Recent Trends and Issues in ESPPs
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A discussion of operational issues in ESPPs and the results from PwC's Global Equity Incentives Survey concerning international trends in the ESPP landscape
![Table of contents 47 Contact information VI ,[object Object],[object Object],[object Object],46 Questions & answers V 29 International considerations IV 24 Latest trends – Survey results from PwC’s Global Equity Incentives Survey III 17 Impact of falling stock prices on ESPPs II 2 Overview of Employee Stock Purchase Plans (ESPP) I Page Section](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Recent Trends and Issues in ESPPs
- 1. Trends in the International ESPP Landscape Philadelphia NASPP Chapter Meeting October 20, 2009
- 3. Section 1 Overview of Employee Stock Purchase Plans (ESPP)
- 18. Section 2 Impact of falling stock prices on ESPPs
- 25. Section 3 Latest trends in ESPPs
- 27. Survey results from PwC’s Global Equity Incentives Survey Section 3 – Latest trends in ESPPs Options: Service Options: Perf/Mkt RS & RSU: Service RS & RSU: Perf/Mkt SAR: Service SAR: Perf/Mkt Phantom Stock ESPP Equity comp mix - Companies with employees in the US 0% 10% 20% 30% 40% 50% 60% 70% 2009 All Companies 2007 All Companies 2006 All Companies
- 28. Survey results from PwC’s Global Equity Incentives Survey Section 3 – Latest trends in ESPPs Driver of equity comp practices 0% 10% 20% 30% 40% 50% 60% 70% 80% Align Comp w/ Bus. strategy Address market trends Changes made - Other Address shareholder issues International comp strategy Address Corp Gov/BoD issues Address tax issues Out of the money options Address Acc'g issues 2009 Grants 2008 Grants 2007 All Companies 2006 All Companies
- 29. Survey results from PwC’s Global Equity Incentives Survey Section 3 – Latest trends in ESPPs ESPP participation levels - US 0% 10% 20% 30% 40% 50% 60% 0-25% 25-50% 50-75% 75-100% 2009 2007
- 30. Section 4 International considerations
- 48. Section 5 Questions & answers
- 49. Section 6 Contact information
- 51. © 2009 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity. This document was not intended written to be used, and it cannot be used, for the purpose of avoiding U.S. federal, state local tax penalties.
Editor's Notes
- Here we can see the major changes in ESPP plans in recent years. The discount offered on the price of shares is by for the predominant change in these plans.
- As can be seen here, a slight majority of companies offer no look back period. For those that do offer a look back period, all firms in the 2009 survey choose either a 6 or 12 month lookback period. This result is quite different from the previous year when firms chose a variety of different lookback periods.
- As is the case with the lookback period, the majority of firms are starting to issue a common discount for the ESPP. Over 2/3 of companies surveyed issue 15% discounts for their ESPP plans. Slight increase in number of companies using 15% discount.
- Again here, most companies are adopting a standard purchase period of 6 months. As can be seen in this chart, the 2007 results indicated a wide variety of purchase period lengths, while this year’s survey results indicate a convergence towards the 6 month period.
- AS can be seen here, most firms do not plan to discontinue their ESPPs, for those that due, most plan to eliminate them altogether.
- Three year trend towards using Safe Harbor Plans. In the past three years, more firms have steadily chosen to issue Safe Harbor ESPP plans, which incur no compensation expenses under FAS 123R. More than 5% increase every year to offer ESPP with no look back and 5% discount.
- As can be seen here, ESPP plans are a less common type of equity vehicle than either stock options or restricted stock units (RSUs). This chart displays the increase in RSUs and the decrease in the other main types of equity tools including both options and ESPP plans. While the frequency of RSUs rose over ten percent in the past two years, the prevalence of ESPP plans and stock option plans both declined around ten percent. Decline in performance based RSU and rise in service based RSUs – importance of recruiting in a down market. Overall decline in ESPP plans. Note: survey completed in Nov 2007 and Jan 2009 surveys are only a little over a year apart.
- While the main driver of equity compensation practices remains aligning compensation with a business strategy, the strength of this equity purpose declined in the past year. Accounting issues are no longer a main driver for granting practices. Real driver = aligning comp/market trends.
- Country where ESPP prevalence decreased by 3% or more in 2009 This graph indicates an interesting change from 2007 to 2009. Participation levels appear to be on the rise overall in the US. Therefore, when companies are continuing to use ESPP plans, employees are making increased use of them.
- Country where ESPP prevalence decreased by 3% or more in 2009 For Germany, on the other hand, participation appears to be decreasing.
- Country where ESPP prevalence increased by 3% or more in 2009. Participation in Argentina appears relatively stable between 2007 and 2009. Participation may be low here due to the newness of plans.
- Country where ESPP prevalence increased by 3% or more in 2009. Russia shows a drastic change in ESPP participation, which substantially fell between 2007 and 2009. Again, participation may be low here due to the newness of plans.