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Chapter 15. Shopping at the Company Stor... > Stocking the Shelves with ISOs, NSOs... - Pg. 152

Shopping at the Company Store 152 And, of course, the primary reason why we have ESOPs on the shelf at the company store is that they provide an employee benefit. Many large Fortune 500 companies offer ESOPs to their em- ployees. The thinking behind ESOPs is this: If you expect employees to play an ever-greater role in managing a company and increasing profits, you ought to make them owners of the company. Studies have shown that employees are more dedicated and committed when there is an ESOP in place and the employees have more of a stake in the company than just a weekly paycheck. Warning! Many experts believe that it is not prudent to have more than 10 percent of your portfolio invested in the assets of the company that you work for. Your income, benefits, and pension are already tied to the company's prof- itability. Forewarned is forearmed. Mix and Match If companies offer both a 401(k) and an ESOP, they are usually independent of each other. Many public companies (ones traded on the stock exchanges) use their ESOPs in combination with their 401(k) plans. They use ESOP contributions to match employee contributions in the 401(k) plan.