Study: S ESOP Companies Create Jobs and Savings for Workers and Have Higher Productivity, Profitability, Job Stability, and Job Growth discussed a new study that found that S ESOPs create new jobs and savings that would not have otherwise been earned. Here is the abstract for S Corp ESOP Legislation Benefits and Costs: Public Policy and Tax Analysis:

Samuel Zell's acquisition of the Tribune Company in December 2007 using an S corporation employee stock ownership plan (S ESOP) brought S ESOPs to national attention. An S ESOP is a trust that holds shares of an S corporation (a closely held corporation whose shareholders are taxed on a pass-through basis similarly to partners in a partnership) for the benefit of the corporation's employees. S ESOPs, which have only existed since 1998 are not as well known as C ESOPs, an ESOP that holds shares of a C corporation (a separately taxed corporation). Enron, Polaroid and United Airlines, all of which had ESOPs when they went bankrupt, were C corporations.

Perhaps because they have only existed for ten years, little academic attention has focused on S ESOPs. In this paper we draw on the extensive existing employee ownership literature to describe the benefits and costs to employees, to firms and to society at large from the legislation that authorizes S ESOPs, and, where possible, we quantify these costs and benefits. We estimate that annual contributions to S ESOPs on behalf of employees total $14 billion, which represent additional compensation that would not have been paid without an ESOP. Annual gains attributable to increased job stability also save employees approximately $3 billion annually. Accumulated stakes, which are essentially forced savings and usually do not displace other savings, lead to additional annual accruals of $34 billion. Employers pay for ESOP contributions out of firm-level productivity and sales gains of $33 billion annually attributable to employee ownership. We estimate that one quarter of the annual gain, $8 billion ultimately goes to the federal treasury, which thereby also benefits from the adoption of S ESOPs.

The working paper covers the following:

• The History of ESOPs and S ESOPs
  
  
• Methodology
  
  
• Benefits and Costs to Employees from ESOP Adoption
  
  
  
  • S Corp ESOP contributions
  • Accruals on equity stakes in company stock
  • Employee ownership is associated with greater employment stability
  • Employee ownership is associated with (mildly) increased job satisfaction and increased organizational commitment, identification, motivation, and workplace participation
  • ESOPs and financial risk
    
    
• Benefits and Costs to Firms and from ESOP Adoption
  
  
  
  • Shareholder return is higher for employee owned firms than for comparable firms
  • Employee ownership leads to increased productivity and profitability
  • Employee ownership leads to increased sales and employment growth
  • Employee-owned firms survive longer than comparable firms
    
    
• Societal Costs and Benefits of Employee Ownership
  
  
  
• Consequences to the US Federal Treasury
• Tax Treatment of S ESOPs
• The Tax Advantages and Disadvantages of S ESOPs
• An S ESOP does not affect the amount of taxable income
• ESOPs defer employee tax without affecting employer deduction timing
• S ESOPs increase tax collections because productivity gains are taxed
• Society-wide economic benefits attributable to S ESOPs
• Social benefits of employee ownership
  
  
• Summary
  
  
• References
  
  
• Appendices
  
  
• Appendix A. Enhancements and Modifications of ESOP Tax Incentives
• Appendix B. Sensitivity Analysis of our Estimates
  
  
  
  • Attributes and Extent of S ESOPs and C ESOPs
  • Contributions
  • S ESOP firm level productivity gains and profits from increased sales
    
    
• Appendix C. Sources of additional information about ESOPs and Employee Ownership

UPDATE 8/6/08: The study results are discussed in S ESOPs Create More Revenue for the Treasury.