Harry Potter and the Employee Stock Ownership Plan
I am a Harry Potter geek. I love all of it – the books, the movies and the theme park in Orlando. The book series made J. K. Rowling one of the best-selling fiction authors of all time. She introduced an entire generation of kids–that were more familiar with Facebook and video games than books– to the joy of reading (although, I did celebrate a bit when the books became available in an ebook format).
Rowling also created a shared experience. Kids, parents and grandparents were reading the books at the same time and discussing them. In fact, there was quite a debate at my house as to who was going to get to read the final book first.
Creating a shared experience is at the heart of Employee Stock Ownership Plans (ESOPs). An ESOP allows employees to earn an ownership interest in their company through a qualified retirement plan. Because it is a retirement plan, it must include virtually all full-time employees to pass coverage testing (similar to a 401(k) plan). As a result, senior executives, entry level employees and everyone in-between share ownership.
Shared ownership aligns their personal goals with those of the company. As the stock price rises, all owners benefit, not just the executives. As a result, everyone in the organization is focused on improved performance.
The Foundation for Enterprise Development has produced a documentary titled We the Owners: Employees Expanding the American Dream. The film looks at three companies and the role that employee ownership has had. You can see the four and a half minute trailer at:
As the trailer showed, an ESOP allows both the company and employees to benefit. That wasn’t the case with Harry Potter –one had to die so that the other could live.
SPOILER ALERT: Harry Potter lives and Lord Voldemort dies.
In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Click to follow me on Twitter – @jlripperger.
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