Who appoints the ESOP trustee?
Corporate governance is often an area questioned with ESOPs. The ESOP trustee is appointed by the board of directors through a board resolution. When the ESOP holds a controlling interest in the Company, the board is ultimately controlled by the trustee’s vote because the trustee elects the directors. Although this seems propitious for the trustee, existing directors may have staggered terms and therefore are subject to re-election at different times. When a controlling interest ESOP is established, an agreed upon board structure may be put in place to balance the corporate governance objectives of the Company, the ESOP trustee, and non-ESOP shareholders.
Related Questions
- Newly formed S Corp and newly formed ESOP. The S Corp buys assets from LLC to continue operating the business as S Corp. Does IRC section 1239 apply or is the ESOP NOT a related party? Who really owns the ESOP at the start?
- Who is the ESOP Trustee? How will the ESOP be represented on the board of directors?
- Who appoints the ESOP fiduciaries?
