A Statistical Profile of Employee Ownership
Updated January 2014
Estimated Number of Plans and Employees; Value of Plan Assets*
|Type of Plan||Number of Plans (estimated as of the end of 2012)||Number of Participants (as of the end of 2012)||Value of Plan Assets (as of the end of 2011)|
|ESOPs, stock bonus plans, & profit sharing plans primarily invested in employer stock||12,000||11 million||$870 billion|
|401(k) plans primarily invested in company stock||600||3 million||$200 billion|
|Broad-based individual equity plans||3,000||10 million||not estimated|
|Stock purchase plans||4,000||11 million||not estimated|
Currency of DataThe NCEO estimates are based a variety of company surveys and, where available, government data. Another way to look at the data was provided by several questions included in the General Social Survey (GSS), a 2010 random sampling of working adults performed by the National Opinion Research Center (NORC) of the University of Chicago. Joseph Blasi and Douglas Kruse of Rutgers and Richard Freeman of Harvard, all affiliated with the Shared Capitalism Project of the National Bureau of Economic Research, organized the questions and their analysis. The National Center for Employee Ownership was one of the sponsors of the survey questions, along with the Shared Capitalism Project, the Beyster Institute, the Plan Sponsor Council of America, and the Employee Ownership Foundation. The Shared Capitalism Project receives support from the Rockefeller and the Russell Sage Foundations.
The GSS data are reported in detail in a separate page on this site. In sum, however, they showed that as of 2010, 17.4% of all employees working in the private sector report owning stock or stock options in their companies, while 8.7% specifically held stock options. Looked at another way, 36% of employees working for companies with stock (this excludes government employers, nonprofits, partnerships, etc.) own stock or options in their companies. This mean that approximately 28 million Americans own employer stock through ESOPs, options, stock purchase plans, 401(k) plans.
Because of the differing estimating techniques and inevitable ambiguities of data collection and interpretation in this area, however, variations in results are to be expected. These numbers, as well as any other estimates, should always be understood with the caveat that they cannot be precise.
ESOPs and 401(k) PlansESOPs (employee stock ownership plans) are stock bonus plans qualified to borrow money; otherwise, the two types of plans are very similar. Estimating the number of ESOP companies, participants, and the assets they hold is limited by the availability and quality of data collected by the US Department of Labor through Form 5500.
The NCEO has revised its estimates for the number of ESOPs, using a consistent and conservative method across each plan filing year from 1999 on (earlier estimates use a different combination of methods). You may have seen somewhat different numbers in prior years, but we believe this new technique is both more conservative and more accurate. Estimates for prior years may change as more complete data for prior filing years is released by the Department of Labor, although the DOL believes that its data files from 2008 and earlier are now in their final form. The current method begins with all available 5500 records. The NCEO cleaned the data in as many ways as possible by searching for missing data, removing companies that appear to have inactive ESOPs, and removing records with obvious errors. We erred on the side of making the most conservative estimate we were comfortable with, especially with regard to the number of plans.
The trends reflected in the "Growth of ESOPs and Equivalent Plans" table further down on this page illustrate a complex picture. The number of plans increases through 1999. From 1999 to 2006 the number of plans levels off at around 10,000, then increases to closer to 12,000 for 2012. The number of participants increases each year through 2012 to 11 million. Plan assets generally increased each year, then dropped during the market fall off in 2008-2012 and not have recovered in 2012 to $858 million.
These numbers reflect our best efforts to remove sham S corporation ESOPs. In 1997, S corporations were allowed to create ESOPs, and starting in 1998 were given substantial tax benefits. Ambiguity in the law led to the heavy promotion of sham S corporation ESOPs in which only one or a few usually highly paid people actually got any ownership. In 2001, Congress passed a law to shut down these bogus plans, and the IRS issued strict new regulations. A high number of plans set up between 1999 and 2001 that were then unwound in the next few years. We identified and removed these companies where possible. These sham plans are not included in the data presented on this page.
