Employee Stock Ownership Plan (ESOP)

A qualified retirement plan in which an employer contributes shares of its own stock to a trust for the benefit of employees, giving them an ownership stake in the company. Employees typically receive shares based on their salary and years of service, and those shares vest over time. When employees retire or leave, the company buys back their shares at fair market value. ESOPs serve as both an employee benefit and a corporate finance strategy, aligning staff incentives with shareholder interests and often facilitating succession planning in closely held companies.