Of course, there are some that are wary of the ESOP model. MarketWatch recently featured the ESOP and some criticisms of the approach in an article titled “When founder cash out, do workers lose?” Some of the criticisms are broad generalizations, especially as to the topic of valuation. Other criticisms are well taken.
As the article points out, this does affect the employees by opening them up to some of the risks of actual ownership. Is this a good thing? It can mean a whole new kind of motivation and source of innovation, as many have experienced, but it can also become a tricky game of all-your-eggs-in-one-basket for employees-turned-owners. There is a reason some people have the mettle to be owners and others are content to be employees.
From success stories to criticisms there are many voices talking about the ESOP. The original article is worth reading for due diligence purposes if you are on the employee side of the table. Regardless, an ESOP can be a very special tool for all parties at the table and one worth understanding and, just maybe, putting into force.