The Employee Benefit Research Institute and the Investment Company Institute for 2008 is the source for data on 401(k) plans. The data are analyzed based on participant account data, making it impossible to come up with more than a rough estimate of the number of plans that have company stock in them. Better estimates can be made for the number of employees who invest in company stock in their 401(k) plans and the value of these assets. Note, however, that very few of these plans are primarily invested in company stock any more (something more common several years ago).
Stock Options"Broad-based stock option plans" are those that grant stock options to 50% or more of full-time employees. Unlike the case with ESOPs, it is not realistic to chart the growth of stock options year-by-year because there are no hard data compiled on a comparable basis year-by-year. We can look back at 1990 and estimate roughly a million option holders and look at the present day and estimate roughly 9 million option holders, but it is impossible to accurately say how many employees held options in 1994, 1995, 1996, 1997, etc. Why? ESOPs are highly regulated retirement plans, and companies with ESOPs must tell the government every year how many employees are in the plan. The government regularly publishes summaries of these data. Although it is imperfect, it gives us something to go on. For stock options, on the other hand, nothing of the sort is available.
Our current estimate for employees holding options is based on data from three sources. The first is an NCEO calculation done in the late 1990s that extrapolated from surveys of companies on the issue of what percentage of public companies had plans that included most or all employees as actual grant recipients (rather than just being eligible for grants). We assumed that although many private companies have broad-based plans, the total employment in these companies is relatively small; the number receiving options, we estimated would be one million or less. Using the public companies survey data, some of which was broken down by company size, we estimated how many employees would work for these companies and meet minimal criteria for actually receiving a grant. That number came to about 8 to 10 million in the late 1990s. More recent surveys have some downward movement in the percentage of companies offering broadly granted options through 2007.
The second source is the 2010 General Social Survey of the National Opinion Research Center. The survey's details are available on this Web site. The survey indicates that 9.3 million employees hold options. This is the largest of all the surveys. A 2007 Harris Interactive poll asking a similar question showed the number to be about 10 million.
A 2009 Bureau of Labor Statistics survey indicated that about 9% of all private sector employees have stock options (the BLS has not repeated the survey since then). The BLS data do not describe how many people this is. The total non-government workforce is about 130 million, but this includes about 30 million people who are part-time, temporary, and unemployed. The BLS data are based on a survey of employees nationwide that asks them if they have a stock option, defined as the right to buy shares in the future at today's price. Some employees may interpret this to include an employee stock purchase plan; others may not (because an ESPP is rarely called a stock option by an employer). Moreover, the definition excludes restricted stock and stock appreciation rights, which have replaced broad-based options in some companies. Looking at trend data in this number may be more useful. It was only 8% in 2008, compared to 9% in 2006. The survey indicates that 12% of managers and professionals receive options compared to 11% in sales and office work, 4% of service employees, and 8% in manufacturing. Sixteen percent of employees in the top 10% of wage earners received options, 14% in the top 25%, 9% in the top 50% to 75% of wage earners, and 6% among the remaining employees. Thirteen percent of employees in companies with over 100 employees get options, compared to 4% in companies smaller than this.
A 2010 National Association for Stock Plan (NASPP) Professionals/Deloitte Consulting survey of 597 companies found that at least 25% of the respondents made non-exempt employees eligible for some kind of equity award (stock options, stock appreciation rights, restricted stock, or restricted stock units) and at least 20% of non-exempt employees in these companies actually received awards. The survey asked companies how many non-exempt employees were eligible or received each kind of award. Because some people receive more than one kind of award (such as stock options and restricted stock), it is not possible to add up eligibility or actual receipt numbers to come to a total. The 25% figure is a very conservative estimate based on expected overlap. The survey sample was made of primarily of very large companies (68% had 1,500 or more employees), almost all of whom are members of NASPP. Because companies that offer equity awards to just one or a very few people may be less interested in joining a trade association on stock plans, the sample may be somewhat biased towards companies with broad-based plans.
