By John Hoffmire

Myth #1 – You have to pay a lot for your ESOP
•    There are groups such as the Beyster Institute that do all of what the private sector advisors do
•    These alternatives are available in most states
•    On the other hand, don’t ever pay too little to try a new advisor who is looking to set up or fix his or her first ESOP

Myth #2 – ESOP valuations swing too much year to year
•    It is little discussed, but many ESOP valuations are “smoothed”
•    Smoothing is a process where valuations don’t rise or fall as much as they would in a true market environment
•    Editorial note: I think this is a good practice

Myth #3 – There can never be too much participative management
•    Contrary to popular opinion, there are, at times, diminishing returns to participative management
•    Signs of over-participation are that the vast majority feel there are too many meetings and high achievers are being held back

Myth #4 – All ESOPS have the same potential benefits to employees
•    A statistical analysis shows that it is the industry an employee works in that determines, most, the size of an ESOP payout.
•    Implications of this on acquisition strategy for ESOP companies are monumental

Myth #5 – An ESOP surpasses a non-ESOP which has good technology
•    All other factors equal, an ESOP will not overcome a technology advantage possessed by a competitor
•    Of course, this is dependent on the industry. But, ESOPS are not able to cure every ill of a firm

John Hoffmire is Chairman of the Center on Business and Poverty. He also holds the Carmen Porco Chair of Sustainable Business at the Center.