credited by its advocates with the ability to redistribute wealth, assist in capital formation, motivate workers, promote economic growth, and reduce welfare costs. Critics claim that an ESOP is an expensive method of raising capital and a risky venture for employees. Who is right? The author examines both arguments, comparing ESOPs to other capital formation devices and to other employee benefit programs. He concludes that ESOPs are neither panacea nor placebo but a "pharmaceutical" with limited application.
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