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The ESOP represents additional compensation to employees: In our example, there is a $50 million (or more) transfer of wealth from existing shareholders to employees over the 15-year period. Presumably, if the ESOP were not created, then some other form of compensation would have been required, and that alternative compensation might not have the secondary benefit of enhancing productivity. Also note that the ESOP’s payments to employees (as opposed to the payment by the company) come primarily at retirement, and Congress wanted to boost retirement incomes.

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