Employee Stock Ownership Plans

Pursuant to a congressional request, GAO reviewed information on employee stock ownership plans (ESOP), specifically: (1) the numbers and types of stock plans; (2) the distribution of ESOP by industry, region, and type of corporate ownership; (3) the number of participants in and amounts of assets held by employee stock plans; and (4) the corporate tax savings associated with ESOP.

GAO noted that: (1) in early 1985, there were 4,200 active ESOP with more than 7 million participants and nearly $19 billion in assets; (2) tax credit stock plans have more participants and hold larger amounts of assets than other types of plans, but leveraged stock plans provide the highest asset value per participant; and (3) corporate income tax revenue lost through incentives to promote ESOP totalled $9.9 billion between 1977 and 1983, of which $8.9 billion was attributable to tax-credit ESOP. GAO found that: (1) nearly 40 percent of all terminated stock plans were nonleveraged; (2) the largest share of stock ownership plans is in the manufacturing sector; (3) the distribution of the types of stock plans varied by business sector; (4) only the finance, insurance, and real estate sector showed a high proportion of leveraged plans; and (5) the highest absolute concentration of all types of ESOP was in the east north central region of the United States. GAO also found that: (1) nearly 76 percent of active plans are sponsored by privately held rather than publicly traded corporations; (2) publicly traded firms are required to contribute stock that carries voting rights to the tax credit or leveraged ESOP they sponsor; (3) overall, 90 percent of all ESOP participants are in tax-credit plans; and (4) although the majority of ESOP are sponsored by private companies, 93 percent of the participants and 83 percent of the assets in active ESOP are in plans sponsored by publicly traded corporations.