Looking at the issue more on the basis of company practices, in "Give Everyone a Prize? Employee Stock Options in Private Venture-Backed Firms" (2005, unpublished), John R.M. Hand of the Kenan-Flagler Business School looked at data from 2004 and 2005 provided by VentureOne, a data provider on venture-backed firms. The VentureOne survey reported on the depth of options in 1,032 venture-backed companies responding to the survey for which adequate data were available. The study found the mean percentage of employees getting options was 89%, and 74% of the companies granted options to everyone.
A survey by the National Association of Stock Plan Professionals (NASPP) and Deloitte Consulting showed that companies have cut back somewhat on broad-based equity plans, but that these plans remain an important part of the employee ownership landscape. The survey presents the data in a way that makes it difficult to figure out just what percentage of companies offer awards to most or all employees, but some inferences can be drawn. (To be fair, this was not their primary purpose.)
A 2007 NASPP/Deloitte Consulting "Domestic Stock Plan Design and Administration Survey" found that among the 383 respondents (almost all public companies), the median percentage of employees participating in any kind of equity plan except an ESPP was 15%. Smaller companies were more likely than larger companies to have broad-based participation. The median was 75% or more in companies with up to 750 employees. At least 75% of the companies with fewer than 250 employees reported 100% employee participation in some kind of plan. As company size increases, the percentage drops so that full participation is rare at the largest employers. For companies with more than 10,000 employees, for instance, the 10% of companies with the highest participation levels average about 37% participation, while the typical company of that size has only 4% participation.
Looked at in another way, in companies with more than 30,000 employees, only 3% of the employees hold equity compensation awards. In companies with 251-750 employees, 75% do, while in smaller companies the percentage rises to 100%. The data are based on an equal-weighting for each company, regardless so size.
The value of exercised equity awards in the S&P 1500 was $38,000,000 in 2008 according to estimates by Richard Freeman of the National Bureau of Economic Research and Joseph Blasi and Douglas Kruse of Rutgers. Of this, $9 billion was exercised by the top five officers. There is no way to accurately estimate what was exercised in broad-based plans specifically, but the range was probably between $5 and $10 billion. The 2008 number is smaller than prior years, where the total value of equity exercised which ranged from $29 billion to $73 billion over the prior seven years.
The data on ESPPs included 348 companies, 60% of which had ESPPs. Of those plans, 77% were qualified plans under Section 423 of the Code. Among companies with 423 plans, 16% reported participation rates of 71% or more, and 29% had participation rates of 50% or more. Non-qualified plans, which unlike Section 423 plans do not have to be broad-based, had much lower participation. A total of 79% of the companies with Section 423 plans said they offer a 15% discount, and another 6% offer a 10% discount. Two-thirds of the 423 plans have a look-back feature in which the purchase price is based on the lower of the stock's price at the beginning or end of the offering period. Offering periods tended to be short, 48% of the companies with Section 423 plans had six-month offering periods, and another 18% had thee-month offering periods.
Employee Stock Purchase Plans (ESPPs)Employee stock purchase plans (ESPPs) include both tax-qualified "423 plans," which about 2,500 companies offer, and nonqualified plans, which about 1,500 companies offer. Data are based primarily on the National Association for Stock Plan Professionals' Stock Plan Design and Administration Survey (1998 and every two years thereafter), especially the more recent surveys, and the 2012 paper "Do non-executive employees have information? Evidence from employee stock purchase plans," by Ilona Babenko and Rik Sen. To estimate the number of employees covered under the plans, we took the total number of companies offering plans, multiplied those numbers by the average number of employees in the companies, and multiplied that number by the average percentage of participation in the plans. Almost all companies with ESPPs are public. Babenko and Sen found that in companies with ESPPs between 1998 and 2007, the mean annual contribution of participating employees was $1,630 per year.
Multiple PlansMany companies offer multiple plans, and many employees participate in more than one plan. For example, many ESPP participants are also in 401(k), stock option, or other equity compensation plans. Hence, the total number of participants in all these plans is definitely not the total of the numbers in the "Number of participants" column in the table at the top of this page.
