The ESOP Association

3 BUSINESS VIEW MAGAZINE VOLUME 10, ISSUE 2 In the US the relationship between the employer and the employee is changing. No longer viewed as a traditional top-down employee approach, a growing number of US-based businesses are reworking their business models to allow for the employees to be part owners in the company. This company structure is referred to as an ESOP -- an Employee Stock Ownership Plan. The first ESOP was created in 1956 by Louis Orth Kelso, a prominent lawyer, and economist, in order to enable the employees of Peninsula Newspapers Inc., in Palo Alto, California to buy out the company’s founders. Kelso believed that ESOPs would help transform “labor workers” into “capital workers,” thus spurring growth and productivity within the broader economy. ESOPs were eventually codified by Congress in 1974 under the Employee Retirement Income Security Act (ERISA) to provide a federally regulated vehicle by which a company’s employees could obtain an ownership stake in their company through a Qualified Retirement Plan (QRP), wherein individual employees are allocated company stock into their retirement accounts from a trust fund, and when they leave the I