Employee Stock Ownership Plans and Corporate Takeovers: Restraints on the Use of ESOPs by Corporate Officers and Directors to Avert Hostile Takeovers

Authors

Margaret E. McLean

Document Type

Comment

Abstract

In 1974, Congress enacted the Employee Retirement and Income Security Act (ERISA), which was designed to promote employee benefit plans and provide safeguards for the assets of the plans. An employee stock ownership plan is a device used by corporations which holds corporate stock as the primary asset of the employee benefit plan. Recently, corporate executives have seized the opportunity to use ESOPs as a defensive tactic for averting takeovers considered to be adverse to the corporation. However, provisions of ERISA, particularly relating to fiduciary duty, exclusive benefit, and prudence, seriously impede the use of an ESOP by incumbent management to avert takeovers. This article outlines and discusses ERISA and its application to corporate management utilizing an ESOP to avert a corporate takeover.

Recommended Citation

Margaret E. McLean Employee Stock Ownership Plans and Corporate Takeovers: Restraints on the Use of ESOPs by Corporate Officers and Directors to Avert Hostile Takeovers, 10 Pepp. L. Rev. Iss. 4 (1983)
Available at: https://digitalcommons.pepperdine.edu/plr/vol10/iss4/2