The NASPP Blog

In my very first NASPP blog, I chose a topic that was particularly passionate for me: employee communications. I like all the aspects of communicating with employees about their stock plan benefits. I recently came across an article that touched on an interesting fact: most people who achieve “millionaire” status (from stock options, lottery wins, working hard for a long time, inheritance, and several other ways to obtain a large sum of cash) don’t maintain that status for long. In fact, an analysis of IRS data on millionaires revealed that between 1999 and 2007, 50% of millionaires only stayed so for one year, and at the end of the 9 tax years, only 6% of those who were millionaires back in 1999 remained millionaires.

I know you’re just to the point of asking what an analysis of millionaires has to do with employee communications. I’ll get to that in just a minute. Back to the millionaire analysis – it struck me that many people work so hard to make money, and I was floored to see that so many fell off the millionaire bandwagon so quickly after achieving that status.

This data didn’t parse down executives vs. mid and lower level employees within organizations – this was an analysis of all millionaires filing tax returns in the U.S. during that period. However, if we were to look at organizations, I’d be willing to bet the amount of downfall from millionaire status incrementally increases the lower you go within the organization (my opinion only, I have no facts to back this up). Regardless, I began thinking about how we spend so much time putting together stock plans, educating employees on the mechanics of the plans, and even in some cases providing tools that allow employees to “model” future outcomes. I’m guessing many employees plug in some high stock prices and start dreaming about a windfall of cash. That raises a question from me: why do we spend so much time preparing, maintaining, and generally communicating about stock plans if the windfall is going to be so temporary? Yes, of course we don’t have control over what the employee will do with the money – certainly responsibility for squandering a chunk of it would fall squarely on the employee’s shoulders. But for those who are offering broad based stock plans, I ask the question – should more be done to help employees manage their rewards, or at least direct them to resources that can help them do so? As a communicator, I sometimes am frustrated that companies generally are advised to stand squarely outside the realm of “financial advice.” I realize most organizations don’t have trained financial planners, so an edict to stay clear of advice seems appropriate. However, there must be a way to offer a more integrated communication program to employees. Perhaps this type of communication can occur closer to the timing of a stock option exercise or large restricted stock vesting.

I know there are many firms that provide a wealth of stock plan services, including financial planning. Many issuer firms rely on these companies to assist in the financial planning arena, and employees seem to find this of benefit. As a communications nut, I would love to see more evolution in employer messaging, with increased talk about the full gamete of resources available to help employees manage the full life cycle of their stock plan grants and awards, which includes the financial planning component. I’m not suggesting that companies offer financial advice – but we tend to stay away from mentioning these resources in our communications like it’s a taboo topic. We highlight all the tools that will help employees imagine wealth (calculators, modeling scenarios, etc.). Why not pay some attention to what happens when they really do receive a windfall? After all, companies are giving the benefits to employees – shouldn’t we also help them figure out how to handle the upside?

I threw in a poll, because I want to know how you feel about companies taking steps to offer more communications on the financial planning resources that may be available to stock plan participants.

-Jennifer