Since 2003, special effects experts Adam Savage and Jamie Hyneman have examined rumors, myths, urban legends, and misconceptions for the Discovery Channel MythBusters show (one of my favorites is the Jaws special – Season 3 Episode 15). The crew uses scientific approaches to attempt to replicate the myths under review (often times stretching well beyond the initial myth in their efforts).
The myths end up with one of three labels following their testing:
(3) Busted (the most common outcome that often involves things being blown up)
Let’s bust some ESOP misconceptions
Overcoming myths and misconceptions is certainly not limited only television. On a regular basis I am questioned about Employee Stock Ownership Plan (ESOP) misconceptions. Seven common misconceptions about ESOPs are:
(1) The owner will lose control of the company
(2) The owner will have to sell the whole company
(3) The company will have to disclose detailed financial information to employees
(4) Transaction costs for an ESOP are too large
(5) ESOPs are difficult for employees to understand and appreciate
(6) With an ESOP, the owner is not getting full value in the sale
(7) Only large companies can put an ESOP in place
As you probably already guessed, these seven misconceptions are all “busted.”
You can find out how these misconceptions were busted in the June 2012 Investment Advisor or on-line at AdvisorOne.com.
In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Click to follow me on Twitter- @jlripperger .
No investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss in periods of declining values. Company stock is not a pooled investment. Stock may experience greater volatility and should not be directly compared to investment options that have a more diversified investment mix. It is not intended to serve as a complete investment program by itself.
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