A Research On Employee Stock Ownership Plan And Pension Plans In China

There are many private corporations in US. The whole private pension system consists of various private pension plans which sponsored by employers of these companies. Employee Stock Ownership Plan (ESOP), a qualified pension plan, only has 50 years history, however, it plays very important role in private pension plan system. The aim of this report is to introduce ESOP into China and give the recommendation on pension plans of Chinese corporations through comparing ESOP between America and China.This report can be divided into four parts and compose of eight chapters. The first part includes the first chapter. In this chapter, the author summarized the background, the purpose of this report and the situation of related research in and out of China, then, explained the method of composing this report.Chapter two, three, four, five and six make up the second parts. The ESOP in US companies was discussed in details. Chapter two introduced the history and current situation of ESOP. Following, the third chapter classified the types of ESOP; moreover, the author demonstrated the function of ESOP. The fourth chapter is the vital chapter in this part. Firstly, the specific operational procedure, which included contribution, distribution, vesting etc, was demonstrated in this chapter, the favorable tax policies that the ESOP can be taken also mentioned in the passage. Secondly, the author illustrated the method to freeze and terminate ESOP. In chapter five, the characters of ESOP's investment and management were pointed out, especially the distinct character—ESOP invested the entire asset in qualified employer securities, and the author interpreted the reason why employers and employees were willing to select employer securities as tools for investment in despite of the risks were higher than other investment tools. In addition, the liability for employer to repurchase the security which distribute to the employee's account was put forward in the report, this is the critical step for ESOP to ensure employees acquire the pension benefit; the management of ESOP was introduced briefly thereafter. The sixth chapter mainly discussed the effect of ESOP. Different kinds of companies had different effect after using ESOP as a private pension plan. Corporations were divided into two categories—publicly-held corporation and closely-held corporation. The impact of ESOP in closely-held corporation was much clearer than in publicly-held corporation, ESOP corporation has higher salary and benefit standard and better performance in market, since the employer not only enjoy tax preference but also encouraged the employees work harder for employer and corporation. On the other hand, employees can obtain the participation in management with shareholders. Furthermore, non-tax effect can be shown in the closely-held corporation as well.The third part is the seventh chapter of this report. Comparison was made in this chapter and concluded the advantage of ESOP in US and disadvantage in China. At the end of this report the author proposed suggestions for Chinese corporation to develop ESOP and indicated that employer should set up suitable pension plans for their own company.The eighth chapter is the last part. In this part, the conclusion was made according to contents mentioned above, moreover, innovation and insufficiency was also pointed out in this part. At last, the author prospected the research direction on the future study.