This model also puts a lot of risk on the employees. It’s basically forcing investment in the same company that pays your salary. An investment that has less liquidity than standard investments. It’s like putting all your retirement fund into your company’s stock.
>It’s like putting all your retirement fund into your company’s stock.
As opposed to putting your retirement fund into other company's stocks, which everyone does at the same time, making those companies too big too fail without unraveling several threads of social fabric.
I think your statement actually proves why employees should have stock in the company.
If we really were worried about issues such as this we'd have universal (not attached to you employer) healthcare and a pretty robust (but minimal) retire fund for citizens.
But we have the opposite of that with none of the upsides.
I agree with you on Healthcare and retirement. And there are non-financial benefits to owning shares where you work.
But any investment manager will recommend that your savings are diversified. That helps to insulate you from individual events thus making your savings more resistant to failure.
So you might invest in public shares, or property, or personal energy (residential solar) and so on. You might mix different kinds of shares. Etc.
By contrast owning shares where you work offers few financial upsides. It may or may not out perform the market. It may or may not be liquid. And so on.
It does however come with substantial financial risk. With one point of failure, one event, you can lose your income and savings.
Only you can decide if the risk is worth the upside. For most people, it's not.
Not true, 90% of employees with an ESOP account also have a 401k or other retirement account. The ESOP account is not instead of a retirement account, it's in addition to it.
This is a very good and understated point. One of the benefits we have as employers is being unattached. If things go bad, we can cut and run to some other company. On the other hand, the owners and primary investors are by definition more invested, and have to actual bear the burden of failure. I definitely didn't want that level of involvement in most of the companies I have worked for.
