Abbreviated as ESOP, refers to a trust established by a corporate which acts as a tax-qualified, defined-contribution retirement plan by making the corporation's employees partial owners. contributions are made by the sponsoring employer, and can grow tax-deferred, just as with an IRA or 401(k). But In contrast to other retirement plans, the contributions must be invested in the firm's stock. The benefits for the firm include increased cash flow, tax savings, and increased productivity from highly motivated workers. The main benefit for the employees is the ability to share in the firm's success. Due to the tax benefits, the administration of ESOPs is regulated, and numerous restrictions apply. Also known as stock purchase plan.