which of the following explains why shouldnt a business make an employee stock ownership plan its main retirement plan for employees
it is too expensive for a company with low salary budget
it wont cover the business's contractors and consultants
it doesn't deliver equal pay for comparable worth
it is risky to have all one investments be in a single company
All of the listed options explain why a business shouldn't make an employee stock ownership plan (ESOP) its main retirement plan for employees.
The reasons why a business should not make an employee stock ownership plan (ESOP) its main retirement plan for employees are as follows:
1. It is too expensive for a company with a low salary budget: Implementing an ESOP requires the company to allocate a significant portion of its financial resources towards purchasing company stock for employees. If the business has a limited budget, it may not be able to afford the costs associated with establishing and maintaining an ESOP.
2. It won't cover the business's contractors and consultants: ESOPs are generally designed to benefit employees who are considered full-time staff of the company. Contractors and consultants, who are often not considered regular employees, may not be eligible to participate in the ESOP. This can create disparity among the different types of workers within the organization.
3. It doesn't deliver equal pay for comparable worth: ESOPs distribute benefits based on the number of shares an employee owns, rather than compensation for their job skills or responsibilities. This can result in pay discrepancies among employees who have similar roles but varying amounts of stock ownership. In terms of promoting equal pay for comparable worth, an ESOP might not be the most suitable retirement plan.
4. It is risky to have all investments in a single company: Relying solely on an ESOP as the main retirement plan means that employees' retirement savings are heavily dependent on the success and performance of a single company. If the company encounters financial difficulties or goes bankrupt, the value of the ESOP could dramatically decline or become worthless, jeopardizing employees' retirement security. Diversification of investments is generally considered a safer strategy to manage risk in retirement planning.
Overall, while ESOPs can have certain benefits, it is important for businesses to carefully evaluate their financial capabilities, employee composition, and the diversification of retirement investments before making it the main retirement plan for employees.
The correct answer to the question is "it is risky to have all one investments be in a single company."
To determine the reason why a business should not make an employee stock ownership plan (ESOP) its main retirement plan for employees, let's go through each option and analyze them one by one.
1. "It is too expensive for a company with a low salary budget": This option suggests that the reason not to implement an ESOP as the main retirement plan is due to its cost, specifically for companies with limited funds. While cost can be a valid concern for businesses, it is not the main reason for not choosing an ESOP. Additionally, this reason may not be applicable to all businesses, as some companies may be able to afford an ESOP despite having a low salary budget.
2. "It won't cover the business's contractors and consultants": This choice points out that an ESOP may not extend its benefits to the business's contractors and consultants. While this might be a limitation of an ESOP, it is not the primary reason for not selecting it as the main retirement plan for employees. Furthermore, ESOPs typically focus on providing retirement benefits primarily to employees rather than contractors or consultants, who are not permanent employees.
3. "It doesn't deliver equal pay for comparable worth": This option highlights potential concerns about unequal pay for employees with similar job roles but different values. While this is an important matter to consider in any retirement plan, it is not the central reason for not making an ESOP the main retirement plan. Equal pay for comparable worth can be addressed and improved within an ESOP structure with appropriate policies and evaluation methods.
4. "It is risky to have all one investments be in a single company": This choice explains the primary reason for not choosing an ESOP as the main retirement plan. Concentrating all investments in a single company, especially one's employer, can be risky. If the company encounters financial difficulties or fails, employees may suffer both the loss of their jobs and the loss of their retirement savings. It is generally recommended to diversify investments to mitigate risk and avoid over-dependence on a single entity.
Therefore, the most fitting reason among the options mentioned is that it is risky to have all one's investments in a single company.