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Proposal For A Non-Subsidized, Non-Retirement-Plan, Employee-Owned Investment Vehicle To Replace The Esop, Sean M. Anderson, Andrew Stumpff Morrison

Law & Economics Working Papers

The authors have previously been critical of the existing American legal exemption and subsidy regime for employee stock ownership plans (“ESOPs”). By definition such plans create dangerously undiversified investment programs tying employees’ retirement security to the financial health of a single company – which, to compound the problem, is the employees’ employer, thereby correlating participants’ retirement security risk with the risk of losing their jobs. No demonstrated compensating policy benefit justifies this extraordinary large-scale departure from basic principles of financial prudence. One context, however, where a plausible case might be made for employee ownership is that which arises when a …