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Updated: October 20, 2025 How To

How to make ESOP communication a success

By Chris Whitney

One of the key benefits of an Employee Stock Ownership Plan is its potential to boost employee retention.

Research shows that ESOPs tend to have lower voluntary quit rates and longer employee tenures than non-ESOP companies. In an economy like ours, where workforce shortages are a top issue, that’s critical.

With ESOPs, once employees become vested in the company’s success, the organization’s prosperity becomes personal. They see work less as just a job and more like a place where they can build their careers.

Chris Whitney, Spinnaker Trust

But organizations that adopt ESOP structures can only reap those benefits if participants truly understand the benefits. That’s why good consistent communication is critical to any ESOP’s success. Here are some key things to help you get the communication right.

1. Open up. Federal law requires ESOPs to disclose the share price, number of shares allocated, and account balances to employees on an annual basis. But it’s a good idea to say much more. What metrics drive the company’s profitability, and what are the expenses that drag it down? What are the factors that go into the company’s valuation? Give your team members concrete examples of how the work they do every day affects the bottom line.

2. Spell it out. Never underestimate the need for explanation. Most people aren’t familiar with terms like vesting or valuation, and many haven’t had any need to understand the difference between revenues and profits. Technical terms that are parts of a business leader’s routine vocabulary can sound like a foreign language to everyone else. It can be intimidating for employees to ask what something means in a large group setting, and you want to make sure they understand what key metrics mean in the context of your own business. Don’t leave it to Google or AI; too much can get lost in translation.

3. Communicate early and often: The announcement that the company is becoming an ESOP often comes with a lot of hoopla. But it can be six to 18 months plus before employees receive their first share statements. What’s more, those initial statement balances are typically small, because of the initial debt the company takes on as part of the ESOP transaction. It takes time, anywhere from four to seven years, for employees to see their accounts grow to an amount that they can get excited about. It’s important to make sure that ESOP participants understand that, just like taking out a mortgage to buy a house, their equity stakes will grow as the debt is paid down. Consider setting up quarterly ESOP meetings with employees, folding updates into regular company-wide communications, or forming a committee to support ongoing education. Keep ownership culture front and center, and create space for employees to ask questions.

4. Describe your why. Candor isn’t every leader’s comfort zone, but the transparency you have in the short term will go a long way towards keeping your team intact for the long term. In most cases, a business leader’s decision to adopt an ESOP structure stems from a heartfelt desire to set up a succession strategy that retains the company’s culture, jobs and local presence. But any change can be unnerving and set off speculation about worst case scenarios. Help employees understand the future you envision. Invite them to submit questions and concerns anonymously.

5. Get outside perspective. At education sessions, we find that employees get peace of mind from having a third party answer questions — especially since we’re the ESOP trustee that has a fiduciary duty to represent their interests. They feel more comfortable asking us questions that they don’t want to take to their supervisors.

Chris Whitney is a vice president and ESOP client advisor with Portland-based Spinnaker Trust.

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