Study Shows Companies With ESOPs Have Better Returns

A study of 382 publicly traded U.S. companies with Employee Stock Ownership Plans (ESOPs) shows that they outpace their non-ESOP peers in financial performance. The study, conducted by Lincolnshire, Ill.-based Hewitt Associates in conjunction with Northwestern University's Kellogg Graduate School of Management, covered the period from 1971 through 1995. The report examined the financial performance two years before and four years immediately after each of the companies adopted an ESOP. Companies with ESOPs beat industry averages on total shareholder return and return on assets. In total shareholder return, companies with ESOPs outperformed companies without ESOPs by almost 7%. Companies with ownership plans had an average annual return on assets almost 3% higher than industry peers. "Clearly, the edge goes to companies that use employee ownership as a strategy for driving business results," says Judy Lindquist, an ownership consultant with Hewitt.