Which term describes a program that allows employees to own shares in the company through defined contributions?

Which term describes a program that allows employees to own shares in the company through defined contributions?

• A. ESOP
• B. Equity partnership
• C. ERP
• D. Ethnocentrism

Answer: (A)

An ESOP is a program that lets employees own shares in the company through defined contributions. In an Employee Stock Ownership Plan, the employer contributes funds to a trust whose purpose is to buy company stock for employees. Over time, those shares are allocated to employees’ accounts, typically with vesting rules, so ownership builds up as employees stay with the company. This approach ties part of compensation to the company’s performance and can offer tax advantages to both the company and participants. It differs from an equity partnership, which is about a direct ownership stake outside of a defined-contribution retirement framework; ERP is about an enterprise resource planning software system; and Ethnocentrism is a cultural bias, not an ownership program.

An ESOP is a program that lets employees own shares in the company through defined contributions. In an Employee Stock Ownership Plan, the employer contributes funds to a trust whose purpose is to buy company stock for employees. Over time, those shares are allocated to employees’ accounts, typically with vesting rules, so ownership builds up as employees stay with the company. This approach ties part of compensation to the company’s performance and can offer tax advantages to both the company and participants. It differs from an equity partnership, which is about a direct ownership stake outside of a defined-contribution retirement framework; ERP is about an enterprise resource planning software system; and Ethnocentrism is a cultural bias, not an ownership program.