Background Note | HBS Case Collection | November 2000

Note on Employee Stock Ownership Plans (ESOPs) and Phantom Stock Plans

by Dwight B. Crane and Indra Reinbergs


Provides a brief overview of employee stock ownership plans (ESOPs) and phantom stock plans for owners of closely held companies. ESOPs can be used as a tool of corporate financing, and can provide employees with ownership interests. Phantom stock plans can reward executives for value creation without giving up ownership. Covers typical company motives for establishing such plans, regulation, tax advantages, administrative costs, issues of corporate governance, and payment of plan benefit. Includes a two-page bibliography with references to further sources of legal and tax information.

Keywords: Financing and Loans; Employee Stock Ownership Plan; Motivation and Incentives; Management Teams; Corporate Governance; Ownership Stake; Taxation;


Crane, Dwight B., and Indra Reinbergs. "Note on Employee Stock Ownership Plans (ESOPs) and Phantom Stock Plans." Harvard Business School Background Note 201-034, November 2000.