By John Drachman
Following the onset of Covid-19 last spring, “reduced participation” was cited as the top concern of 62% of employers polled on their firms’ employee stock participation plans by The National Association of Stock Plan Professionals (NASPP).
“Although virtually all employee stock purchase plans protect participants in the event of a decline in stock price, many employees instinctively divest their equity holdings during a market drop,” according to the report.
Most companies however had made little effort to communicate to employees about the often temporary impact of market volatility on the value of company stock. Employers had also neglected to remind employees that typically the strike price for buying their options is at a discount to what the shares were worth on the market when the options were granted; thereby providing at least a partial cushion against downward price pressures.
Even as market-wary employees divested their holdings, the NASPP noted that stock options remain the number one equity vehicle of choice for employers. While 51% of public companies grant stock options, 74% of private companies grant them – especially the 92% of employers surveyed in Silicon Valley.
Ingersoll Rand’s Employee Stock Plan Goes Global
While many companies offer stock option plans as a particularly attractive pair of golden handcuffs to their most-favored employees, industrial powerhouse Ingersoll Rand Inc. (NYSE: IR) took their award a step further last month. In what the machinery manufacturer termed a first for its industry, the firm “celebrated a $150 million equity grant to nearly 16,000 employees worldwide with a virtual ringing of the opening bell at the New York Stock Exchange.”
From an hourly assembly worker on the production line in Quincy, Illinois to a sales representative based in Shanghai, China, all eligible employees received a grant equal in value on the grant date to 20% of that employee’s annual base cash compensation. “This is a $150 million investment in our employees,” said Vicente Reynal, IR’s Chief Executive Officer. “We are not aware of any other industrial company our size having done something like this; it’s a meaningful way to build an ownership culture where all employees can benefit from creating value as they all contribute to our success.”
Mr. Reynal continued, “If everybody thinks and acts like an owner, we all share in the benefits of any future value creation as the company continues its growth strategy and improves its profitability.”
The Bottom Line
For pandemic-harried workforces, IR’s all-embracing move may be a sign of things to come.
In the volatile days ahead, stock plan participants should probably think twice before opting out of their stock plans. If the monies are not required for emergency purposes, it’s may be best to hold fast to your shares. Check your plan documents if you’re feeling nervous about market events. Then, consider speaking with a financial advisor to evaluate your personal financial situation.
If more employers follow IR’s lead and opt to “go global” with their employee stock plans, future share purchases will put upward pressure on stock prices. After all, increased demand for shares always precedes improved performance whether the shares are purchased by a high net worth investor – or the machinery sales rep next door.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.