The primary purpose of an employee stock ownership plan (ESOP) is to:

The primary purpose of an employee stock ownership plan (ESOP) is to align employee and shareholder interests (C). At the SPHR level, ESOPs are viewed as long-term ownership and alignment mechanisms rather than short-term incentive tools.

By granting employees ownership stakes in the organization, ESOPs encourage employees to think and act like owners. This alignment fosters commitment to organizational success, long-term value creation, and sustainable performance. Employees benefit financially when the organization performs well, directly linking their interests to shareholder outcomes.

Tying rewards to individual performance (A) is the function of incentive or merit pay, not ESOPs. Improving profit awareness (B) and encouraging participation (D) may be secondary benefits but are not the plan’s primary objective.

SPHR exam content highlights ESOPs as part of strategic total rewards and ownership culture, emphasizing alignment, retention, and long-term engagement rather than immediate performance motivation.

References :

HRCI SPHR Exam Content Outline — Functional Area: Total Rewards (equity-based compensation; ESOPs).

HRCI SPHR Study Guide — Purpose and design of employee ownership programs.