The soaring popularity of employee stock ownership plans may only have set them up for a grand fall. While the number of employee stock ownership plans established each year has remained about constant, the money flowing into the plans has skyrocketed as big companies have noticed their appeal. During the first half of this year, companies borrowed an estimated $18 billion to set up ESOPs, as they are called, according to the National Center for Employee Ownership in Oakland. That figure compares to about $6.5 billion companies borrowed in 1988. ''I've been kind of amazed,'' said C. Michael Ford, executive vice president of Macon, Ga.-based Charter Medical Corp., which set up an ESOP in 1988. ESOPs act like a retirement program, setting aside company stock for employees. In this aspect, the employees become owners. After watching mostly small companies set up ESOPs since the 1970s, big companies finally saw the huge advantages of ESOPs in the middle 1980s. When a company sets up an ESOP, the just-created trust borrows money to buy the company stock it will distribute to the employees over time. Therefore, the company gets a cash infusion. And because of a tax law designed to promote employee ownership plans, the lender can deduct 50 percent of the interest it earns on the loan, a savings often passed along to the company. The company gets further savings because it can deduct the dividends it pays on the stock the ESOP holds. These tax advantages provided companies with a cheap way to borrow money, which came in especially handy with the boom in corporate buyouts. For instance, Charter Medical used an ESOP to help fund its $1.65 billion management-led leveraged buyout. ''We needed the ESOP to do our transaction,'' Ford said. ''We needed somebody to provide equity.'' Other companies believed an ESOP would boost shareholder value. ''By more closely aligning the interests of our personnel with those of our stockholders, the ESOP should also enhance stockholder values,'' Ronald W. Allen, chairman and chief executive officer of Delta Air Lines Inc., said in setting up an ESOP earlier this month. Citizens and Southern Corp. (C&S) also waved the banner of increased shareholder value when it established an ESOP this month. ESOPs, too, seemed like an easy way to put a big chunk of shares in the hands of a group considered friendly to management, making the plan an anti-takeover device. For example, Polaroid Corp. thwarted a hostile takeover attempt by setting up an ESOP. With companies using these reasons for establishing ESOPs, some observers began to grow concerned because it began to seem like the employees were being left out. In fact, one powerful observer who took notice -- Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee -- introduced legislation in June that would drastically reduce an ESOP's tax advantages. The bill would allow a company to retain the tax benefits if it put 30 percent of its stock in employees' hands. However, few large companies can do this because of the huge cost involved. If the legislation were approved, experts agree that it would turn back the current tide. While the number of ESOPs would continue to rise, they would become dominated once again by small companies. With the government mired in a gigantic budget deficit, ESOPs cost the federal Treasury at least $1.6 billion a year, said one committee staff member who asked that his name not be used. Rostenkowski figured the Congress was ''overly generous,'' the staff member said. More important, ''I think ESOPs are less of a good thing'' because of the lack of emphasis on employees, he said. The ones recently set up ''did not look like traditional ESOPs in terms of giving greater benefits to the employees,'' he said. Instead, the ESOPs of today were either methods to entrench management or clever ways to raise money. ''They really had no other agenda,'' he charged. The staff member added that with investment bankers now cleared to sell ESOP debt to investors, the time has come to slam the brakes on the establishment of ESOPs before they get out of control. An Internal Revenue Service ruling earlier this year found that companies could sell the debt and not derail the tax advantages. This was viewed as a major victory for ESOPs, probably clearing the way for more companies to use them. Martin Staubus, associate director of the Washington-based ESOP Association, called Rostenkowski's legislation a ''spiteful, anti-ESOP kind of move. ''For someone to say it's an abuse because it's used for financing purposes is 180 degrees wrong,'' Staubus said. ''It's not an abuse. It's a use.'' When Congress first began legislation in the 1970s to spur the creation of ESOPs, the idea had been to utilize the financing incentives as a carrot on a stick for management, he said. And ''whatever the motivation may be,'' the end result is good, he added. ''We think America would be a better place if it's a standard thing to give ownership to the employees.'' While C&S set up an ESOP to boost shareholder value, ''the employees are the beneficiaries there over time,'' company spokesman Scott Scredon contended. ''I think it's a combination. You're hoping that by linking the company's share price to a benefit the employee receives, they'll become more productive.'' Likewise, Charter Medical sees more good than cheap financing from its ESOP. By setting aside stock equal to 25 percent of each employee's salary during the ESOP's first year, Ford said the company expects employees to do a better job. An ordinary retirement plan sets aside no more than 5 percent of an employee's pay. ''If he can take this and make Charter's stock worth something, then he can generate some real value for himself,'' Ford said. Yet many want management to go even further. ''Participation should be a more important factor,'' said Raul Rothblatt, a project coordinator with the National Center for Employee Ownership. ''It shouldn't be just a tax scheme.'' Employee participation could take many forms, even including worker representation on the board of directors. More typically, though, an ESOP committee could foster greater employee participation by acting as an adviser to the board. Studies have shown that companies with ESOPs and participation enjoy a higher level of productivity than those without participation. ''Maybe it will just take time to make people realize that participation improves productivity,'' Rothblatt said. C&S and Charter Medical don't have vehicles for employee participation. But in setting up an ESOP to help management buy out HCA Psychiatric Co. of Nashville, President Jim Don established an ESOP committee. ''I think a lot of weight was given to the fact that the employees could participate,'' Don said. ''They will be able to have input.'' HCA Psychiatric's ESOP may be one of the last big ones. Rostenkowski's legislation would include ESOPs set up after July 10, leaving many in jeopardy. Because Rostenkowski's ESOP legislation is a small part of a $5.3 billion budget bill, the staff member said the overall bill's future won't be a reflection on ESOPs alone. Still, it could mark the beginning of another era in ESOP history.