The survey report “Employee Equity Plans: Do They Have a Future?” suggests employers still consider equity plans an integral part of a company’s total rewards strategy — a tool to help motivate and retain employees, according to a press release. More than 70% of companies that are able to operate some type of employee equity plan choose to do so.
However, less than 10% of employers indicated that a
majority of eligible employees are participating in employee stock purchase
plans (ESPPs). In addition, at least 80% of respondents said their stock options
are underwater (i.e., the current share price is lower than the option price),
but more than 80% of that group have taken no action to address the situation.
Other survey findings included:
- Company size is important in predicting the presence of employee equity plans; they are more common among companies with 20,000 or more full-time employees.
- Industry is more important than geography in predicting the presence of an employee equity plan; plans are most common among technology firms and financial institutions while being least prevalent in consumer goods, manufacturing, and consumer services.
- Substantive changes are not planned for pricing strategy relative to market in the next 24 months. In the U.S., most options will still be offered at market value while most ESPP shares will continue to be offered at a discount to market (discounts typically range from 5% to 15% below market price).
- A majority of plans have eligibility restrictions – first by level, then by location.
“Our survey confirms the importance of equity plans
as an important part of the organization’s total rewards package,” said
Don Lindner, senior practice leader at WorldatWork, in the press release.
“They are especially vital in terms of aligning employee interests and
goals with the company’s.”
The study looked at the prevalence of three types of employee stock plans – options, free/restricted shares, and ESPPs – in companies in the U.S., U.K. and Western Europe.