We are big fans of employee stock purchase plans (ESPPs). They allow ordinary employees to become company shareholders and build wealth. At a socio-economic level, ESPPs can thus perhaps even reduce income inequality, as can other forms of equity compensation. On myStockOptions.com, we have so much content on ESPPs that we could be called myESPP.com as well.
Studies about trends in ESPP design can be hard to find. Fortunately, the National Association of Stock Plan Professionals (NASPP), the National Center for Employee Ownership (NCEO), and the Certified Equity Professional Institute recently published data from their joint 2016 ESPP survey. The survey results are summarized at the website of the NASPP. Responses were received from 239 companies, 91% of which have tax-qualified Section 423 ESPPs. Among the findings of interest:
- 70% of respondents offer a 15% discount.
- 50% have a six-month offering period.
- 56% base the purchase price on the price at the beginning or the end of the offering period, whichever is lower.
- 79% do not have a required holding period.
- 54% spend less than 0.5% of their total compensation budget on the ESPP, while 21% spend between 0.5% and 0.9%.
- 24% report that they do not use any particular way of communicating the plan to their employees. Among those that do use specific communication channels, the most common means are email (93%) and the company website/intranet (90%).
- 36% of the companies are very satisfied with their ESPPs, and another 36% of them are somewhat satisfied; 25% percent report feeling neutral about their ESPPs; and 3% are dissatisfied with their ESPPs.
That last point is especially interesting. Not surprisingly, the companies that report spending more on participant education tend to also have a higher level of satisfaction with their ESPPs. As the NASPP observes in its summary of the results, companies therefore "might be wise to consider investing more in educating employees about their plans." With features such as those mentioned in the survey, an ESPP can be a really good financial deal for employees.
The full survey results, plus analysis of them, can be purchased from the NCEO.