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ESPPs: Basics

Why do companies offer employee stock purchase plans?

Companies offer their employees the opportunity to purchase company stock through ESPPs to let them own shares of the business. ESPPs can take different forms. ESPPs with a discount on the purchase price provide an attractive investment opportunity and a broad-based employee benefit. Making you not only an employee but also a stockholder, an ESPP gives you a personal stake in your company's financial success.

In its 2014 Domestic Stock Plan Administration Survey, the National Association of Stock Plan Professionals found that the following considerations were most prevalent among the top three ESPP priorities reported by companies:

Objective among top three priorities Percentage of companies
Employee ownership 74%
Corporate identity/ownership culture 49%
Hiring practice 46%
Competitiveness 38%
Incentive/reward 23%
Wealth accumulation 21%
Employee retention 17%

After surveying ESPP participants in nine countries (including the US, the UK, and Ireland), joint research by Computershare and the London School of Economics found that employees who take part in ESPPs feel more motivated, work harder, stay with their employer longer, and are more likely to recommend their company as a workplace than those who do not participate in ESPPs. A recent study of behavior among ESPP participants also found that ESPPs can help to improve employees' financial well-being.

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