Which of the following describes a con of Sales to Employees (ESOPS)?

The selection of the requirement for share buy-back from departing employees as a con of Employee Stock Ownership Plans (ESOPs) is accurate. This aspect can create financial obligations for the company, as it needs to repurchase shares from employees when they leave or retire. This repurchase obligation can strain liquidity, especially for businesses that are not financially robust or have limited cash flow. It also requires careful planning and management to ensure that adequate funds are available to support the buy-back, which could otherwise hinder the company’s financial flexibility.

In contrast, the other statements highlight benefits or neutral aspects of ESOPs. For instance, increased simplicity in ownership transfer is often seen as a positive; it can facilitate a smoother transition of ownership within the company. The ability for employees to purchase shares with pre-tax dollars is another attractive feature, providing tax advantages to the employees participating in the plan. Furthermore, encouraging long-term employee retention is a key benefit of ESOPs, as they align the interests of employees with those of the company and can lead to increased commitment and productivity.