What is an ESOP?

The term ESOP stands for Employee Stock Ownership Plan. ESOPs are a common structure for employee stock ownership across the United States. There are over 10,000 ESOP companies that operate in every business sector of the economy with combined national employment of over 10 million employees. Media companies that make use of ESOPs include the Bureau of National Affairs in Washington, D.C., a TNG-CWA employer with 1,800 employees (www.bna.com), the Monroe (MI) Evening News www.monroenews.com and the Omaha World-Herald (www.omaha.com).

The most recent high profile use of the ESOP structure in the media and newspaper industry took place in 2007 at the Tribune Corporation where financier Sam Zell used an ESOP to purchase that company which in turn ownsthe Chicago Tribune, the Los Angeles Times, the Hartford Courant, the Baltimore Sun and Newsday. 

Employers in Maine that make use of Employee Stock Ownership Plans include Maine Oxy Supply in Auburn, Howell Laboraties in Bridgton, Moody’s Collision Centers and the Pittsfield-based Cianbro construction company.

Legally, an ESOP is a specific form of defined contribution benefit or pension plan, in the same family of benefit plans as the well known 401(k) plan. Instead of investing in a wide array of stocks, ESOPs invest “primarily” in the stock of an individual employer. An ESOP gives employees of a company sponsoring the ESOP a “beneficial ownership interest” in the stock of the company sponsor, which is why employees of an ESOP company are referred to as "employee owners." Employees have a “beneficial ownership interest” because they don’t own shares directly, but rather, their ESOP shares are held by a legal Trust, and employee-owners sell their shares only when they retire or leave the company. These Trusts are administered by Trustees who are legally bound to pursue the best interests of employee shareholders, and who must follow employee-owners instructions on certain voting issues.

In larger transactions such as may come about in the Blethen Maine Newspapers, the Trustees would be selected by management of the acquiring corporation (here called “New Corporation” or “NEWCO”) in consultation with the unions representing employees of “NEWCO.” Should the ESOP option become a likely one for Blethen Maine Newspapers, we will offer much more information about how ESOPs function in the FAQ section.

For information about employee ownership, visit www.nceo.org, www.esopassociation.org and www.esca.us.