The False Promise of Worker Capitalism: Congress and the Leveraged Employee Stock Ownership Plan

Leveraged employee buyouts as a core application of the leveraged employee stock ownership plan (ESOP) program are analyzed. After placing the program in the setting of tax and pension law, the principal arguments supporting leveraged ESOPs are identified. These arguments are analyzed using modern f...

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Bibliographic Details
Published in:The Yale law journal 1985-11, Vol.95 (1), p.148-173
Main Author: Levin, William R.
Format: Article
Language:English
Subjects:
Business structures
Capitalism
Congress
Corporations
Employee ownership
Employee pension plans
Employee stock option plans
Employee stock ownership plans
Employees as stockholders
Employment
ERISA
ESOP
Federal legislation
Income taxes
Labor legislation
Law (stock ownership)
Leverage (finance)
Leveraged buyouts
Pension plans
Reforms
Regulations
Subsidies
Tax subsidies
Wealth
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Summary:Leveraged employee buyouts as a core application of the leveraged employee stock ownership plan (ESOP) program are analyzed. After placing the program in the setting of tax and pension law, the principal arguments supporting leveraged ESOPs are identified. These arguments are analyzed using modern financial theory and they are found wanting. Evidence is offered that the program systematically harms workers and the economy as a whole. Both the premise and the structure of leveraged ESOPs are fatally flawed. It is suggested that the program is expensive, harmful, and unnecessary, and it should be abolished. Instead, Congress should depend on individual firms to determine whether to invest worker assets in employer securities.
ISSN:0044-0094
1939-8611
DOI:10.2307/796124