Smaller Companies Have More Generous Stock Purchase Plans and Higher Participation Rates

The new NCEO survey on employee stock purchase plans (ESPPs) shows that companies with fewer employees have both more generous plan features and higher participation rates. The differences are dramatic. For instance, 45% of the companies with 500 or fewer employees report hourly participation rates over 30%, compared to 17% for companies with more than 5,000 employees. Seventy-nine percent of the companies with 500 or fewer employees have a look-back feature in their plan, but only 45% of the largest companies do. Twenty-seven percent of the smaller companies have offering periods of 12 months or more, compared to 17% of the largest. Forty percent of hourly employees in smaller companies contribute 5% or more of their pay to the ESPP, compared to 21% in the largest companies. Differences in the amount of the discount offered, however, were very small. Similar differences for these measures show up for non-managerial salaried employees as well.

The differences show up in a consistent step-wise pattern: for each increase in size category, the generosity of the plan and the participation rates goes down. Of course plan features and participation rates are highly, if imperfectly, correlated. Larger companies may feel more pressure from institutional shareholders to keep the expensing attributable to the ESPP down, or it may be that smaller companies have more of a "we're all in this together" culture.

The results are from a major new survey of ESPPs by the NCEO and the Certified Equity Professional Institute (CEPI). It is the largest ESPP survey ever conducted. To obtain either a detailed report on the survey, or full access to the data base with dozens of questions, go to this link.