NASPP Survey Shows ESPPs Somewhat More Conservative

Preliminary results from the 2007 "Trends in Equity Compensation" survey by the National Association of Stock Plan Professionals and Deloitte show that employee stock purchase plans (ESPPs) have become somewhat more conservative in response to accounting rule changes that became fully effective in 2006. The survey looked at 428 companies, almost all of which are publicly traded and half of which have over 2,500 employees. For most participants, the changes do not dramatically lower the benefits of participation.

Looking just at qualified plans (Section 423 plans), the survey found that 66% of the ESPPs have look-back provisions allowing employees to choose between the price of the stock at the beginning or end of the offering period, compared to 84% in 2004. Seventy-eight percent of the companies offered a 15% discount on the purchase, compared to 87% in 2004. Offering periods were shorter as well. In 2007, 13% of the companies had offering periods of three months, 48% had offering periods of six months, and 28% had offering periods of one year of more. In 2004, 43% of the companies had offering periods of one year or more. For the much less common non-qualified plans, discounts and offering periods were much less favorable to employees.

Among qualified plans in 2007, 38% of the respondents had participation rates of 20% or less, 40% of the companies had rates of 20% to 50%, and 22% of the companies had rates over 50%. Non-qualified plans had very low rates of participation: almost two-thirds (62%) of such plans had 20% or fewer of employees taking part. Comparative participation rates for 2004 were not listed.