ESOP Survival Rates/Employee Tenure Study
May 22, 2007

The latest NCEO Employee Ownership Update is online. 

ESOP Survival Rates

The Update discusses the survival rate of ESOPs.  The ESOP survival rate for ESOPs established in the 70s is 20%, 80s is 40%, and the 90s is 50%.  The article also noted that ESOP companies are more likely to stay in business than their non-ESOP counterparts.  For more information on ESOP terminations, check out this post:  ESOP Terminations

Employee Tenure Study

The Update also referenced a study by the Employee Benefit Research Institute.  Here is a link to the press release. 

The study looked at the impact of many factors such as gender, age, and sector (public vs. private) on employee tenure.  Using the study as support, the Update discusses how the perception that employee turnover has increased over the years is a myth, and how employee turnover has not significantly changed in the last 25 years.  The Update added that ESOP companies tend to have higher job tenure rates than their non-ESOP counterparts:

“We do not have comparable detailed data for companies with employee ownership plans, but the data we do have indicate that job tenure rates are significantly longer than industry norms and that the percentage of employees who say they plan to look for new jobs is much lower.”

The study also said that the persistence of job changing has retirement implications, including a decrease in participation in and existence of defined benefit plans and a potential reduction in remaining retirement plan account balances at retirement, as well as the public policy impact of these implications.

Using an Auction to Establish Account Value

The Update also discussed how a company is using an auction to establish the account value for employee stock options.