employee share ownership plan

Means of providing a company's employees with shares in the company. The sponsoring company sets up the ESOP, which then purchases shares in the company. The shares are subsequently distributed to the employees who satisfy certain performance targets. This method of share distribution has the advantage of not diluting the company's share capital. ESOPs are intended to build company loyalty among the workforce by providing employees with an active interest in the financial fortunes of the company that employs them. In the USA these are known as employee stock option plans.