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 a survey of ESPPs in the United States, 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|
|Corporate identity/ownership culture||49%|
For a discussion of how companies can design ESPPs to meet these various objectives, see The Key To Engagement: Designing An ESPP To Drive Your People Strategy, an article in the magazine Workspan.
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.
ESPPs Are More Common In Some Sectors Than Others
A 2020 study by the consulting firm Aon found a wide disparity in the use of ESPPs across economic sectors. The firm discovered the ESPPs are most common at companies in information technology and healthcare and relatively uncommon in utilities and energy.
|Sector||S&P 500 companies with ESPPs||Russell 3000 companies with ESPPs|
Aon's study also found that ESPPs are far more common in California (73% of S&P 500 companies) than anywhere else in the US.
|Region||S&P 500 companies with ESPPs||Russell 3000 companies with ESPPs|
|Other western states||47%||32%|
In looking at ESPP prevalence by market cap, Aon found that for Russell 3000 companies, those with a larger market cap are more likely to offer an ESPP. It didn't find similar correlations for the S&P 500 with ESPPs found more equally throughout market-cap percentiles. As for any correlations between employee headcount, it noticed that Russell 3000 companies with smaller populations have a higher percentage of ESPPs, while in the S&P 500 companies with between 5,000 and 100,000 employees have the highest percentage of ESPPs.