Low Employee Participation Hinders Stock Plans Meant to Share Company Ownership
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Walmart and Chipotle recently split their stocks to make shares more affordable for employees to purchase through employee stock purchase plans (ESPPs). However, low participation rates are common unless companies promote financial education.
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ESPPs allow employees to buy company stock directly from their paycheck, often at a discount. This can be better than buying fractional shares through a brokerage account.
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Companies need to offer financial planning resources and education for employees to understand the benefits of buying company stock, especially lower-wage workers struggling with expenses.
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Even with education, many employees would be better served investing limited discretionary income into low-cost, diversified index funds rather than company stock.
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To drive more employee stock ownership, companies could enhance ESPP discounts, offer restricted stock grants, or provide larger equity awards, but these tactics can be costly.