Essay on The Benefits of an Entreprise Offering Profit Sharing

1090 Words 5 Pages
Another group continuum represents incentive plans that by cooperation of all organizational members create a culture of ownership. These common incentives are profit sharing, and stock option and employee stock ownership plans (ESOPs).
According to Coates (1991) “profit sharing plans are defined as an arrangement in which companies make contribution, based on profits, to individual employee account” (p. 19). It can be distributed in form of cash (added to paycheck) or in a deferred form, where employer contributes to a retirement trust (Kruse, 1993, p. 5).
One of the advantages is that employees, by increasing their productivity and quality of work, assist with business growth and ultimately help themselves by gaining higher
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According to WorlddatWork, a compensation association, the stock options are an efficient tool in motivating and rewarding workers (Estes, Holsinger, Shannon, 2001). 2010 General Social Survey reveals that 18.7 million American employees own stock in their organizations (NCEO, 2010).
Stock option plans allow employee to buy a number of stakes at fixed price. Gerhart and Milkovich (1992) in their research on employee compensation, note that stock plans “(a) motivate employees to act in the best interest of the organization as a whole, (b) (…) enhance employee identification with the organization, and (c) have labor cost vary with organization performance.” (p. 83).
Another form of employee ownership is employee stock option plans (ESOP). In this case, private or public employer forms ESOP tax-exempt trust (Shanney-Saborsky, 2000). Corey Rosen, the executive director of the National Center for Employee Ownership concluded “under the ESOP system a company makes a contribution to a trust fund, so employees get some amount of company stock and sometimes cash each year” (as cited in Boyett, Conn, p. 139-140). Weitzman and Kruse (1990) also wrote “ESPOs have a sharing profit component, in that participants (along with outside stockholders) receive dividends (or share piece increase) on stock allocated to their account (…)” (p. 109-110).
Boyett and Conn (1999) in Workplace 2000, reason that one of the advantages of ESOPs plans is “if employee

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