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Companies with Stock Plans Generate Higher Returns on Capital Than Their Peers

Companies with Stock Plans Generate Higher Returns on Capital Than Their Peers
  • Publicly traded Technology, Healthcare and Financial Services companies with more than 500 employees on average generated a 43% higher return on equity (ROE) and 24% higher return on invested capital (ROIC) with 10% less debt than non-ESPP peers
  • Companies with ESPPs deliver more compensation via stock and invest more heavily in R&D than their non-ESPP counterparts

Carver Edison, a New York City-based financial technology firm committed to helping public companies increase stock plan participation rates, has announced the preliminary results of a groundbreaking study quantifying how companies with Employee Stock Purchase Plans (ESPPs) perform relative to their non-ESPP peers.

The study analyzed financial data from 891 Technology, Healthcare and Financial Services Companies traded on NYSE and NASDAQ with at least 500 employees during the 2018 calendar year1. The 472 companies with ESPPs realized dramatically higher returns on equity and invested capital, with 43% and 24% outperformance over their non-ESPP peers, respectively. Companies with ESPPs were able to meaningfully produce higher returns on capital despite having considerably less leverage and EBITDA margins than their peers. Further, ESPP companies on average produced $55,270 in returns for shareholders per employee, compared to $30,683 for Non-ESPP companies – a staggering 44.5% increase.

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“ESPPs are a powerful financial benefit that can unlock extraordinary value for employees and shareholders alike” said Aaron Shapiro, founder of Carver Edison. “Our ability to quantify the staggering outperformance of companies with ESPPs compared to their peers demonstrates that increasing stock plan participation rates can help drive improved business results.”

“We already know that ESPPs are a cost-effective way to deliver stock to broad-based employees.” commented Amanda Benincasa, a director in Aon’s Equity Services practice, who peer reviewed the study for Carver Edison. “This research goes a step further and begins to show that ESPPs are not only ‘nice to have,’ but a positive driver of business and employee success.”

Carver Edison will release the expanded results of this study as well a recurring quarterly report tracking the performance of ESPP companies versus non-ESPP peers by sector at the end of this quarter.

Employee Stock Purchase Plans are a popular financial benefit which have been offered to employees of public companies since 1964 – 14 years before the creation of the 401k. Among eligible employees, roughly 70%2 do not participate in an ESPP when offeredi resulting in enormous lost opportunity for employees and shareholders alike. Cashless Participation™3 is a patented technology solution for global ESPPs that helps public companies increase stock plan participation rates.

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