Question

Which of the following forms of compensation includes an employee stock ownership plan?

Select one:
a. Salaries
b. Profit sharing
c. Wages
d. Commissions
e. Bonuses

Answer 1

An Employee Stock Ownership Plan (ESOP) is a form of profit sharing and is considered a type of defined contribution retirement and savings benefit.

Step-by-step explanation:

An Employee Stock Ownership Plan (ESOP) is a form of compensation that provides employees with ownership interest in the company. Unlike direct wages, salaries, commissions, or bonuses, which provide immediate financial compensation for work performed, an ESOP offers a retirement and savings benefit, as it typically vests over time and is a form of deferred compensation.

It falls under the category of profit sharing, where employees are granted stock, which may increase in value with the success of the business, aligning employee interests with shareholder interests. This kind of plan is a defined contribution plan as the benefit received by the employee depends on the performance of the invested stock.