Chipotle and Walmart are making waves in the corporate world by not only raising pay and offering debt-free college tuition assistance but also by implementing a new tactic to benefit their employees: publicly traded stock splits.
Both companies have recently announced stock splits, with Walmart completing a 3-for-1 split on Feb. 26 and Chipotle set to split its shares on June 26. This move is aimed at making company stock more accessible to their large, low-wage workforces.
While a stock split can make shares more affordable, benefits consultants caution that it may not necessarily lead to increased employee ownership. Factors such as financial education, availability of employer-sponsored financial programs, and competing financial interests among employees all play a role in whether workers will take advantage of stock ownership opportunities.
Companies like Walmart and Chipotle are combining their stock splits with other efforts to encourage employee stock ownership, such as employee stock purchase plans (ESPP) and financial education offerings. These programs aim to make it easier for employees to buy company stock and understand the benefits of ownership.
Financial education is key in encouraging employees to participate in stock ownership programs. Companies that make ESPP part of their culture and provide robust financial education see higher participation rates among employees. However, many companies still struggle to get employees to buy into stock ownership programs, with participation rates typically ranging from 20% to 30%.
Despite the benefits of owning company stock, some experts suggest that employees may be better off investing in low-cost index funds for diversification. Saving for retirement and meeting basic needs often take precedence over buying company shares for many workers.
To further incentivize employees to participate in stock ownership programs, companies can enhance their offerings, such as increasing discounts on stock purchases or giving equity awards to lower-level workers as part of their compensation. While these strategies can be costly for companies, they may be worth considering to increase employee buy-in and ownership.
