New Data from NASPP on ESPPs
Executive Director
The 2014 Domestic Stock Plan Administration Survey, sponsored by the National Association of Stock Plan Professionals (NASPP) and Deloitte, contains data on how public companies are operating employee stock purchase plans (ESPPs). The study includes responses from 487 companies.
Several key findings stand out. Fifty-two percent of all responding companies have ESPPs, including 67% of technology companies but just 25% of manufacturing companies. Twenty-five percent of respondents had eliminated an ESPP, mostly over three years ago, but 17% had started new plans. Eighty percent of the plans were qualified under Section 423 of the Internal Revenue Code.
The percentage of employees who participate in the plan varied widely by plan type and the discount offered, with the median percentage participation rate in the low 30s for 423 plans and under 10%-20% for non-Section 423 plans:
Participation Rates, by Plan Types
| % of companies with participation rates between | 423 Plans | Non-423 Plans |
|---|---|---|
| 0%-20% | 33% | 66% |
| 21%-30% | 13% | 7% |
| 31%-40% | 14% | 11% |
| 41%-60% | 18% | 12% |
| 61%-100% | 26% | 6% |
Seventy-two percent of the 423 plans offer a 15% discount on the share price, but just 30% of the non-423 plans do. Similarly, 63% of the 423 plans with a discount offer it based on the lower of the beginning or end of the offering period price (a "look-back"), but just 33% of the non-423 plans do. Half the 423 plans have a six-month offering period, with the rest mostly divided between 3-month and 12 month periods.
Some critics of ESPPs say they do not create employee ownership because employees often sell their shares as soon as they exercise, but the data show only 11% do this, while 36% hold shares one to two years and 31% more than two years.