A Major Problem with ESOPs Is That

question 98

Multiple Choice

A major problem with ESOPs is that

• A) they carry a significant risk for employees.
• B) employees are not allowed to participate in votes by shareholders.
• C) the stocks within the trust are too widely diversified to earn high returns.
• D) any earnings from the trust holdings are taxed at an extremely high rate.
• E) they result in reduced profitability for the employees.

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Definitions:

Personal Income Tax

A tax that governments impose on individuals based on their earnings or income.

Top Marginal

Refers to the highest tax rate applied to the last dollar of taxable income in a progressive tax system.

Federal Income Tax Rate

The percentage of an individual's or corporation's income that is paid to the federal government, which varies based on income level and filing status.

Progressive

Favoring or implementing social reform or new, liberal ideas.