Growth of ESOPs and Equivalent Plans
|Year||Number of Plans||Participants||Plan Assets|
We also count as ESOPs ERISA-qualified profit sharing plans primarily invested in company stock and stock bonus plans, which function almost identically to ESOPs in most ways. We count only such plans that have 10 or more active participants. The main differences between profit sharing plans that invest primarily in company stock and ESOPs are: (1) only ESOPs can borrow money, (2) profit sharing plans cannot own company shares in an S corporation, and (3) the requirements for stock appraisals are less rigorous for profit sharing plans.
For those interested in our methods, we began with the Form 5500 data as collected by Judy Diamond Associates, a firm that processes and cleans the data. We counted all companies that filed as having ESOPs, stock bonus plans, or profit sharing plans that have at least 50% of their assets in company stock and 10 or more participants. Where one company offered several plans that met these criteria, we rolled all the plans into a single record to avoid double-counting companies. We estimated the amount of missing data. For example, a company that filed a return in 2007 and stated the plan was established in 2004, but did not file in 2006 counts as a missing record for 2006.
We did not change any results from 2005 or earlier, but we did revise the results for 2006 and later based on the current analysis (with the exception of the column on collectively bargained plans, which was not included in earlier issue briefs). The rows for years before 1999 use our earlier estimates, often involving different methods.
Numbers in years from 1999 to 2002 exclude ESOPs in S corporations set up by one provider (almost 1,000 plans) that apparently were never funded and were terminated by 2003. These plans appear to have been created to try to get around ESOP anti-discrimination requirements. Both Congress and the IRS acted against these kinds of plans, with the strong support of the ESOP community. We took out all the plans attributable to this one provider, but we believe there were others we could not easily identify that also artificially inflated the numbers between 1999 and 2002.
Growth of Stock OptionsUnlike the case with ESOPs, it is not realistic to chart the growth of stock options year-by-year over this same period, because there is no hard data to go on. We can look back at 1990 and estimate roughly a million option holders and look at the present day and estimate roughly 10 million option holders, but it is impossible to accurately say how many employees held options in 1994, 1995, 1996, 1997, etc. Why? ESOPs are highly regulated retirement plans, and companies with ESOPs must tell the government every year how many employees are in the plan. The government regularly publishes summaries of this data. Although it is imperfect, it gives us something to go on. For stock options, on the other hand, nothing of the sort is available.
Percentage of Company Stock Owned by Employee Ownership Plans
|Private co. ESOPs||20%||20%||30%||30%|
|Public co. ESOPs||62%||34%||3%||1%|
Data for this table were drawn from surveys in Ohio and Michigan in 1994 and 1990, a 1995 NCEO survey of 401(k) plans, a 2000 NCEO survey of companies with broad-based stock option plans, and NCEO databases.
Stock option figures are estimates of the percentage of total outstanding company stock that the options represent. Percentages are higher in smaller companies and high-technology companies. We do not have an estimate for employee stock purchase plans.
Employee Ownership and Corporate PerformanceThis issue is described in detail in our article Research on Employee Ownership, Corporate Performance, and Employee Compensation. Generally, the results show that ESOPs make a significant contribution to corporate performance, particularly when combined with management styles that stress employee involvement in decision-making at the job level and sharing financial information with employees. Data for broad-based stock options also paint a positive picture, although the results are somewhat more ambiguous.
Basic Characteristics of ESOPs
|% of ESOPs that are in S Corporations||40-45%|
|% of ESOPs that are 100% ESOP-Owned||30-40%|
|% of Private Companies Passing Through Full Voting Rights||17%|
|% of Majority-Owned Private Companies Passing Through Full Voting Rights||25%|
|Mean Allocation to Accounts, as a % of Payroll (Private Companies)||5-8%|
|Mean Allocation to Accounts, as a % of Payroll (Public Companies)||3-4%|
|Median Number of Employees, Private Companies||125|
|Mean Number of Employees, Private Companies||1,500|
|Median Number of Employees, Public Companies||2,100|
|Mean Number of Participants, Public Companies||14,000|
|Percentage of ESOPs That Are in Public Companies||3%|