History / chronicals

The idea and concept of ESOP is as old as share. Mr. Louis Orth Kelso from U.S.A recognized as inventor and pioneer of the Employee Stock Ownership Plan . He created the first ESOP Plan (Scheme) in 1956 for a closely-held newspaper chain where the retiring owners sold their shares to the employee. Two years later Kelso and his co-author, the philosopher Mortimer J. Adler, explained the macro-economic theory on which the ESOP is based in The Capitalist Manifesto (Random House, 1958).

This was the first step taken by the pioneer and from that time till now the 50-plus years since then, ESOPs have become a popular alternative to empower employees, a sale or merger as a tool of business succession, and there are now more employee owners.

The National Center for Employee Ownership reports (U.S.A) that the mid-1970s saw an increase in formerly nearly unknown ESOPs.

In 1979, the U.S. Supreme Court attempted to clarify what constitutes a stock sale within private pension plans, including ESOPs, in the case of "International Brotherhood of Teamsters v. Daniel." By 1980, the United States Securities and Exchange Commission (SEC) sought to further explain the status of employee stock plans. According to the SEC, Employee Stock Ownership Plans were considered securities. However, such stocks did not require registration with the SEC because employees did not purchase ESOP stocks, but were given them by their companies.

By 2010, 13 million employees in U.S.A participated in ESOPs through 11,000 companies.

Indian Companies has accepted and adopted ESOPs in the early 90''s where the IT Companies, Manufacturing Companies and the Companies engaged in the business of providing services has started coming with various ESOP Plans (Schemes). Although in India ESOP is used not as a Buyout plan but it''s an incentive plan for the employees, helps to retain the employees and to reduce the attrition rate.

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