According to experts, the universe is 13.8 billion years old. The 40 years that Employee Stock Ownership Plans (ESOPs) have existed is a mere blink of the eye (or less) compared to the age of the universe. That does not diminish their importance for the 10.3 million Americans that are participants in the plans1.
ESOPs were enabled in the Employee Retirement Income Security Act (ERISA) of 1974. There were a handful of employee stock retirement plans that existed prior to that through exemptions granted by the Internal Revenue Service, but they were not considered mainstream. Although 40 years is insignificant in relation to the age of the universe, it is helpful to put it in context to the changes that have occurred in society.
For example, in 1974 most of us had at most 4 television channels (ABC, CBS, NBC, and PBS). If you wanted to watch a movie either you found it on TV or went to a theatre.
Today, it is common for people to have hundreds of channels available on their TV. You can get movies on demand or stream them from services such as Netflix. You can stop by a multitude of locations to rent a DVD or blue ray disc at Red Box. This is a far cry from the early days of renting a VCR because they were too expensive for most people to own. In the early days rental movies were on VHS (who can forget “Be kind, please rewind”) and there were stores that focused on renting movies.
Consider the telephone…40 years ago it was common that homes had a single analog phone on a party lines. The handset was connected to the phone by a cord (gasp!). There was no Twitter, Facebook, instant messaging, etc. If you wanted to talk to someone, you actually had to talk.
Today, smart phones dominate the landscape. People can literally be connected 24/7/365. The number of ways to connect is almost too high to count.
In 1974 if you wanted to send someone a message you either sent them a letter (external) or a memorandum (internal). Most people today would not know how to format either of these due to the prevalence of email.
Yet all of these examples have one thing in common; the core activity hasn’t changed. Sure the tools and techniques are different but we are still trying to deliver entertainment to connect people, and communicate. The tools we are using today will be as archaic as party lines in 2054.
So why have ESOPs continued to thrive? The core hasn’t changed. ESOPs benefit employees, business owners, companies, and society as a whole. I will continue to post more about these benefits on this blog over the coming months (or maybe I will send a memo, call you, or put in on VHS…NOT).
Let me know your thoughts and what you would like to know more about. I look forward to it.
1ESOP Statistics, The ESOP Association, 2010.
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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